,,ii #aai? ,,congress #a/ ,session ,s4 #ahba ,,9 ,,! ,,s5ate ,,( ,,! ,,unit$ ,,/ates ,may #bj1 #bjbe ,mr4 ,tillis introduc$ ! foll[+ bill2 :i* 0 read twice & ref]r$ to ! ,committee on ,f9ance ,a ,,bill ,to am5d ! ,int]nal ,rev5ue ,code ( #aihf to e/abli% a tax on income f litigation :i* is receiv$ by ?ird-p>ty entities t provid$ f9anc+ = su* litigation4 #a4 ,%ort title ,?is ,act may be cit$ z ! ,tackl+ ,pr$atory ,litigation ,fund+ ,act4 #b4 ,litigation f9anc+ 7a7 ,9 g5]al ,subtitle ,d ( ! ,int]nal ,rev5ue ,code ( #aihf is am5d$ by add+ at ! end ! foll[+ new *apt]3 #ej;,b ,litigation ,f9anc+ ,sec4 #ejjj;,e-#a4 ,tax impos$4 ,sec4 #ejjj;,e-#b4 ,def9itions4 ,sec4 #ejjj;,e-#c4 ,special rules4 #ejjj;,e-#a4 ,tax impos$ 7a7 ,9 g5]al ,a tax is h]eby impos$ = ea* taxable ye> 9 an am\nt equal to ! applicable p]c5tage ( any qualifi$ litigation proce$s receiv$ by a cov]$ p>ty4 7b7 ,applicable p]c5tage ,= purposes ( subsection 7a71 ) respect to any taxable ye>1 ! applicable p]c5tage %all be ! am\nt 7express$ z a p]c5tage7 equal to ! sum (-- 7#a7 ! highe/ rate ( tax impos$ by section #a = su* taxable ye>1 plus 7#b7 #c4h p]c5tage po9ts4 7c7 ,application ( tax = pass-,?ru entities ,9 ! case ( a cov]$ p>ty t is a p>tn]%ip1 ,s corporation1 or o!r pass-?ru entity1 ! tax impos$ "u subsection 7a7 %all be appli$ at ! entity level4 #ejjj;,e-#b4 ,def9itions ,9 ?is *apt]-- 7#a7 ,civil action 7,a7 ,9 g5]al ,! t]m civil action means any civil action1 adm9i/rative proce$+1 claim1 or cause ( action4 7,b7 ,multiple actions ,! t]m civil action may1 unless o!rwise indicat$1 include m ?an #a civil action4 7#b7 ,cov]$ p>ty 7,a7 ,9 g5]al ,! t]m cov]$ p>ty means1 ) respect to any civil action1 any ?ird p>ty 7includ+ an individual1 corporation1 p>tn]%ip1 or sov]eign weal? fund7 to su* action :i*-- 7i7 receives funds pursuant to a litigation f9anc+ agreem5t1 & 7ii7 is n an attorney repres5t+ a p>ty to su* civil action4 7,b7 ,inclusion ( dome/ic & =eign entities ,subp>agraph 7,a7 %all apply to any ?ird p>ty )\t reg>d to :e!r su* p>ty is creat$ or organiz$ 9 ! ,unit$ ,/ates or "u ! law ( ! ,unit$ ,/ates or ( any ,/ate4 7#c7 ,litigation f9anc+ agreem5t 7,a7 ,9 g5]al ,! t]m litigation f9anc+ agreem5t means1 ) respect to any civil action1 a writt5 agreem5t-- 7i7 :]eby a ?ird p>ty agrees to provide funds to "o ( ! nam$ p>ties or any law firm affiliat$ ) su* civil action1 & 7ii7 :i* creates a direct or collat]aliz$ int]e/ 9 ! proce$s ( su* action 7by settlem5t1 v]dict1 judgm5t or o!rwise7 :i*-- 7,i7 is bas$1 9 :ole or "p1 on a fund+-bas$ obligation to-- 7aa7 su* civil action1 7bb7 ! appe>+ c\nsel1 7cc7 any contractual co-c\nsel1 or 7dd7 ! law firm ( su* c\nsel or co-c\nsel1 & 7,,ii7 is execut$ )-- 7aa7 any attorney repres5t+ a p>ty to su* civil action1 7bb7 any co-c\nsel 9 ! litigation ) a cont+5t fee int]e/ 9 ! repres5tation ( su* p>ty1 7cc7 any ?ird p>ty t has a collat]al-bas$ int]e/ 9 ! cont+5cy fees ( ! c\nsel or co-c\nsel firm :i* is relat$1 9 :ole or "p1 to ! fees d]iv$ f repres5t+ su* p>ty1 or 7dd7 any nam$ p>ty 9 su* civil action4 7,b7 ,sub/antially simil> agreem5ts ,! t]m litigation f9anc+ agreem5t %all include any contract 7includ+ any option1 =w>d contract1 futures contract1 %ort position1 swap1 or simil> contract7 or o!r agreem5t :i*1 z det]m9$ by ! ,secret>y1 is sub/antially simil> to an agreem5t describ$ 9 subp>agraph 7,a74 7,c7 ,exceptions ,! t]m litigation f9anc+ agreem5t %all n include any agreem5t-- 7i7 "u :i* ! total am\nt ( funds describ$ 9 subp>agraph 7,a77i7 ) respect to an individual civil action is less ?an #aj1jjj1 or 7ii7 9 :i* ! ?ird p>ty describ$ 9 subp>agraph 7,a7-- 7,i7 has a "r to receive proce$s :i* are d]iv$ f1 or pursuant to1 su* agreem5t t are limit$ to-- 7aa7 repaym5t ( ! pr9cipal ( a loan1 7bb7 repaym5t ( ! pr9cipal ( a loan plus any int]e/ on su* loan1 provid$ t ! rate ( int]e/ does n exce$ ! great] (-- 7,,aa7 #g p]c5t1 or 7,,bb7 a rate equal to twice ! av]age annual yield on #cj-ye> ,unit$ ,/ates ,treasury securities 7z det]m9$ = ! ye> prec$+ ! date on :i* su* agreem5t 0 execut$71 or 7cc7 reimbursem5t ( attorney's fees1 or 7,,ii7 be>s a relation%ip describ$ 9 section #bfg7;b7 to ! nam$ p>ty receiv+ ! paym5t describ$ 9 subp>agraph 7,a77i74 7#d7 ,qualifi$ litigation proce$s 7,a7 ,9 g5]al ,! t]m qualifi$ litigation proce$s means1 ) respect to any taxable ye>1 an am\nt equal to ! realiz$ ga9s1 net income1 or o!r pr(it receiv$ by a cov]$ p>ty dur+ su* taxable ye> :i* is d]iv$ f1 or pursuant to1 any litigation f9anc+ agreem5t4 7,b7 ,anti-nett+ ,any ga9s1 income1 or pr(it describ$ 9 subp>agraph 7,a7 %all n be r$uc$ or (fset by any ord9>y or capital loss 9 ! taxable ye>4 7,c7 ,prohibition on exclusion ( c]ta9 am\nts ,9 det]m9+ ! am\nt ( realiz$ ga9 "u subp>agraph 7,a71 am\nts describ$ 9 section #ajd7;a77#b7 & #hib7;a77#a7 %all n be exclud$4 #ejjj;,e-#c4 ,special rules 7a7 ,)hold+ ( tax on litigation proce$s ,any applicable p]son hav+ ! control1 receipt1 or cu/ody ( any proce$s f a civil action 7by settlem5t1 judgm5t1 or o!rwise7 ) respect to :i* su* p]son _h ent]$ into a litigation f9anc+ agreem5t %all d$uct & )hold f su* proce$s a tax equal to #ej p]c5t ( ! applicable p]c5tage 7z det]m9$ "u section #ejjj;,e-#a7;b77 ( any paym5ts :i* are requir$ to be made to a ?ird p>ty pursuant to su* agreem5t4 7b7 ,applicable p]son ,= purposes ( ?is section1 ! t]m applicable p]son means any p]son :i*-- 7#a7 is a nam$ p>ty 9 a civil action or a law firm affiliat$ ) su* civil action1 & 7#b7 has ent]$ into a litigation f9anc+ agreem5t ) respect to su* civil action4 7c7 ,application ( )hold+ provisions 7#a7 ,liability = )held tax ,e p]son requir$ to d$uct & )hold any tax "u ?is *apt] is h]eby made liable = su* tax & is h]eby indemnifi$ aga9/ ! claims & dem&s ( any p]son = ! am\nt ( any paym5ts made 9 accordance ) ! provisions ( ?is *apt]4 7#b7 ,)held tax z cr$it to recipi5t ( qualifi$ litigation proce$s ,qualifi$ litigation proce$s on :i* any tax is requir$ to be )held at ! s\rce "u ?is *apt] %all be includ$ 9 ! return ( ! recipi5t ( su* proce$s1 b any am\nt ( tax s )held %all be cr$it$ aga9/ ! am\nt ( tax z comput$ 9 su* return4 7#c7 ,tax paid by recipi5t ( qualifi$ litigation proce$s ,if-- 7,a7 any p]son1 9 violation ( ! provisions ( ?is *apt]1 fails to d$uct & )hold any tax "u ?is *apt]1 & 7,b7 !reaft] ! tax aga9/ :i* su* tax may be cr$it$ is paid1 ! tax s requir$ to be d$uct$ & )held %all n be collect$ f su* p]son1 b ?is p>agraph %all 9 no case relieve su* p]son f liability = int]e/ or any p5alties or additions to ! tax o!rwise applicable 9 respect ( su* failure to d$uct & )hold4 7#d7 ,refunds & cr$its ) respect to )held tax ,:]e !re has be5 an ov]paym5t ( tax "u ?is *apt]1 any refund or cr$it made "u *apt] #fe %all be made to ! )hold+ ag5t unless ! am\nt ( su* tax 0 actually )held by ! )hold+ ag5t4 4 7b7 ,exclusion f def9ition ( capital asset ,section #abba7;a7 ( ! ,int]nal ,rev5ue ,code ( #aihf is am5d$-- 7#a7 9 p>agraph 7#g71 by /rik+ or at ! end1 7#b7 9 p>agraph 7#h71 by /rik+ ! p]iod at ! end & ins]t+ 2 or1 & 7#c7 by add+ at ! end ! foll[+ new p>agraph3 7#i7 any f9ancial arrangem5t creat$ by1 or any proce$s d]iv$ f1 a litigation f9anc+ agreem5t 7z def9$ "u section #ejjj;,e-#b74 4 7c7 ,removal f gross income ,"p ,,iii ( sub*apt] ,b ( *apt] #a ( ! ,int]nal ,rev5ue ,code ( #aihf is am5d$ by ins]t+ aft] section #aci;,i ! foll[+ new section3 #aci;,j4 ,qualifi$ litigation proce$s ,gross income %all n include any qualifi$ litigation proce$s 7z def9$ 9 section #ejjj;,e-#b74 4 7d7 ,cl]ical am5dm5ts 7#a7 ,section #ggja7;a77#af7 ( ! ,int]nal ,rev5ue ,code ( #aihf is am5d$ by ins]t+ #ejjj;,e-#c7;c77#a71 be=e #adda4 7#b7 ,! table ( *apt]s = subtitle ,d ( ! ,int]nal ,rev5ue ,code ( #aihf is am5d$ by ins]t+ aft] ! item relat+ to *apt] #ej;,a ! foll[+ new item3 ,*apt] #ej;,b--,litigation ,f9anc+ 4 7#c7 ,! table ( sections = "p ,,iii ( sub*apt] ,b ( *apt] #a ( su* ,code is am5d$ by ins]t+ aft] ! item relat+ to section #aci;,i ! foll[+ new item3 ,sec4 #aci;,j4 ,qualifi$ litigation proce$s4 4 7e7 ,effective date ,! am5dm5ts made by ?is section %all apply to taxable ye>s beg9n+ aft] ,decemb] #ca1 #bjbe4