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CONGRESSIONAL RECORD—SENATE S11340

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CONGRESSIONAL RECORD—SENATE S11340 Powered By Docstoc
					S11340                                      CONGRESSIONAL RECORD — SENATE                                               October 2, 1998
island community. Thus, a passenger                 tured settlement payments in factoring      jured victims. Recent cases involve a
flying to or from such a community                  transactions, and for other purposes; to    quadriplegic in Oklahoma, a paraplegic
would pay a tax equal to 10% of the                 the Committee on Finance.                   in Texas, a person in Connecticut with
price of a ticket. It is important to                STRUCTURED SETTLEMENT PROTECTION ACT       traumatic brain injuries dating from
note that this is less favorable than the           ∑ Mr. CHAFEE. Mr. President, today I        childhood, and an injured worker re-
exemption currently provided to pas-                am introducing legislation, together        ceiving workers’ compensation in Mis-
sengers to and from rural airports.                 with Senators BAUCUS, GRASSLEY,             sissippi. Realizing the long-term risk
  I encourage my colleagues to join me              MOSELEY-BRAUN, ROCKEFELLER, and             being inflicted on these seriously-in-
as cosponsors of this important health              KERREY of Nebraska, the Structured          jured individuals, this legislation has
initiative.                                         Settlement Protection Act. Companion        the active support of the National Spi-
  Mr. President, I ask unanimous con-               legislation has been introduced in the      nal Cord Injury Association, as well as
sent that the text of the bill be printed           House as H.R. 4314, cosponsored by Rep-     the American Association of Persons
in the RECORD.                                      resentative CLAY SHAW and PETE              With Disabilities (AAPD).
  There being no objection, the bill was            STARK and a broad bipartisan group of         The National Spinal Cord Injury As-
ordered to be printed in the RECORD, as             members of the House Ways and Means         sociation recently wrote to the Chair-
follows:                                            Committee.                                  man of the Finance Committee strong-
                     S. 2542                           The Act protects structured settle-      ly supporting the legislation. They
  Be it enacted by the Senate and House of Rep-     ments and the injured victims who are       state: ‘‘[o]ver the past 16 years, struc-
resentatives of the United States of America in     the recipients of the structured settle-    tured settlements have proven to be an
Congress assembled,                                 ment payments from the problems             ideal method for ensuring that persons
SECTION   1.    MODIFICATION OF TAX ON AIR          caused by a growing practice known as       with disabilities, particularly minors,
               TRANSPORTATION TO AND FROM           structured settlement factoring.
               SPARSELY POPULATED ISLANDS.                                                      are not tempted to squander resources
                                                       Structured settlements were devel-       designed to last years or even a life-
  (a) IN GENERAL.—Subsection (e) of section         oped because of the pitfalls associated
4261 of the Internal Revenue Code of 1986 is                                                    time. That is why the National Spinal
                                                    with the traditional lump sum form of       Cord Injury Association is so deeply
amended by redesignating paragraphs (4) and
(5) as paragraphs (5) and (6) and by inserting      recovery in serious personal injury         concerned about the emergence of com-
after paragraph (3) the following new para-         cases, where all too often a lump sum       panies that purchase payments in-
graph:                                              meant to last for decades or even a life-   tended for disabled persons at drastic
  ‘‘(4) SEGMENTS TO AND FROM CERTAIN ISLAND         time swiftly eroded away. Structured        discount. This strikes at the heart of
AIRPORTS.—                                          settlements have proven to be a very
  ‘‘(A) EXCEPTION FROM SEGMENT TAX.—The
                                                                                                the security Congress intended when it
                                                    valuable tool. They provide long-term       created structured settlements.’’
tax imposed by subsection (b)(1) shall not          financial security in the form of an as-
apply to any domestic segment beginning or
                                                    sured stream of payments to persons           It is appropriate to address this prob-
ending at an airport which is a qualified is-                                                   lem through the federal tax system be-
land airport for the calendar year in which         suffering serious, often profoundly dis-
                                                    abling, physical injuries. These pay-       cause these purchases directly con-
such segment begins or ends (as the case                                                        travene the Congressional policy re-
may be).                                            ments enable the recipients to meet
                                                    ongoing medical and basic living ex-        flected in the structured settlement
  ‘‘(B) QUALIFIED ISLAND AIRPORT.—For pur-
poses of this paragraph, the term ‘qualified        penses without having to resort to the      tax rules and jeopardize the long-term
island airport’ means, with respect to any          social safety net.                          financial security that Congress in-
calendar year, any airport if—                         Congress has adopted special tax         tended to provide for the injured vic-
  ‘‘(i) such airport is located on an island        rules to encourage and govern the use       tim. This problem is nationwide, and it
having a population of 20,000 or less (deter-                                                   is growing rapidly.
                                                    of structured settlements in physical
mined under the 1990 decennial census), and
                                                    injury cases. By encouraging the use of       Accordingly, the legislation we are
  ‘‘(ii) during the second preceding calendar
year—                                               structured     settlements     Congress     introducing would impose substantial
  ‘‘(I) there were 400,000 or fewer commercial      sought to shield victims and their fam-     penalty tax on a factoring company
passengers departing by air from such air-          ilies from pressures to prematurely dis-    that purchases the structured settle-
port, and                                           sipate their recoveries. Structured set-    ment payments from the injured vic-
  ‘‘(II) 50 percent or more of the initial flight   tlement payments are nonassignable.         tim. This is a penalty, not a tax in-
segments of such commercial passengers are          This is consistent with worker’s com-       crease. Similar penalties are imposed
100 miles or less.                                                                              in a variety of other contexts in the In-
                                                    pensation payments and various types
  ‘‘(C) TICKET TAX.—In the case of any do-
                                                    of Federal disability payments which        ternal Revenue Code to discourage
mestic segment beginning or ending at an
airport which is a qualified island airport for     are also non-assignable under applica-      transactions that undermine Code pro-
the calendar year in which such segment be-         ble law. In each case, this is done to      visions, such as private foundation pro-
gins or ends (as the case may be), subsection       preserve the injured person’s long-term     hibited transactions and greenmail.
(a) shall be applied by substituting ‘10 per-       financial security.                         The factoring company would pay the
cent’ for ‘7.5 percent’ and paragraph (6) shall        I am very concerned that in recent       penalty only if it engages in the trans-
not apply. A rule similar to the rule of para-      months there has been sharp growth in       action that Congress has sought to dis-
graph (1)(C)(ii) shall apply for purposes of        so-called structured settlement factor-     courage. An exception is provided for
this subparagraph.’’
                                                    ing transactions. In these transactions,    genuine court-approved hardship cases
  (b) CONFORMING AMENDMENT.—Clause (i) of
section 4261(e)(1)(C) of such Code is amended       companies induce injured victims to         to protect the limited instances where
by striking ‘‘Paragraph (5)’’ and inserting         sell off future structured settlement       a true hardship warrants the sale of a
‘‘Paragraph (6)’’.                                  payments for a steeply-discounted           structured settlement.
  (c) EFFECTIVE DATE.—                              lump sum, thereby unraveling the              This bipartisan legislation, which is
  (1) IN GENERAL.—The amendments made by            structured settlement and the crucial       supported by the Treasury Depart-
this section shall apply to transportation be-      long-term financial security that it        ment, should be enacted as soon as pos-
ginning 7 days after the date of enactment of       provides to the injured victim. These
this Act.                                                                                       sible to stem this growing nationwide
  (2) TREATMENT OF AMOUNTS PAID.—The
                                                    factoring company purchases directly        problem.
amendments made by this section shall not           contravene the intent and policy of           Mr. President, I ask unanimous con-
apply to amounts paid before 7 days after the       Congress in enacting the special struc-     sent that the text of the bill and a
date of enactment of this Act.∑                     tured settlement tax rules. The Treas-      summary be printed in the RECORD.
                                                    ury Department shares these concerns
      By Mr. CHAFEE (for himself, Mr.                                                             There being no objection, the items
                                                    as is evidenced with a similar proposal
        BAUCUS, Mr. GRASSLEY, Ms.                                                               were ordered to be printed in the
                                                    included in the Administration’s FY
        MOSELEY-BRAUN, Mr. KERREY,                                                              RECORD, as follows:
                                                    1999 budget.
        and Mr. ROCKEFELLER):                          Court records from across the coun-                          S. 2543
  S. 2543. A bill to amend the Internal             try are shedding light on factoring           Be it enacted by the Senate and House of Rep-
Revenue Code of 1986 to impose an ex-               company purchases of structured set-        resentatives of the United States of America in
cise tax on persons who acquire struc-              tlement payments from gravely-in-           Congress assembled,

				
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