By King of Parker, Morrison                           H.B. No. 1799
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the assignment or deposit of certain lottery prizes.
 1-4           SECTION 1.  Section 466.402(d), Government Code, is amended
 1-5     to read as follows:
 1-6           (d)  The state is discharged of all further liability on the
 1-7     payment of a prize under Section 466.403, 466.404, 466.406, [or]
 1-8     466.407, or 466.410 or this section or under any additional
 1-9     procedures established by rule.
1-10           SECTION 2.  Section 466.406, Government Code, is amended to
1-11     read as follows:
1-12           Sec. 466.406.  RIGHT TO PRIZE NOT GENERALLY ASSIGNABLE.  (a)
1-13     Except as [otherwise] provided by this section and Section 466.410,
1-14     the right of any person to a prize is not assignable.
1-15           (b)  Payment of prize payments not previously assigned as
1-16     provided by this section or Section 466.410 shall [a prize may] be
1-17     made to the estate of a deceased prizewinner if the prizewinner was
1-18     an individual.
1-19           (c)  A prize to which a winner is otherwise entitled may be
1-20     paid to any person under an appropriate judicial order.
1-21           SECTION 3.  Section 466.408(b), Government Code, is amended
1-22     to read as follows:
1-23           (b)  If a claim is not made for prize money on or before the
1-24     180th day after the date on which the winner was selected, the
 2-1     prize money shall be deposited to the credit of the Texas
 2-2     Department of Health State Owned Multi-categorical Teaching
 2-3     Hospital Account for the purpose of providing funding for indigent
 2-4     health care [used to provide additional money to the state lottery
 2-5     account for the purposes prescribed by Section 466.355(b)(1)].
 2-6           SECTION 4.  Subchapter I, Chapter 466, Government Code, is
 2-7     amended by adding Section 466.410 to read as follows:
 2-8           Sec. 466.410.  ASSIGNMENT OF PRIZES.  (a)  A person may
 2-9     assign, in whole or in part, the right to receive prize payments
2-10     that are paid by the commission in installments over time if the
2-11     assignment is made to a person designated by an order of a district
2-12     court of Travis County, except that installment prize payments due
2-13     within the final two years of the prize payment schedule may not be
2-14     assigned.
2-15           (b)  A district court shall issue an order approving a
2-16     voluntary assignment and directing the commission to direct prize
2-17     payments in whole or in part to the assignee if:
2-18                 (1)  a copy of the petition for the order and copies of
2-19     all notices of any hearing in the matter have been served on the
2-20     executive director not later than 20 days prior to any hearing or
2-21     entry of any order.  The commission may intervene in a proceeding
2-22     to protect the interests of the commission but shall not be
2-23     considered an indispensable or necessary party.  A petition filed
2-24     under this section shall include in the caption the prizewinner's
2-25     name as it appears on the lottery claim form;
2-26                 (2)  the assignment is in writing, executed by the
2-27     assignor and assignee (or designated agent), and by its terms
 3-1     subject to the laws of this state; and
 3-2                 (3)  the assignor provides a sworn and notarized
 3-3     affidavit stating that the assignor:
 3-4                       (A)  is of sound mind, over 18 years of age, is
 3-5     in full command of the person's faculties, and is not acting under
 3-6     duress;
 3-7                       (B)  has been advised regarding the assignment by
 3-8     independent legal counsel and has had the opportunity to receive
 3-9     independent financial and tax advice concerning the effects of the
3-10     assignment;
3-11                       (C)  understands that the assignor will not
3-12     receive the prize payments, or portions of the prize payments, for
3-13     the assigned years;
3-14                       (D)  understands and agrees that with regard to
3-15     the assigned payments, the state, the commission, and its officials
3-16     and employees will have no further liability or responsibility to
3-17     make the assigned payments to the assignor;
3-18                       (E)  has been provided a one-page written
3-19     disclosure statement stating, in boldfaced type, 14 points or
3-20     larger:
3-21                             (i)  the payments being assigned, by
3-22     amounts and payment dates;
3-23                             (ii)  the purchase price being paid, if
3-24     any;
3-25                             (iii)  if a purchase price is paid, the
3-26     rate of discount to the present value of the prize, assuming daily
3-27     compounding and funding on the contract date; and
 4-1                             (iv)  the amount, if any, of any
 4-2     origination or closing fees that will be charged to the assignor;
 4-3     and
 4-4                       (F)  was advised in writing, at the time the
 4-5     assignment was signed, that the assignor had the right to cancel
 4-6     without any further obligation not later than the third business
 4-7     day after the date the assignment was signed.
 4-8           (c)  It shall be the responsibility of the assignor to bring
 4-9     to the attention of the court, either by sworn testimony or by
4-10     written declaration submitted under penalty of perjury, the
4-11     existence or nonexistence of a current spouse.  If married, the
4-12     assignor shall identify his or her spouse and submit to the court a
4-13     sworn and notarized statement wherein the spouse consents to the
4-14     assignment.  If the assignor is married and the sworn and notarized
4-15     statement is not presented to the court, the court shall determine,
4-16     to the extent necessary and as appropriate under applicable law,
4-17     the ability of the assignor to make the proposed assignment without
4-18     the spouse's consent.
4-19           (d)  With respect to any given prize, the order shall also
4-20     recite and identify all prior assignments by amount of or fraction
4-21     of payment assigned, the identity of the assignee, and the date(s)
4-22     of payment(s) assigned.  A court order obtained pursuant to this
4-23     section, together with all such prior orders, shall not require the
4-24     commission to divide any single prize payment among more than three
4-25     different persons.
4-26           (e)  The court order shall include specific findings as to
4-27     compliance with the requirements of Subsections (b), (c), and (d)
 5-1     and shall specify the prize payment or payments assigned, or any
 5-2     portion thereof, including the dates and amounts of the payments to
 5-3     be assigned, the years in which each payment is to begin and end,
 5-4     the gross amount of the annual payments assigned before taxes, the
 5-5     prizewinner's name as it appears on the lottery claim form, the
 5-6     assignor's social security or tax identification number, and, if
 5-7     applicable, the citizenship or resident alien number of the
 5-8     assignee if an individual.
 5-9           (f)  A certified copy of a court order granted under this
5-10     section shall be delivered to the commission and such order must be
5-11     provided to the commission no later than 20 days prior to the date
5-12     upon which the first assigned payment is to be paid to the
5-13     assignee.  Within 20 days of receipt of the court order, the
5-14     commission shall acknowledge in writing to both the assignor and
5-15     the assignee its receipt of said court order.  Unless the
5-16     commission provides written notice to the assignor and assignee
5-17     that the commission cannot comply with the court order, the
5-18     commission shall thereafter make the prize payments in accordance
5-19     with the court order.
5-20           (g)  The commission shall establish and collect a reasonable
5-21     fee to defray any administrative expenses associated with an
5-22     assignment made under this section, including the cost to the
5-23     commission of any processing fee imposed by a private annuity
5-24     provider.  The commission shall establish the amount of the fee to
5-25     reflect the direct and indirect costs associated with processing
5-26     the assignment.
5-27           (h)  An assignment pursuant to court order may not include or
 6-1     cover payments or portions of payments that are subject to any
 6-2     offset provided by this chapter.
 6-3           (i)  Notwithstanding any other provision of this section,
 6-4     there will be no right to assign prize payments following:
 6-5                 (1)  the issuance, by the Internal Revenue Service, of
 6-6     a technical rule letter, revenue ruling, or other public ruling of
 6-7     the Internal Revenue Service that determines that, based on the
 6-8     right of assignment as provided by this section, a lottery
 6-9     prizewinner who does not assign prize payments would be subject to
6-10     an immediate income tax liability for the value of the entire prize
6-11     rather than annual income tax liability for each installment when
6-12     paid; or
6-13                 (2)  the issuance by a court of a published decision
6-14     holding that, based on the right of assignment as provided by this
6-15     section, a lottery prizewinner who does not assign prize payments
6-16     would be subject to an immediate income tax liability for the value
6-17     of the entire prize rather than annual income tax liability for
6-18     each installment when paid.
6-19           (j)  After receiving a letter or ruling from the Internal
6-20     Revenue Service or a published decision of a court as provided by
6-21     Subsection (i)(1) or (2), the executive director shall immediately
6-22     file a copy of the letter, ruling, or published decision with the
6-23     secretary of state.  When the executive director files a copy of
6-24     the letter, ruling, or published decision with the secretary of
6-25     state, an assignor is ineligible to assign a prize under this
6-26     section, and the commission shall not make any payment to an
6-27     assignee pursuant to a court order entered after the date of such
 7-1     letter or ruling.
 7-2           SECTION 5.  This Act takes effect September 1, 1999.
 7-3           SECTION 6.  The change in law made by this Act to Section
 7-4     466.408(b), Government Code, applies only to a prize for which the
 7-5     winner is selected on or after September 1, 1999.  A prize for
 7-6     which the winner was selected before September 1, 1999, is governed
 7-7     by the law as it existed immediately before the effective date of
 7-8     this Act, and that law is continued in effect for that purpose.
 7-9           SECTION 7.  The importance of this legislation and the
7-10     crowded condition of the calendars in both houses create an
7-11     emergency and an imperative public necessity that the
7-12     constitutional rule requiring bills to be read on three several
7-13     days in each house be suspended, and this rule is hereby suspended.