Tackling Predatory Litigation Funding Act
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Progress
Where this bill stands in the legislative process.
- Introduced
- Passed House
- Passed Senate
- To President
- Became Law
Overview
This bill, the Tackling Predatory Litigation Funding Act, aims to tax income received by third parties who provide financing for lawsuits. It establishes a new tax on ‘qualified litigation proceeds’ – profits earned by these third parties from litigation financing agreements. The tax is calculated as 3.8 percentage points plus the current top individual income tax rate. The bill also introduces withholding requirements for payments related to litigation financing, and clarifies definitions related to litigation financing agreements and qualified litigation proceeds, including an exclusion of certain types of litigation financing agreements.
Key provisions
- Imposes a tax on ‘qualified litigation proceeds’ received by third parties involved in litigation financing.
- The tax rate is calculated as the current top individual income tax rate plus 3.8 percentage points.
- Requires withholding of 50% of the tax on payments related to litigation financing.
- Defines ‘litigation financing agreement’ to cover various contractual arrangements related to litigation funding.
- Excludes certain types of litigation financing agreements from the definition, particularly those with limited funding amounts or specific repayment terms.
- Clarifies that ‘qualified litigation proceeds’ include realized gains and net income from litigation.
- Amends the definition of capital assets to include financial arrangements and proceeds from litigation financing agreements.
- Establishes a process for refunds and credits related to withheld tax.
Bill text
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