What does Preamble of S 1821 do?

This bill proposes to amend the Internal Revenue Code of 1986. The proposed amendment establishes a tax on income from litigation. This tax applies to income received by third-party entities. These third-party entities provided financing for the litigation.

What does SHORT TITLE. of S 1821 do?

This bill is formally titled the Tackling Predatory Litigation Funding Act.

What does LITIGATION FINANCING. of S 1821 do?

This section amends the Internal Revenue Code of 1986 by adding a new chapter, Chapter 50B, titled 'Litigation Financing'. A tax is imposed on qualified litigation proceeds received by a covered party, calculated as the applicable percentage. The applicable percentage is the highest rate of tax imposed by section 1 plus 3.8 percentage points. The tax is applied at the entity level for pass-thru entities like partnerships and S corporations. The term 'covered party' refers to a third party receiving funds under a litigation financing agreement who is not an attorney. A 'litigation financing agreement' is a written agreement providing funds to a party or affiliated law firm in exchange for an interest in the proceeds of a civil action. Certain agreements are excluded, including those with a total funding amount less than $10,000 or those with limited repayment rights. Qualified litigation proceeds are realized gains, net income, or other profit derived from a litigation financing agreement. Applicable persons, such as named parties or affiliated law firms, are required to deduct and withhold 50 percent of the applicable percentage from litigation proceeds. The amendments apply to taxable years beginning after December 31, 2025.

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Tackling Predatory Litigation Funding Act — S. 1821

Last updated: 5/20/2025 · Introduced: 5/20/2025

Author: Thomas Tillis (R-NC)

TL;DR (AI)

This bill establishes a tax on income received by third-party entities that finance litigation, excluding agreements with funding amounts under $10,000 or limited repayment rights.
The tax rate is calculated as the highest federal income tax rate plus 3.8 percentage points, applied at the entity level.
Applicable persons are required to withhold 50 percent of the applicable percentage from litigation proceeds.

119th Congressin committeeHR. 3512(In Committee)Official page

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Other Sections

Includes provisions on preamble, short title., and 1 more.

3 sections

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