By:  Armbrister                                       S.B. No. 1117
                                A BILL TO BE ENTITLED
                                       AN ACT
 1-1     relating to the payment of certain lottery prizes.
 1-3           SECTION 1.  Subsection (d), Section 466.402, Government Code,
 1-4     is amended to read as follows:
 1-5           (d)  The state is discharged of all further liability on the
 1-6     payment of a prize under Section 466.403, 466.404, 466.406, [or]
 1-7     466.407, or 466.410 or this section or under any additional
 1-8     procedures established by rule.
 1-9           SECTION 2.  Section 466.406, Government Code, is amended to
1-10     read as follows:
1-11           Sec. 466.406.  RIGHT TO PRIZE [NOT ASSIGNABLE].  (a)  [Except
1-12     as otherwise provided by this section, the right of any person to a
1-13     prize is not assignable.]
1-14           [(b)]  Payment of a prize shall [may] be made to the estate
1-15     of a deceased prizewinner.
1-16           (b) [(c)]  A prize to which a winner is otherwise entitled
1-17     may be paid to any person under an appropriate judicial order.
1-18           SECTION 3.  Subchapter I, Chapter 466, Government Code, is
1-19     amended by adding Section 466.410 to read as follows:
1-20           Sec. 466.410.  ASSIGNMENT OF PRIZES.  (a)  A person may
1-21     assign, in whole or in part, the right to receive prize payments
1-22     that are paid by the commission in installments over time if the
1-23     assignment is made to a person designated by an order of a district
1-24     court of the county where the assignor resides or Travis County.
 2-1           (b)  A district court shall issue an order approving a
 2-2     voluntary assignment and directing the commission to direct prize
 2-3     payments in whole or in part to the assignee if:
 2-4                 (1)  the assignment is in writing, executed by the
 2-5     assignor, and by its terms subject to the laws of this state; and
 2-6                 (2)  the assignor provides a sworn affidavit stating
 2-7     that the assignor:
 2-8                       (A)  is of sound mind, is in full command of the
 2-9     person's faculties, and is not acting under duress;
2-10                       (B)  has been advised regarding the assignment by
2-11     independent legal counsel and has had the opportunity to receive
2-12     independent financial and tax advice concerning the effects of the
2-13     assignment;
2-14                       (C)  understands that the person will not receive
2-15     the prize payments, or portions of the prize payments, for the
2-16     assigned years;
2-17                       (D)  understands and agrees that with regard to
2-18     the assigned payments, the state, the commission, and its officials
2-19     and employees will have no further liability or responsibility to
2-20     make the assigned payments to the assignor;
2-21                       (E)  has been provided a one-page written
2-22     disclosure statement stating, in boldface type, 14 points or
2-23     larger:
2-24                             (i)  the payments being assigned, by
2-25     amounts and payment dates;
2-26                             (ii)  the purchase price being paid;
 3-1                             (iii)  the rate of discount to the present
 3-2     value of the prize, assuming daily compounding and funding on the
 3-3     contract date; and
 3-4                             (iv)  the amount, if any, of any
 3-5     origination or closing fees that will be charged to the assignor;
 3-6     and
 3-7                       (F)  was advised in writing, at the time the
 3-8     assignment contract was signed, that the assignor had the right to
 3-9     cancel the contract without any further obligation not later than
3-10     the third business day after the date the contract was signed.
3-11           (c)  A voluntary assignment may not include or cover payments
3-12     or portions of payments that are subject to any offset provided by
3-13     this chapter.
3-14           (d)  The commission shall establish and collect a reasonable
3-15     fee to defray any administrative expenses associated with an
3-16     assignment made under this section, including the cost to the
3-17     commission of any processing fee imposed by a private annuity
3-18     provider.  The commission shall establish the amount of the fee to
3-19     reflect the direct and indirect costs associated with processing
3-20     the assignment.
3-21           (e) Notwithstanding any other provision of this section, a
3-22     prizewinner does not have a right to assign prize payments
3-23     following:
3-24                 (1)  the issuance, by the Internal Revenue Service, of
3-25     a technical rule letter, revenue ruling, or other public ruling of
3-26     the Internal Revenue Service that determines that, based on the
 4-1     right of assignment provided by this section, a lottery prizewinner
 4-2     who does not assign prize payments under this section would be
 4-3     subject to an immediate income tax liability for the value of the
 4-4     entire prize rather than annual income tax liability for each
 4-5     installment when paid; or
 4-6                 (2)  the issuance by a court of a published decision
 4-7     holding that, based on the right of assignment provided by this
 4-8     section, a lottery prizewinner who does not assign prize payments
 4-9     under this section would be subject to an immediate income tax
4-10     liability for the value of the entire prize rather than annual
4-11     income tax liability for each installment when paid.
4-12           (f)  After receiving a letter or ruling from the Internal
4-13     Revenue Service or a published decision of a court as provided by
4-14     Subsection (e), the director shall immediately file a copy of the
4-15     letter, ruling, or published decision with the secretary of state.
4-16     When the director files a copy of the letter, ruling, or published
4-17     decision with the secretary of state, a prizewinner is ineligible
4-18     to assign a prize under this section.
4-19           SECTION 4.  Section 466.403, Government Code, is amended to
4-20     read as follows:
4-21           Sec. 466.403.  PAYMENT OF PRIZE IN INSTALLMENTS.  (a)  If the
4-22     director determines that prize money is to be paid in installments,
4-23     the comptroller shall invest funds from the state lottery account
4-24     as necessary to ensure the payment of the installments.  The
4-25     investments may be in securities, annuities, or other instruments
4-26     as determined by the comptroller.
 5-1           (b)  Except as otherwise provided by this chapter, with
 5-2     regard to any prize money to be paid in installments in accordance
 5-3     with a schedule established by the commission at the time of award,
 5-4     the commission shall not alter the timing or amount of scheduled
 5-5     payments or otherwise accelerate, defer, commute, or discount such
 5-6     scheduled payments.
 5-7           SECTION 5.  This Act takes effect September 1, 1999.
 5-8           SECTION 6.  The importance of this legislation and the
 5-9     crowded condition of the calendars in both houses create an
5-10     emergency and an imperative public necessity that the
5-11     constitutional rule requiring bills to be read on three several
5-12     days in each house be suspended, and this rule is hereby suspended.