No CRS summary available for this bill.
This section establishes a new chapter in the Internal Revenue Code imposing a tax, for each taxable year, equal to the highest individual income tax rate plus 3.8 percentage points on qualified litigation proceeds (i.e., realized gains, net income, or profit, without loss netting or exclusions under IRC §§104(a)(2) or 892(a)(1)) received by a covered party from a litigation financing agreement. A covered party is any third party (domestic or foreign, including individuals, corporations, partnerships, or sovereign wealth funds, but not attorneys) receiving funds under such an agreement, which is defined as a written contract providing funds to a named party or affiliated law firm in exchange for a direct or collateralized interest in civil action proceeds (broadly including administrative proceedings or claims), subject to exceptions for agreements involving less than $10,000 or limited to principal repayment, principal plus interest not exceeding the greater of 7% or twice the average annual yield on 30-year U.S. Treasury securities from the prior year, or payments to related parties under IRC §267(b). For pass-thru entities, the tax applies at the entity level; additionally, named parties or affiliated law firms entering such agreements must withhold a tax equal to 50% of the applicable percentage from payments to third parties.