HBA-MPA H.B. 1799 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 1799 By: King, Phil Licensing & Administrative Procedures 7/12/1999 Enrolled BACKGROUND AND PURPOSE Prior to the 76th Legislature, large Texas state lottery prizes could be paid in annual installments over a period of 20 years. Many state lotteries have established procedures that allow prizewinners to sell their right to collect lottery prizes over time in exchange for a lump sum cash payment from a third party, including individuals, banks, investment or loan companies. H.B. 1799 regulates the assignment of lottery payment streams and clarifies that voluntary assignment of lottery prize payments, as authorized by court order, is allowable, but only subject to specified consumer protection safeguards. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 466.402(d), Government Code, to make conforming changes. SECTION 2. Amends Section 466.406, Government Code, to make conforming and nonsubstantive changes. SECTION 3. Amends Section 466.408(b), Government Code, to require prize money to be deposited to the credit of the Texas Department of Health state-owned multicategorical teaching hospital account or the tertiary care facility account, if a claim is not made within 180 days after the winner was selected, according to specified criteria. Deletes provision that such additional money be provided to the state lottery account for the purpose of paying prizes to winning lottery ticket holders. SECTION 4. Amends Subchapter I, Chapter 466, Government Code, by adding Section 466.410, as follows: Sec. 466.410. ASSIGNMENT OF PRIZES. (a) Authorizes a person to assign, in whole or in part, the right to receive prize payments paid over time by the Texas Lottery Commission (commission) if the assignment is made to a person designated by an order of a district court of Travis County. Prohibits installment prize payments due within the final two years of the prize payment schedule from being assigned. (b) Requires a district court to issue an order approving a voluntary assignment and directing the commission to direct prize payments in whole or in part to the assignee if: (1) a copy of the petition and notice of hearing are served on the executive director of the commission (executive director) no later than 20 days before the hearing or entry of any order. Authorizes the commission to intervene in a proceeding to protect the interests of the commission, but prohibits it from being considered an indispensable or necessary party. Requires a petition filed under this section to include in the caption the prizewinner's name as it appears on the lottery claim form; (2) the assignment is in writing and executed by the assignor and assignee (or designated agent), and by its terms subject to the laws of this state; (3) the assignor provides a sworn and notarized affidavit stating that the assignor is over 18 years old; of sound mind and not acting under duress; has been advised on the legal, financial and tax implications of the assignment; understands that the assignor will not receive prize payment or portions thereof for the assigned years; understands that this relieves the state, the commission, and its officials and employees of further liability for the assigned payments; has been provided with a one-page written disclosure statement containing certain specified information; and was advised in writing when the assignment contract was signed that the assignor has the right to cancel the assignment no later than the third day after it is signed. (c) Requires that it is the responsibility of the assignor to bring to the attention of the court the existence or nonexistence of a current spouse. Requires the assignor, if married, to identify his or her spouse and submit to the court a sworn and notarized statement wherein the spouse consents to the assignment. Requires the court to determine that the assignment can be made without the consent of the spouse, if the assignor is married and a sworn and notarized statement is not submitted to the court. (d) Requires the order, with respect to any given prize, to recite and specify all prior assignments by amount of or fraction of payment assigned, the identity of the assignee, and the date(s) of payment(s) made. Prohibits a court order obtained under this section and all prior orders from dividing any single prize payment among more than three different persons. (e) Requires the court order to include specific findings as to compliance with this section, and specify the prize payment or payments assigned, or any portion thereof, and certain specified information. (f) Requires a certified copy of a court order granted under this section to be delivered to the commission within 20 days of the date when the first assigned payment is to be made. Requires the commission, within 20 days of receipt of a certified copy of a court order, to provide the assignor and the assignee a written acknowledgment of the commission's receipt of the court order, and make prize payments as provided by the order, unless the commission provides written notice to the assignor and assignee of the commission's inability to comply with the court order. (g) Requires the commission to establish and collect a reasonable fee to defray administrative expenses, including processing fees imposed by a private annuity provider. Requires the commission to itemize the fee to reflect direct and indirect costs. (h) Prohibits an assignment pursuant to a court order from including or covering payments or portions of payments that are subject to any offset provided by this chapter. (i) Provides that, notwithstanding any other provision of this section, there will be no right to assign prize payments following: (1) issuance of a determination from the Internal Revenue Service (IRS) that a lottery prizewinner who does not assign prize payments is not subject to immediate income tax liability for the value of the entire prize rather than annual income tax liability for each installment when paid; or (2) issuance by a court of a published decision holding that a lottery prizewinner who does not assign prize payments is not subject to immediate income tax liability for the assignment value of the entire prize rather than annual income tax liability for each installment when paid; (j) Requires the executive director to immediately file a copy of the official determination of the IRS or court ruling with the secretary of state's office. Prohibits the commission from making any payment to an assignee under a court order entered after the date of such a determination or ruling. SECTION 5.Effective date: September 1, 1999. SECTION 6.Makes application of Section 466.408(b), Government Code, as amended by this Act, prospective. SECTION 7. Emergency clause.