1-1 By: Patterson S.B. No. 1031
1-2 (In the Senate - Filed March 7, 1997; March 11, 1997, read
1-3 first time and referred to Committee on State Affairs;
1-4 April 18, 1997, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 13, Nays 0; April 18, 1997,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1031 By: Nixon
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the assignment of a lottery prize.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Subsection (d), Section 466.402, Government Code,
1-13 is amended to read as follows:
1-14 (d) The state is discharged of all further liability on the
1-15 payment of a prize under Section 466.403, 466.404, 466.406, [or]
1-16 466.407, or 466.410 or this section or under any additional
1-17 procedures established by rule.
1-18 SECTION 2. Section 466.406, Government Code, is amended to
1-19 read as follows:
1-20 Sec. 466.406. RIGHT TO PRIZE [NOT ASSIGNABLE]. (a) [Except
1-21 as otherwise provided by this section, the right of any person to a
1-22 prize is not assignable.]
1-23 [(b)] Payment of a prize may be made to the estate of a
1-24 deceased prizewinner.
1-25 (b) [(c)] A prize to which a winner is otherwise entitled
1-26 may be paid to any person under an appropriate judicial order.
1-27 SECTION 3. Subchapter I, Chapter 466, Government Code, is
1-28 amended by adding Section 466.410 to read as follows:
1-29 Sec. 466.410. ASSIGNMENT OF PRIZES. (a) A person may
1-30 assign, in whole or in part, the right to receive prize payments
1-31 that are paid in installments over time by the commission if the
1-32 assignment is made to a person designated by an order of a district
1-33 court of Travis County.
1-34 (b) The commission may intervene in a proceeding under this
1-35 section but is not a necessary or indispensable party in the
1-36 proceeding.
1-37 (c) A district court shall issue an order approving a
1-38 voluntary assignment and directing the commission to direct prize
1-39 payments in whole or in part to the assignee if:
1-40 (1) a copy of the petition for the order and a copy of
1-41 the notice of a hearing in the matter are served on the executive
1-42 director not later than the 10th day before the date of each
1-43 hearing or the entry of an order;
1-44 (2) the assignment is in writing, executed by the
1-45 assignor, and by its terms subject to the laws of this state; and
1-46 (3) the assignor provides a sworn affidavit stating
1-47 that the assignor:
1-48 (A) is at least 18 years of age;
1-49 (B) is of sound mind, is in full command of the
1-50 person's faculties, and is not acting under duress;
1-51 (C) has been advised regarding the assignment by
1-52 an independent legal counsel and has had the opportunity to receive
1-53 independent financial and tax advice concerning the effects of the
1-54 assignment;
1-55 (D) understands that the person will not receive
1-56 the prize payments, or portions of the prize payments, for the
1-57 assigned years;
1-58 (E) understands and agrees that with regard to
1-59 the assigned payments, the state, the commission, and its officials
1-60 and employees will have no further liability or responsibility to
1-61 make the assigned payments to the assignor;
1-62 (F) has been provided a one-page written
1-63 disclosure statement stating, in boldface type, 14 points or
1-64 larger:
2-1 (i) the payments being assigned by amounts
2-2 and payment dates;
2-3 (ii) the purchase price being paid;
2-4 (iii) the rate of discount to the present
2-5 value of the prize, assuming daily compounding and funding on the
2-6 contract date; and
2-7 (iv) the amount, if any, of any
2-8 origination or closing fees that will be charged to the assignor;
2-9 and
2-10 (G) was advised in writing, at the time the
2-11 assignment contract was signed, that the assignor had the right to
2-12 cancel the contract without any further obligation not later than
2-13 the third business day after the date the contract was signed.
2-14 (d) A court shall include in its order specific findings
2-15 regarding compliance with the requirements of Subsection (c) and
2-16 shall specify:
2-17 (1) the prize payments or portion of prize payments
2-18 assigned;
2-19 (2) the year in which each assigned payment is to be
2-20 made;
2-21 (3) the gross amount of the annual payments assigned
2-22 before taxes;
2-23 (4) the prizewinner's name as it appears on the
2-24 lottery claim form;
2-25 (5) the full legal name of the assignor if different
2-26 than the prizewinner's name as it appears on the lottery claim
2-27 form;
2-28 (6) the assignor's social security or tax
2-29 identification number;
2-30 (7) the assignee's full legal name and social security
2-31 number or tax identification number; and
2-32 (8) if applicable, the citizenship and resident alien
2-33 number of the assignee.
2-34 (e) It is the responsibility of the prizewinner to bring to
2-35 the attention of the court, either by sworn testimony or by
2-36 notarized declaration submitted under penalty of perjury, the
2-37 existence or nonexistence of a spouse. A prizewinner who is
2-38 married:
2-39 (1) shall identify the prizewinner's spouse and submit
2-40 to the court a notarized statement signed by the spouse consenting
2-41 to the assignment; or
2-42 (2) may allow the court to determine the ability of
2-43 the prizewinner to make the assignment without the consent of the
2-44 spouse.
2-45 (f) After receiving a certified copy of a court order under
2-46 this section, the commission shall:
2-47 (1) provide to the assignor and the assignee a written
2-48 acknowledgement of the commission's receipt of a court order
2-49 granted under this section; and
2-50 (2) make prize payments as provided by the order.
2-51 (g) A voluntary assignment may not include or cover payments
2-52 or portions of payments that are subject to any offset provided by
2-53 this chapter.
2-54 (h) The commission shall establish and collect a reasonable
2-55 fee to defray any administrative expenses associated with an
2-56 assignment made under this section, including the cost to the
2-57 commission of any processing fee imposed by a private annuity
2-58 provider. The commission shall establish the amount of the fee to
2-59 reflect the direct and indirect costs associated with processing
2-60 the assignment.
2-61 (i) Notwithstanding any other provision of this section, a
2-62 prizewinner does not have a right to assign prize payments
2-63 following:
2-64 (1) the issuance, by the United States Internal
2-65 Revenue Service, of a technical rule letter, revenue ruling, or
2-66 other public ruling of the Internal Revenue Service that determines
2-67 that, based on the right of assignment provided by this section, a
2-68 lottery prizewinner who does not assign prize payments would be
2-69 subject to an immediate income tax liability for the value of the
3-1 entire prize rather than annual income tax liability for each
3-2 installment when paid; or
3-3 (2) the issuance by a court of a published decision
3-4 holding that, based on the right of assignment provided by this
3-5 section, a lottery prizewinner who does not assign prize payments
3-6 under this section would be subject to an immediate income tax
3-7 liability for the value of the entire prize rather than annual
3-8 income tax liability for each installment when paid.
3-9 (j) After receiving a letter or ruling from the Internal
3-10 Revenue Service or a published decision of a court, as provided by
3-11 Subsection (i), the director shall immediately file a copy of the
3-12 letter, ruling, or published decision with the secretary of state.
3-13 When the director files a copy of the letter, ruling, or published
3-14 decision with the secretary of state, a prizewinner is ineligible
3-15 to assign a prize under this section.
3-16 SECTION 4. This Act takes effect September 1, 1997.
3-17 SECTION 5. The importance of this legislation and the
3-18 crowded condition of the calendars in both houses create an
3-19 emergency and an imperative public necessity that the
3-20 constitutional rule requiring bills to be read on three several
3-21 days in each house be suspended, and this rule is hereby suspended.
3-22 * * * * *