New Article: Karen Czapanskiy, Tax Policy, Structured Settlements and Factoring: Making Exploitation Easy and Profitable, 93 University of Detroit Mercy Law Review 455 (2020).
Secondary sales of streams of income payable under structured settlements of tort claims are such a disfavored transaction that Congress imposed a punitive 40 percent excise tax on them. These “factoring transactions” are disfavored because it is believed that payees are likely to be exploited, to dissipate the lump sum which is paid for the stream of income and to become dependent on taxpayers when payees become indigent as a result. Congress was also persuaded that state courts could keep an eye on the problems, however, so the 40 percent excise tax is excused if the transaction is approved by a state court in a proceeding under a state “Structured Settlement Protection Act” or SSPA.
Poverty Law 