By Counts H.B. No. 2691
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the sale, assignment or transfer of structured
1-3 settlements.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Title 6, Civil Practice and Remedies Code, is
1-6 amended by adding Chapter 140 to read as follows:
1-7 CHAPTER 140. STRUCTURED SETTLEMENTS
1-8 Sec. 140.001. DEFINITIONS. In this chapter:
1-9 (1) "Annuity issuer" means an insurer that has issued
1-10 an insurance contract used to fund periodic payments under a
1-11 structured settlement:
1-12 (2) "Applicable law" means:
1-13 (A) the federal laws of the United States;
1-14 (B) the laws of this State, including principles
1-15 of equity applied in the courts of this State; and
1-16 (C) the laws of any other jurisdiction:
1-17 (i) which is the domicile of the payee or
1-18 any other interested party; or
1-19 (ii) under whose laws a structured
1-20 settlement agreement was approved by a court or responsible
1-21 administrative authority;
2-1 (3) "Dependents" include a payee's spouse and minor
2-2 children and all other family members and other persons for whom
2-3 the payee is legally obligated to provide support, including
2-4 alimony;
2-5 (4) "Discounted present value" means the fair present
2-6 value of future payments, as determined by discounting such
2-7 payments to the present using the most recently published
2-8 applicable federal rate for determining the present value of an
2-9 annuity, as issued by the United States Internal Revenue Service;
2-10 (5) "Favorable tax determination" means, with respect
2-11 to a proposed transfer of structured settlement payment rights, any
2-12 of the following authorities that definitively establishes that the
2-13 federal income tax treatment of the structured settlement for the
2-14 parties to the structured settlement agreement and any qualified
2-15 assignment, other than the payee, will not be affected by such
2-16 transfer;
2-17 (A) a provision of the United States Internal
2-18 Revenue Code, United States Code Title 26, as amended from time to
2-19 time, or a United States Treasury regulation adopted pursuant
2-20 thereto;
2-21 (B) a revenue ruling or revenue procedure issued
2-22 by the United State Internal Revenue Service; or
2-23 (C) a private letter ruling by the United States
2-24 Internal Revenue Service with respect to such transfer; or
2-25 (D) a decision of the United States Supreme
3-1 Court or a decision of a lower federal court in which the United
3-2 States Internal Revenue Service has acquiesced;
3-3 (6) "Independent professional advice" means advice of
3-4 an attorney, certified public accountant, actuary or other licensed
3-5 professional advisor;
3-6 (A) who is engaged by a payee to render advice
3-7 concerning the legal, tax, and financial implications of a transfer
3-8 of structured settlement payment rights;
3-9 (B) who is not in any manner affiliated with or
3-10 compensated by the transferee of such transfer; and
3-11 (C) whose compensation for rendering such advice
3-12 is not affected by whether a transfer occurs or does not occur;
3-13 (7) "Interested parties" means, with respect to any
3-14 structured settlement, the payee, any beneficiary designated under
3-15 the annuity contract to receive payments following the payee's
3-16 death, the annuity issuer, the structured settlement obligor, and
3-17 any other party that has continuing rights or obligations under
3-18 such structured settlement;
3-19 (8) "Payee" means an individual who is receiving tax
3-20 free payments under a structured settlement and proposed to make a
3-21 transfer of payment rights thereunder;
3-22 (9) "Periodic payments" include scheduled future lump
3-23 sum payments;
3-24 (10) "Qualified assignment agreement" means an
3-25 agreement providing for a qualified assignment within the meaning
4-1 of section 130 of the United States Internal Revenue Code, United
4-2 States Code Title 26, as amended from time to time;
4-3 (11) "Responsible administrative authority" means,
4-4 with respect to a structured settlement, any government authority
4-5 vested by law with exclusive jurisdiction over the settled claim
4-6 resolved by such structured settlement;
4-7 (12) "Settled claim" means the original tort claim or
4-8 workers' compensation claim resolved by a structured payment;
4-9 (13) "Structured settlement" means an arrangement for
4-10 periodic payment of damages for personal injuries established by
4-11 settlement or judgment in resolution of a tort claim or for
4-12 periodic payment in settlement of a workers' compensation claim;
4-13 (14) "Structured settlement agreement" means the
4-14 agreement, judgment, stipulation, or release embodying the terms of
4-15 the structured settlement;
4-16 (15) "Structured settlement obligor" means, with
4-17 respect to any structured settlement, the party that has the
4-18 continuing obligations to make periodic payments to the payee under
4-19 a structured settlement agreement or a qualified assignment
4-20 agreement;
4-21 (16) "Structured settlement payment rights" means
4-22 rights to receive periodic payments under a structured settlement,
4-23 whether from the structured settlement obligor or the annuity
4-24 issuer, where:
4-25 (A) the payee is a resident of this State; or
5-1 (B) the structured settlement agreement was
5-2 approved by a court or responsible administrative authority in this
5-3 State;
5-4 (17) "Transfer" means any sale, assignment, pledge,
5-5 hypothecation, or other form of alienation or encumbrance made by a
5-6 payee for consideration; and
5-7 (18) "Transferee" means a party acquiring or proposing
5-8 to acquire structured settlement payment rights through a transfer;
5-9 (19) "Terms of the structured settlement" include,
5-10 with respect to any structured settlement, the terms of the
5-11 structured settlement agreement, the annuity contract, any
5-12 qualified assignment agreement and any order or approval of any
5-13 court or responsible administrative authority or other government
5-14 authority authorizing or approving such structured settlement;
5-15 (20) "Transfer agreement" means the agreement
5-16 providing for transfer of structured settlement payment rights from
5-17 a payee to a transferee.
5-18 Sec. 140.002. CONDITIONS TO TRANSFERS OF STRUCTURED
5-19 SETTLEMENT PAYMENT RIGHTS. No direct or indirect transfer of
5-20 structured settlement payment rights shall be effective and no
5-21 structured settlement obligor or annuity issuer shall be required
5-22 to make any payment directly or indirectly to any transferee of
5-23 structured settlement payment rights unless the transfer has been
5-24 authorized in advance in a final order of a court of competent
5-25 jurisdiction or a responsible administrative authority, based on
6-1 express findings by such court or responsible administrative
6-2 authority that:
6-3 (1) the transfer complies with the requirements of
6-4 this chapter and will not contravene other applicable law;
6-5 (2) not less than ten (10) days prior to the date on
6-6 which the payee first incurred any obligation with respect to the
6-7 transfer, the transferee has provided to the payee a disclosure
6-8 statement in bold type, no smaller than fourteen (14) points,
6-9 setting forth:
6-10 (A) the amounts and due dates of the structured
6-11 settlement payments to be transferred;
6-12 (B) the aggregate amount of such payments;
6-13 (C) the discounted present value of such
6-14 payments, together with the discount rate used in determining such
6-15 discounted present value;
6-16 (D) the gross amount payable to the payee in
6-17 exchange for such payments;
6-18 (E) an itemized listing of all commissions,
6-19 fees, costs expenses and charges payable by the payee or deductible
6-20 from the gross amount otherwise payable to the payee;
6-21 (F) the net amount payable to the payee after
6-22 deduction of all commissions, fees, costs, expenses and charges
6-23 described in subparagraph (e) of this paragraph;
6-24 (G) the quotient (expressed as a percentage)
6-25 obtained by dividing the net payment amount by the discounted
7-1 present value of payments; and
7-2 (H) the amount of any penalty and the aggregate
7-3 amount of any liquidated damages (inclusive of penalties) payable
7-4 by the payee in the event of any breach of the transfer agreement
7-5 by the payee;
7-6 (3) the extraordinary, unanticipated and imminent
7-7 means of the payee or his or her dependents render the transfer
7-8 appropriate;
7-9 (4) the payee has received independent professional
7-10 advice regarding the legal, tax and financial implications of the
7-11 transfer;
7-12 (5) if the transfer would contravene the terms of the
7-13 structured settlement:
7-14 (A) the transfer has been expressly approved in
7-15 writing by:
7-16 (i) each interested party; provided,
7-17 however, that if, at the time the payee and the transferee entered
7-18 into the transfer agreement, a favorable tax determination was in
7-19 effect, then the approval of the annuity issuer and the structured
7-20 settlement obligor shall not be required if all other interested
7-21 parties approve the transfer and waive any and all rights to
7-22 require that the transferred payments be made to the payee in
7-23 accordance with the terms of the structured settlement; and
7-24 (ii) any court or government authority,
7-25 other than the court or responsible administrative authority from
8-1 which authorization of the transfer is sought under this chapter,
8-2 which previously approved the structured settlement; and
8-3 (B) signed originals of all approvals required
8-4 under subparagraph (a) of this paragraph have been filed with the
8-5 court or responsible administrative authority from which
8-6 authorization of the transfer is sought under this chapter, and
8-7 originals or copies have been furnished to all interested parties;
8-8 and
8-9 (6) the transferee has given written notice of the
8-10 transferee's name, address and taxpayer identification number to
8-11 the annuity issuer and the structured settlement obligor and has
8-12 filed a copy of such notice with the court or responsible
8-13 administrative authority.
8-14 Sec. 140.003. APPROVAL OF TRANSFERS.
8-15 (1) An application under this chapter for
8-16 authorization of a transfer of structured settlement payment rights
8-17 shall be made by the transferee and may be brought in the
8-18 appropriate state court of original jurisdiction in the county in
8-19 which the payee, whose presence in this State will trigger
8-20 application of this Chapter, resides or in any court or before any
8-21 responsible administrative authority which approved the structured
8-22 settlement agreement.
8-23 (2) Not less than twenty (20) days prior to the
8-24 scheduled hearing on any application for authorization of a
8-25 transfer or structured settlement payment rights under Section
9-1 140.002 of this Chapter, the transferee shall file with the court
9-2 or responsible administrative authority and serve on any other
9-3 government authority which previously approved the structured
9-4 settlement, on all interested parties, and on the Office of the
9-5 Attorney General, a notice of the proposed transfer and the
9-6 application for its authorization, including in such notice:
9-7 (A) a copy of the transferee's application;
9-8 (B) a copy of the transfer agreement;
9-9 (C) a copy of the disclosure statement required
9-10 under Section 140.002(2) of this chapter;
9-11 (D) notification that any interested party is
9-12 entitled to support, oppose or otherwise respond to the
9-13 transferee's application, either in person or by counsel, by
9-14 submitting written comments to the court or responsible
9-15 administrative authority or by participating in the hearing; and
9-16 (E) notification of the time and place of the
9-17 hearing and notification of the manner in which and the time by
9-18 which written responses to the application must be filed (which
9-19 shall not be less than fifteen (15) days after service of the
9-20 transferee's notice) in order to be considered by the court or
9-21 responsible administrative authority.
9-22 (3) The Office of the Attorney General shall have
9-23 standing to raise, appear and be heard on any matter relating to an
9-24 application for authorization of a transfer of structured
9-25 settlement payment rights under this chapter.
10-1 Sec. 140.004. NO WAIVER; NO PENALTIES.
10-2 (1) The provisions of this chapter may not be waived.
10-3 (2) No payee who proposes to make a transfer of
10-4 structured settlement payment rights shall incur any penalty,
10-5 forfeit any application fee or other payment, or otherwise incur
10-6 any liability to the proposed transferee based on any failure of
10-7 such transfer to satisfy the conditions of Section 140.002 of this
10-8 chapter.
10-9 Sec. 140.005. CONSTRUCTION. Nothing contained in this
10-10 chapter shall be construed to authorize any transfer of structured
10-11 settlement payment rights in contravention of applicable law or to
10-12 give effect to any transfer of structured settlement rights that is
10-13 invalid under applicable law.
10-14 SECTION 2. This Act shall apply to any transfer of
10-15 structured settlement payment rights under a transfer agreement
10-16 entered into on or after the effective date of this Act; provided,
10-17 however, that nothing contained herein shall imply that any
10-18 transfer under a transfer agreement reached prior to such date is
10-19 effective.
10-20 SECTION 3. The importance of this legislation and the
10-21 crowded condition of the calendars in both houses create an
10-22 emergency and an imperative public necessity that the
10-23 constitutional rule requiring bills to be read on three several
10-24 days in each house be suspended, and this rule is hereby suspended.