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                                  * * * * *