Historical Review of Changes Affecting Structured Settlements
1954 IRS Code Section 104 was created to ensure cash settlements of personal injury cases are tax exempt. It was revised to add settlements between periodic payments in 1983. 1960s The origin of periodic payments is associated with the Thalidomide tragedy of the 1960s (which caused severe birth defects), leading to more claims than the producers could cover. Periodic payments were made by way of a trust, compensating the injured party to a greater degree than could have been possible through a lump sum settlement. 1979 Revenue Ruling 79-220. This is a letter written by the IRS into the public which serves as a guideline to guarantee that payments will stream on personal injury, structured settlement cases. 1983 Referral Payment Act (Also called 97-473 and Section 130). This action made the various taxation rulings into legislation and made IRS Section 130 which allowed for the assignment of obligations to a third party. 1983 Private Ruling 8333035. This is a response from the IRS to a private party regarding the taxability of annuity benefits where the cost had been revealed. 1986 Tax Reform Act of 1986. This act split personal and physical injuries, allowing only physical injuries to be delegated under Section 130. Additionally, the act amended Section 72U, further defining the terms under which annuity owners of non-qualified and workers' compensation annuity policies would be taxed for the interest earned in any taxable year. Including only owners that aren't ordinary persons. 1988 The Technical and Miscellaneous Revenue Act of 1988 (TAMRA) eliminated language from Section 130 of the IRS Code that read"the assignee doesn't supply to the recipient of these payments rights against the assignee that are greater than those of a general creditor." So far, there's been no ruling by the IRS to assure us of correct procedures to follow to ensure there are no adverse tax consequences to the plaintiff when he or she's a secured creditor status. 1991 Private Ruling 9125017. This is an answer from the IRS to your private celebration concerning the taxability of annuity gains in which secured creditor standing along with a guarantee had been included. 1992 Personal Injury 9253045 was issued on a single case where the plaintiff attacked a security interest in the annuity contract by submitting notice in his condition and in the mission firm's state and had ownership of the annuity issued by Integrity Life. The IRS ruled that this would not cause him to be taxed on the present value of the annuity contract at the year where he received it. 1992 Department 468(B) covers in detail the taxation treatment of cash going in and out of Designated Settlement Funds and Qualified Settlement Funds. 1993 Revenue Procedure 93-34 enables physically hurt people receiving admissions from mass tort claims (468(B)) to structure their obligations and permits the fund to assign its duty to another party. 1996 Small Business Job Protection Act of 1996 eliminated the exception of damages from gross income on damages received on punitive and non-physical injury awards. Read the full article