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					Page 2645                          TITLE 26—INTERNAL REVENUE CODE                                         § 5891

cluded in the provisions of the Revenue Act of 1987,                (A) the State in which the payee of the
Pub. L. 100–203, title X, to which such amendment re-             structured settlement is domiciled, or
lates, see section 2004(u) of Pub. L. 100–647, set out as a         (B) if there is no statute described in sub-
note under section 56 of this title.
                                                                  paragraph (A), the State in which either the
  Section 2004(o)(1)(B)(ii) of Pub. L. 100–647 provided
that: ‘‘The amendment made by clause (i) [amending                party to the structured settlement (includ-
this section] shall apply to transactions occurring on            ing an assignee under a qualified assignment
or after March 31, 1988.’’                                        under section 130) or the person issuing the
                                                                  funding asset for the structured settlement
                    EFFECTIVE DATE                                is domiciled or has its principal place of
  Section 10228(d) of Pub. L. 100–203 provided that: ‘‘The        business.
amendments made by this section [enacting this chap-
                                                                (4) Applicable State court
ter and amending section 275 of this title] shall apply
to consideration received after the date of the enact-            For purposes of this section—
ment of this Act [Dec. 22, 1987] in taxable years ending          (A) In general
after such date; except that such amendments shall not
apply in the case of any acquisition pursuant to a writ-            The term ‘‘applicable State court’’ means,
ten binding contract in effect on December 15, 1987, and          with respect to any applicable State statute,
at all times thereafter before the acquisition.’’                 a court of the State which enacted such stat-
       FACTORING TRANSACTIONS                                     (B) Special rule
                                                                    In the case of an applicable State statute
                                                                  described in paragraph (3)(B), such term also
5891.     Structured settlement factoring transactions.
                                                                  includes a court of the State in which the
§ 5891. Structured settlement factoring trans-                    payee of the structured settlement is domi-
    actions                                                       ciled.
                                                                (5) Qualified order dispositive
(a) Imposition of tax
                                                                  A qualified order shall be treated as disposi-
  There is hereby imposed on any person who ac-
                                                                tive for purposes of the exception under this
quires directly or indirectly structured settle-
ment payment rights in a structured settlement
factoring transaction a tax equal to 40 percent               (c) Definitions
of the factoring discount as determined under                   For purposes of this section—
subsection (c)(4) with respect to such factoring                (1) Structured settlement
                                                                  The term ‘‘structured settlement’’ means an
(b) Exception for certain approved transactions                 arrangement—
  (1) In general                                                    (A) which is established by—
     The tax under subsection (a) shall not apply                     (i) suit or agreement for the periodic
  in the case of a structured settlement factor-                    payment of damages excludable from the
  ing transaction in which the transfer of struc-                   gross income of the recipient under section
  tured settlement payment rights is approved                       104(a)(2), or
  in advance in a qualified order.                                    (ii) agreement for the periodic payment
                                                                    of compensation under any workers’ com-
  (2) Qualified order
                                                                    pensation law excludable from the gross
     For purposes of this section, the term                         income of the recipient under section
  ‘‘qualified order’’ means a final order, judg-                    104(a)(1), and
  ment, or decree which—
       (A) finds that the transfer described in                    (B) under which the periodic payments
     paragraph (1)—                                              are—
         (i) does not contravene any Federal or                      (i) of the character described in subpara-
       State statute or the order of any court or                  graphs (A) and (B) of section 130(c)(2), and
       responsible administrative authority, and                     (ii) payable by a person who is a party to
         (ii) is in the best interest of the payee,                the suit or agreement or to the workers’
       taking into account the welfare and sup-                    compensation claim or by a person who
       port of the payee’s dependents, and                         has assumed the liability for such periodic
                                                                   payments under a qualified assignment in
      (B) is issued—                                               accordance with section 130.
        (i) under the authority of an applicable               (2) Structured settlement payment rights
      State statute by an applicable State court,
      or                                                         The term ‘‘structured settlement payment
        (ii) by the responsible administrative au-             rights’’ means rights to receive payments
      thority (if any) which has exclusive juris-              under a structured settlement.
      diction over the underlying action or pro-               (3) Structured settlement factoring transaction
      ceeding which was resolved by means of                     (A) In general
      the structured settlement.
                                                                   The term ‘‘structured settlement factoring
  (3) Applicable State statute                                   transaction’’ means a transfer of structured
    For purposes of this section, the term ‘‘ap-                 settlement payment rights (including por-
  plicable State statute’’ means a statute pro-                  tions of structured settlement payments)
  viding for the entry of an order, judgment, or                 made for consideration by means of sale, as-
  decree described in paragraph (2)(A) which is                  signment, pledge, or other form of encum-
  enacted by—                                                    brance or alienation for consideration.

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