Forum shopping in the transfer of structured settlement payment rights transfer is not legal.
26 U.S.C. Section 5891 imposes a 40% excise tax on any structured settlement transfer that does not qualify for one of the exemptions set forth in Section 5891(b).
In order to qualify for one of the exemptions, a transfer petition must be brought in the state that the seller is domiciled in, if that state has a Structured Settlement Protection Act. The only state that does not have a Structured Settlement Protection Act is New Hampshire.
The Internal Revenue Service has published an “Excise Tax on Structured Settlement Factoring Transactions Audit Technique Guide” that states “Structured settlement factoring companies may sometimes be trying to avoid an unfavorable SSPA or an unfavorable forum in the payee’s home state. For example, if a factoring company seeks to acquire structured settlement payment rights from a payee domiciled in North Carolina (which limits the discounts and fees that factoring companies can charge), the factoring company may seek to have its transaction approved under the SSPA, and in the courts, of another state. If that occurs, the resulting order is not a qualified order for purposes of section 5891(b), and the factoring company is liable for the excise tax. ”
If you are a seller who was victimized by a factoring company that filed a transfer petition in a state that you did not reside in, please contact Edward Stone Law by email at firstname.lastname@example.org or by phone at (203) 504-8425.