HBA-MPA H.B. 1799 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1799 By: King, Phil Licensing & Administrative Procedures 3/30/1999 Introduced BACKGROUND AND PURPOSE Currently, large Texas state lottery prizes may 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 and nonsubstantive changes. SECTION 2. Amends Section 466.406, Government Code, to make conforming and nonsubstantive changes. SECTION 3. 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 payments 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. (b) Authorizes the commission to intervene in a proceeding under this section, but is not a necessary or indispensable party in the proceeding. (c) Requires a district court to issue an order approving a voluntary assignment of prize payments and directing the commission to direct them 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 no later than 10 days before the hearing; (2) the assignment is in writing and executed by the assignor under the laws of this state; (3) the assignor provides a sworn 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 informed in writing that the assignor has the right to cancel the assignment no later than the third day after it is signed. (d) Requires the order to include specific findings regarding compliance with the requirements of Subsection (c) and specify the prize payments or portions assigned, the year in which each assigned payment is to be made, the gross amount of annual payments assigned before taxes, the prizewinner's name or assignor's name if it is different, the assignor's social security or tax identification number, and the assignee's full name and social security or tax identification number, and citizenship or resident alien number if applicable. (e) Requires the prizewinner to declare by sworn statement or notarized declaration the marital status of the prizewinner, and if married, requires the prizewinner's spouse to submit a notarized statement consenting to the assignment, or authorizes the court to determine that the assignment can be made without the consent of the spouse. (f) Requires the commission, on 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. (g) Prohibits a voluntary assignment from including a payment or portion of a payment subject to any deduction required by this chapter. (h) 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. (i) Prohibits a prizewinner from assigning prize payments unless the director of the lottery division of the commission (director) has received an official 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 assignment value of the entire prize rather than annual income tax liability for each installment when paid. (i) Requires the director to request an IRS determination as described in Subsection (i). Requires the director to immediately file the official determination, if one is received, with the secretary of state's office for publication in the Texas Register. SECTION 4.Emergency clause. Effective date: upon passage.