S.B. No. 626

AN ACT

relating to lottery winnings, including assignment of winnings, periodic payments of winnings, and the deduction of child support delinquency amounts from winnings paid to a prize winner.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter I, Chapter 466, Government Code, is amended by adding Section 466.4001 to read as follows:

Sec. 466.4001. DEFINITION. In this subchapter, "prize winner" means a person who presents a valid winning ticket, claims a lottery prize, and is recognized by the commission as the person entitled to receive lottery prize payments. The term does not include an assignee of a lottery prize.

SECTION 2. Subsection (b), Section 466.406, Government Code, is amended to read as follows:

(b) Payment of prize payments not previously assigned as provided by this section or Section 466.410 shall be made to the estate of a deceased prize winner [prizewinner] if the prize winner [prizewinner] was an individual.

SECTION 3. Section 466.407, Government Code, is amended by amending Subsections (a) and (b) and adding Subsection (a-1) to read as follows:

(a) The executive director shall deduct the amount of a delinquent tax or other money from the winnings of a prize winner [person] who has been finally determined to be:

(1) delinquent in the payment of a tax or other money to a state agency and that delinquency is reported to [collected by] the comptroller under Section 403.055[, the Texas Workforce Commission, or the Texas Alcoholic Beverage Commission];

(2) [delinquent in making child support payments administered or collected by the attorney general;

[(3) delinquent in reimbursing the Texas Department of Human Services for a benefit granted in error under the food stamp program or the program of financial assistance under Chapter 31, Human Resources Code;

[(4)] in default on a loan made under Chapter 52, Education Code; or

(3) [(5)] in default on a loan guaranteed under Chapter 57, Education Code.

(a-1) The executive director shall deduct delinquent child support payments from the winnings of a prize winner in the amount of the delinquency as determined by a court or a Title IV-D agency under Chapter 231, Family Code.

(b) If the [a person's] winnings of a prize winner exceed the amount of a delinquency under Subsection (a) or (a-1), the director shall pay the balance to the prize winner [person]. The director shall transfer the amount deducted to the appropriate agency or to the state disbursement unit under Chapter 234, Family Code, as applicable.

SECTION 4. Section 466.4075, Government Code, as added by Chapter 1104 (H.B. 2424), Acts of the 75th Legislature, Regular Session, 1997, is amended to read as follows:

Sec. 466.4075. DEDUCTIONS OF CHILD SUPPORT FROM CERTAIN LOTTERY WINNINGS. (a) This section applies only to a prize that is [required to be paid in periodic installments and is] awarded by the director under Section 466.402(b), including a prize paid in periodic installments.

(b) In the event of a single payment, the executive director shall deduct from winnings of the prize winner an amount for delinquent child support owed by the prize winner if the executive director has been provided with a certified copy of a court order or a writ of withholding issued under Chapter 158, Family Code, or notice of a child support lien created under Subchapter G, Chapter 157, Family Code.

(c) If the prize is paid in periodic installments, the [The] executive director shall deduct [an amount a court has ordered a person to pay as child support] from [a person's] periodic installment winnings paid to a prize winner amounts owed by the prize winner for child support if the executive director has been provided with a certified copy of a court order or a writ of withholding issued under Chapter 158, Family Code, or notice of a child support lien created under Subchapter G, Chapter 157, Family Code. This subsection does not apply to the payment of amounts to a person to whom the prize winner assigns the right to receive prize payments under Section 466.410.

(d) [(c)] The court order, writ of withholding, or notice of a child support lien provided under Subsection (c) must direct child support to be paid in the manner in which the periodic installment prize is paid. The executive director is not required to receive the court order, the writ of withholding, or notice of child support lien until the executive director determines there is a periodic installment prize to which the prize winner is entitled.

(e) [(d)] If the [a person's] winnings of a prize winner exceed the amount deducted under Subsection (b) or (c) and Section 466.407 or any other section of this chapter allowing a deduction from the winnings of a prize winner, the executive director shall pay the balance to the prize winner [person]. The executive director shall transfer the money deducted under Subsection (b) or (c) to the appropriate person as determined by court order, the clerk of the court that issued the order for placement in the registry of the court, or the state disbursement unit under Chapter 234, Family Code, as appropriate.

(f) [(e)] The commission may [shall] adopt rules necessary to administer [under] this section [that:

[(1) allow a person with a court order under Chapter 157 or 158, Family Code, to file copies of the order with the commission; and

[(2) describe the procedures used by the commission to compare the list of persons winning periodic installment prizes under Section 466.402(b) with a list of obligors compiled from orders filed under Subdivision (1) and to make the deductions required under this section].

(g) Section 9.406, Business & Commerce Code, does not apply to periodic payments of lottery prize winnings under this section.

SECTION 5. Section 466.410, Government Code, is amended by amending Subsections (a), (b), (e), and (i) and adding Subsection (k) to read as follows:

(a) A person may assign, in whole or in part, the right to receive prize payments that are paid by the commission in installments over time if the assignment is made to a person designated by an order of a district court of Travis County, except that a person may not assign the right to receive prize payments if the person is subject to a child support order and is delinquent in making support payments under that order [installment prize payments due within the final two years of the prize payment schedule may not be assigned].

(b) A district court shall issue an order approving a voluntary assignment and directing the commission to direct prize payments in whole or in part to the assignee if:

(1) a copy of the petition for the order and copies of all notices of any hearing in the matter have been served on the executive director not later than 20 days prior to any hearing or entry of any order. The commission may intervene in a proceeding to protect the interests of the commission but shall not be considered an indispensable or necessary party. A petition filed under this section shall include in the caption the prize winner's [prizewinner's] name as it appears on the lottery claim form;

(2) the assignment is in writing, executed by the assignor and assignee (or designated agent), and by its terms subject to the laws of this state; and

(3) the assignor provides a sworn and notarized affidavit stating that the assignor:

(A) is of sound mind, over 18 years of age, is in full command of the person's faculties, and is not acting under duress;

(B) is not delinquent in payment of child support under a court or administrative order issued in this state or another state;

(C) has been advised regarding the assignment by independent legal counsel and has had the opportunity to receive independent financial and tax advice concerning the effects of the assignment;

(D) [(C)] understands that the assignor will not receive the prize payments, or portions of the prize payments, for the assigned years;

(E) [(D)] understands and agrees that with regard to the assigned payments, the state, the commission, and its officials and employees will have no further liability or responsibility to make the assigned payments to the assignor;

(F) [(E)] has been provided a one-page written disclosure statement stating, in boldfaced type, 14 points or larger:

(i) the payments being assigned, by amounts and payment dates;

(ii) the purchase price being paid, if any;

(iii) if a purchase price is paid, the rate of discount to the present value of the prize, assuming daily compounding and funding on the contract date; and

(iv) the amount, if any, of any origination or closing fees that will be charged to the assignor; and

(G) [(F)] was advised in writing, at the time the assignment was signed, that the assignor had the right to cancel without any further obligation not later than the third business day after the date the assignment was signed.

(e) The court order shall include specific findings as to compliance with the requirements of Subsections (b), (c), and (d) and shall specify the prize payment or payments assigned, or any portion thereof, including the dates and amounts of the payments to be assigned, the years in which each payment is to begin and end, the gross amount of the annual payments assigned before taxes, and the [prizewinner's] name of the prize winner as it appears on the lottery claim form[, the assignor's social security or tax identification number, and, if applicable, the citizenship or resident alien number of the assignee if an individual].

(i) Notwithstanding any other provision of this section, there will be no right to assign prize payments following:

(1) the issuance, by the Internal Revenue Service, of a technical rule letter, revenue ruling, or other public ruling of the Internal Revenue Service that determines that, based on the right of assignment as provided by this section, a lottery prize winner [prizewinner] who does not assign prize payments would be subject to an immediate income tax liability for the value of the entire prize rather than annual income tax liability for each installment when paid; or

(2) the issuance by a court of a published decision holding that, based on the right of assignment as provided by this section, a lottery prize winner [prizewinner] who does not assign prize payments would be subject to an immediate income tax liability for the value of the entire prize rather than annual income tax liability for each installment when paid.

(k) Section 9.406, Business & Commerce Code, does not apply to periodic payments of lottery prize winnings under this section.

SECTION 6. (a) Subsection (c), Section 466.407, Government Code, is repealed.

(b) Section 466.4075, Government Code, as added by Chapter 135 (H.B. 566), Acts of the 75th Legislature, Regular Session, 1997, is repealed.

SECTION 7. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2011.

______________________________ ______________________________

President of the Senate Speaker of the House

I hereby certify that S.B. No. 626 passed the Senate on April 5, 2011, by the following vote: Yeas 31, Nays 0.

______________________________ Secretary of the Senate

I hereby certify that S.B. No. 626 passed the House on May 23, 2011, by the following vote: Yeas 142, Nays 0, one present not voting.

______________________________ Chief Clerk of the House

Approved:

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Date

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Governor