Tackling Predatory Litigation Funding Act
Analysis under review: This bill has generated analysis that may be too generic or incomplete. Clause-level evidence remains available below.
Summary
This bill creates a new tax on third-party litigation financing. Entities that invest in lawsuits in exchange for a share of the proceeds would be taxed at the highest individual income tax rate plus 3.8 percentage points on their litigation-related income. The tax applies to any covered party, including individuals, corporations, partnerships, and sovereign wealth funds, both domestic and foreign. The bill also requires withholding at 50% of the applicable rate from litigation proceeds, removes litigation financing gains from capital asset treatment, and prevents netting of litigation gains against other losses. Small agreements under ,000 and standard loans with interest rates below twice the 30-year Treasury rate are exempted.
Evidence Chain:
This summary is generated from the full bill text using AI analysis. Expand "Detailed Analysis" below for identified beneficiaries/burden bearers.
At a Glance
What This Bill Does
Impose a punitive tax on third-party litigation financing income, targeting entities that fund lawsuits in exchange for a share of proceeds, to discourage predatory litigation funding practices.
Who Benefits
- Defendants in lawsuits (reduced litigation financing availability)
- Insurance companies
- Large corporations facing class action suits
Who Bears Costs
- Third-party litigation funders
- Hedge funds and private equity with litigation portfolios
- Sovereign wealth funds
Key Policy Areas
{'domain': 'Tax', 'evidence': 'Creates new Chapter 50B of the Internal Revenue Code imposing tax equal to the highest individual rate plus 3.8 percentage points on qualified litigation proceeds'}, {'domain': 'Legal', 'evidence': 'Regulates litigation financing agreements and establishes withholding requirements on litigation proceeds'}, {'domain': 'Finance', 'evidence': 'Targets third-party litigation funders including sovereign wealth funds and pass-through entities'}
Primary Purpose
Impose a punitive tax on third-party litigation financing income, targeting entities that fund lawsuits in exchange for a share of proceeds, to discourage predatory litigation funding practices.
Policy Domains
Legislative Strategy
"Use the tax code to impose punitive tax rates on litigation financing to discourage third-party lawsuit funding"
Sponsors
Legislative Progress
In CommitteeIntroduced in Senate
Mr. Tillis introduced the following bill; which was read twice …
Read twice and referred to the Committee on Finance.
Stakeholder Effects
cui bono?How this legislation distributes effects. Mention counts reflect frequency, not effect magnitude.
Defendants in funded lawsuits, Law firms handling funded litigation, Named parties in funded civil actions
Positive-direction: Defendants in funded lawsuits
Negative-direction: Law firms handling funded litigation, Named parties in funded civil actions, Plaintiffs relying on litigation financing
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
- "the_secretary"
- → Secretary of the Treasury
Key Definitions
Terms defined in this bill
Any civil action, administrative proceeding, claim, or cause of action
Any third party to a civil action that receives funds pursuant to a litigation financing agreement and is not an attorney representing a party
Written agreement whereby a third party provides funds to a named party or law firm and creates a direct or collateralized interest in the proceeds
Realized gains, net income, or other profit from litigation financing agreements, with no netting or exclusions allowed
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology