By: Harris S.B. No. 1740
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the transfer of structured settlements.
1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-3 SECTION 1. Chapter 3, Texas Insurance Code, is amended by
1-4 adding Article 3.97, to read as follows:
1-5 Art. 3.97. STRUCTURED SETTLEMENT PROTECTION ACT.
1-6 Sec. 1. DEFINITIONS. In this article:
1-7 (1) "annuity issuer" means an insurer that has issued an
1-8 insurance contract used to fund periodic payments under a
1-9 structured settlement;
1-10 (2) "applicable law" means:
1-11 (A) the federal laws of the United States;
1-12 (B) the laws of this State, including principles of
1-13 equity applied in the courts of this State; and
1-14 (C) the laws of any other jurisdiction:
1-15 (i) which is the domicile of the payee or any
1-16 other interested party; or
1-17 (ii) under whose laws a structured settlement
1-18 agreement was approved by a court or responsible administrative
1-19 authority;
1-20 (3) "dependents" include a payee's spouse and minor children
1-21 and all other family members and other persons for whom the payee
1-22 is legally obligated to provide support, including alimony;
2-1 (4) "discounted present value" means the fair present value
2-2 of future payments, as determined by discounting such payments to
2-3 the present using the most recently published applicable federal
2-4 rate for determining the present value of an annuity, as issued by
2-5 the United States Internal Revenue Service;
2-6 (5) "favorable tax determination" means, with respect to a
2-7 proposed transfer of structured settlement payment rights, any of
2-8 the following authorities that definitively establishes that the
2-9 federal income tax treatment of the structured settlement for the
2-10 parties to the structured settlement agreement and any qualified
2-11 assignment agreement, other than the payee, will not be affected by
2-12 such transfer:
2-13 (A) a provision of the United States Internal Revenue
2-14 Code, United States Code Title 26, as amended from time to time, or
2-15 a United States Treasury regulation adopted pursuant thereto;
2-16 (B) a revenue ruling or revenue procedure issued by
2-17 the United States Internal Revenue Service; or
2-18 (C) a private letter ruling by the United States
2-19 Internal Revenue Service with respect to such transfer; or
2-20 (D) a decision of the United States Supreme Court or a
2-21 decision of a lower federal court in which the United States
2-22 Internal Revenue Service has acquiesced;
2-23 (6) "independent professional advice" means advice of an
2-24 attorney, certified public accountant, actuary or other licensed
2-25 professional adviser:
2-26 (A) who is engaged by a payee to render advice
3-1 concerning the legal, tax and financial implications of a transfer
3-2 of structured settlement payment rights;
3-3 (B) who is not in any manner affiliated with or
3-4 compensated by the transferee of such transfer; and
3-5 (C) whose compensation for rendering such advice is
3-6 not affected by whether a transfer occurs or does not occur;
3-7 (7) "interested parties" means, with respect to any
3-8 structured settlement, the payee, any beneficiary designated under
3-9 the annuity contract to receive payments following the payee's
3-10 death, the annuity issuer, the structured settlement obligor, and
3-11 any other party that has continuing rights or obligations under
3-12 such structured settlement;
3-13 (8) "payee" means an individual who is receiving tax free
3-14 payments under a structured settlement and proposes to make a
3-15 transfer of payment rights thereunder;
3-16 (9) "periodic payments" include scheduled future lump sum
3-17 payments;
3-18 (10) "qualified assignment agreement" means an agreement
3-19 providing for a qualified assignment within the meaning of section
3-20 130 of the United States Internal Revenue Code, United States Code
3-21 Title 26, as amended from time to time;
3-22 (11) "responsible administrative authority" means, with
3-23 respect to a structured settlement, any government authority vested
3-24 by law with exclusive jurisdiction over the settled claim resolved
3-25 by such structured settlement;
3-26 (12) "settled claim" means the original tort claim or
4-1 workers' compensation claim resolved by a structured settlement;
4-2 (13) "structured settlement" means an arrangement for
4-3 periodic payment of damages for personal injuries established by
4-4 settlement or judgment in resolution of a tort claim or for
4-5 periodic payments in settlement of a workers' compensation claim;
4-6 (14) "structured settlement agreement" means the agreement,
4-7 judgment, stipulation, or release embodying the terms of a
4-8 structured settlement;
4-9 (15) "structured settlement obligor" means, with respect to
4-10 any structured settlement, the party that has the continuing
4-11 obligation to make periodic payments to the payee under a
4-12 structured settlement agreement or a qualified assignment
4-13 agreement;
4-14 (16) "structured settlement payment rights" means rights to
4-15 receive periodic payments under a structured settlement, whether
4-16 from the structured settlement obligor or the annuity issuer,
4-17 where:
4-18 (A) the payee or the structured settlement obligor or
4-19 the annuity issuer or any other party to the structured settlement
4-20 agreement or any other interested party is domiciled in this State;
4-21 or
4-22 (B) the structured settlement agreement was approved
4-23 by a court or responsible administrative authority in this State;
4-24 (17) "terms of the structured settlement" include, with
4-25 respect to any structured settlement, the terms of the structured
4-26 settlement agreement, the annuity contract, any qualified
5-1 assignment agreement and any order or approval of any court or
5-2 responsible administrative authority or other government authority
5-3 authorizing or approving such structured settlement;
5-4 (18) "transfer" means any sale, assignment, pledge,
5-5 hypothecation, or other form of alienation or encumbrance made by a
5-6 payee for consideration;
5-7 (19) "transferee" means a party acquiring or proposing to
5-8 acquire structured settlement payment rights through a transfer of
5-9 such rights; and
5-10 (20) "transfer agreement" means the agreement providing for
5-11 transfer of structured settlement payment rights from a payee to a
5-12 transferee.
5-13 Sec. 2. CONDITIONS TO TRANSFERS OF STRUCTURED SETTLEMENT
5-14 PAYMENT RIGHTS. No direct or indirect transfer of structured
5-15 settlement payment rights shall be effective and no structured
5-16 settlement obligor or annuity issuer shall be required to make any
5-17 payment directly or indirectly to any transferee of structured
5-18 settlement payment rights unless the transfer has been authorized
5-19 in advance in a final order of a court of competent jurisdiction or
5-20 a responsible administrative authority, based on express findings
5-21 by such court or responsible administrative authority that:
5-22 (1) the transfer complies with the requirements of this
5-23 article and will not contravene other applicable law;
5-24 (2) not less than ten (10) days prior to the date on which
5-25 the payee first incurred any obligation with respect to the
5-26 transfer, the transferee has provided to the payee a disclosure
6-1 statement in bold type, no smaller than 14 points, setting forth:
6-2 (A) the amounts and due dates of the structured
6-3 settlement payments to be transferred;
6-4 (B) the aggregate amount of such payments;
6-5 (C) the discounted present value of such payments,
6-6 together with the discount rate used in determining such discounted
6-7 present value;
6-8 (D) the gross amount payable to the payee in exchange
6-9 for such payments;
6-10 (E) an itemized listing of all commissions, fees,
6-11 costs, expenses and charges payable by the payee or deductible from
6-12 the gross amount otherwise payable to the payee;
6-13 (F) the net amount payable to the payee after
6-14 deduction of all commissions, fees, costs, expenses and charges;
6-15 (G) the quotient (expressed as a percentage) obtained
6-16 by dividing the net payment amount by the discounted present value
6-17 of the payments; and
6-18 (H) the amount of any penalty and the aggregate amount
6-19 of any liquidated damages (inclusive of penalties) payable by the
6-20 payee in the event of any breach of the transfer agreement by the
6-21 payee;
6-22 (3) the extraordinary, unanticipated and imminent means of
6-23 the payee or his or her dependents render the transfer appropriate;
6-24 (4) the payee has received independent professional advice
6-25 regarding the legal, tax and financial implications of the
6-26 transfer;
7-1 (5) if the transfer would contravene the terms of the
7-2 structured settlement:
7-3 (A) the transfer has been expressly approved in
7-4 writing by:
7-5 (i) each interested party; provided, however,
7-6 that if, at the time the payee and the transferee entered into the
7-7 transfer agreement, a favorable tax determination was in effect,
7-8 then the approval of the annuity issuer and the structured
7-9 settlement obligor shall not be required if all other interested
7-10 parties approve the transfer and waive any and all rights to
7-11 require that the transferred payments be made to the payee in
7-12 accordance with the terms of the structured settlement; and
7-13 (ii) a court or government authority, other than
7-14 the court or responsible administrative authority from which
7-15 authorization of the transfer is sought under this article, which
7-16 previously approved the structured settlement; and
7-17 (B) signed originals of all approvals have been filed
7-18 with the court or responsible administrative authority from which
7-19 authorization of the transfer is sought, and originals or copies
7-20 have been furnished to all interested parties; and
7-21 (6) the transferee has given written notice of the
7-22 transferee's name, address and taxpayer identification number to
7-23 the annuity issuer and the structured settlement obligor and has
7-24 filed a copy of such notice with the court or responsible
7-25 administrative authority.
7-26 Sec. 3. APPROVAL OF TRANSFERS. (a) An application for
8-1 authorization of a transfer of structured settlement payment rights
8-2 shall be made by the transferee and may be brought in the
8-3 appropriate state court of original jurisdiction in the county in
8-4 which the payee or the structured settlement obligor or the annuity
8-5 issuer or any other party to the structured settlement agreement or
8-6 any other interested party resides or in a court or before a
8-7 responsible administrative authority which approved the structured
8-8 settlement agreement.
8-9 (b) Not less than twenty (20) days prior to the scheduled
8-10 hearing on an application for authorization of a transfer of
8-11 structured settlement payment rights, the transferee shall file
8-12 with the court or responsible administrative authority and serve on
8-13 any other government authority which previously approved the
8-14 structured settlement, on all interested parties, a notice of the
8-15 proposed transfer and the application for its authorization,
8-16 including in such notice:
8-17 (1) a copy of the transferee's application;
8-18 (2) a copy of the transfer agreement;
8-19 (3) a copy of the disclosure statement;
8-20 (4) notification that any interested party is entitled
8-21 to support, oppose or otherwise respond to the transferee's
8-22 application, either in person or by counsel, by submitting written
8-23 comments to the court or responsible administrative authority or by
8-24 participating in the hearing; and
8-25 (5) notification of the time and place of the hearing
8-26 and notification of the manner in which and the time by which
9-1 written responses to the application must be filed (which shall be
9-2 not less than fifteen (15) days after service of the transferee's
9-3 notice) to be considered by the court or responsible administrative
9-4 authority.
9-5 (c) The interested parties shall have standing to raise,
9-6 appear and be heard on any matter relating to an application for
9-7 authorization of a transfer of structured settlement payment
9-8 rights.
9-9 Sec. 4. NO WAIVER; NO PENALTIES. (a) The provisions of
9-10 this article may not be waived.
9-11 (b) No payee who proposes to make a transfer of structured
9-12 settlement payment rights shall incur any penalty, forfeit any
9-13 application fee or other payment, or otherwise incur any liability
9-14 to the proposed transferee based on any failure of such transfer to
9-15 satisfy the conditions of this article.
9-16 Sec. 5. CONSTRUCTION. Nothing contained in this article
9-17 shall be construed to authorize any transfer of structured
9-18 settlement payment rights in contravention of applicable law or to
9-19 give effect to any transfer of structured settlement payment rights
9-20 that is invalid under applicable law.
9-21 SECTION 2. This Act takes effect September 1, 1999. This
9-22 Act shall apply to any transfer of structured settlement payment
9-23 rights under a transfer agreement entered into on or after the date
9-24 of enactment; provided, however, that nothing contained in this Act
9-25 shall imply that any transfer under a transfer agreement reached
9-26 before such date is valid.
10-1 SECTION 3. The importance of this legislation and the
10-2 crowded condition of the calendars in both houses create an
10-3 emergency and an imperative public necessity that the
10-4 constitutional rule requiring bills to be read on three several
10-5 days in each house be suspended, and this rule is hereby suspended.