04/14/2003 01:01 PM Senate JUD

           HB  64-PURCHASE OF STRUCTURED SETTLEMENTS                                                                        
                                                                                                                                
CHAIR SEEKINS announced HB 64 to be up for consideration.                                                                       
                                                                                                                                
MR. PAUL LABOLLE, staff to Representative Foster, said HB 64                                                                    
sets up state oversight to the transfer of structured                                                                           
settlements.                                                                                                                    
                                                                                                                                
     There  are three  primary reasons  to do  this. One  is                                                                    
     consumer   protection.  In   this   state,  we've   had                                                                    
     factoring  companies  acquiring structured  settlements                                                                    
     from payees at  discounted rates as low as  20 cents on                                                                    
     the dollar.  Once that  happens, on  top of  that, they                                                                    
     now  have   to  pay   tax,  whereas  as   a  structured                                                                    
     settlement in and of itself is a tax free settlement.                                                                      
                                                                                                                                
     What this does is move  you into the next reason, which                                                                    
     is the  good of  the state. Structured  settlements are                                                                    
     primarily set  up to keep  a disabled person  who can't                                                                    
     work in a  flow of income so that they  do not become a                                                                    
     burden on the  state. If the transfer is  made and they                                                                    
     run out of  money, that person now becomes  a burden on                                                                    
     the state and  the second reason that this  is good for                                                                    
     the state  is many of these  structured settlements are                                                                    
     written in a  way that makes them  non transferable and                                                                    
     currently   we  have   transfers  happening   that  are                                                                    
     technically  legal, but  there is  no state  oversight.                                                                    
     So, nobody is watching what is happening.                                                                                  
                                                                                                                                
     The third  reason is  that it  conforms to  federal tax                                                                    
     law, which came out last  year and imposes a 40 percent                                                                    
     prohibitive  tax  on  structured  settlement  transfers                                                                    
     unless they  are approved by  a qualified  order, which                                                                    
     is issued by a state.                                                                                                      
                                                                                                                                
SENATOR OGAN asked for an example of a structured settlement.                                                                   
                                                                                                                                
MR. LABOLLE replied that in most cases, they are a personal                                                                     
injury settlement, like from a car crash.                                                                                       
                                                                                                                                
SENATOR OGAN asked if some operators are preying on people.                                                                     
                                                                                                                                
MR.  LABOLLE replied  they have  a lot  of anecdotal  evidence of                                                               
that, but that is not  happening currently because of the federal                                                               
tax  law, which  has  effectively  put a  halt  on any  transfers                                                               
because of the 40 percent tax on the discounted value.                                                                          
                                                                                                                                
SENATOR OGAN asked why there is no fiscal note.                                                                                 
                                                                                                                                
MR. LABOLLE  explained there  is a zero  fiscal note  because the                                                               
Alaska  State Court  does not  anticipate there  to be  enough to                                                               
justify a cost and the numbers  would be absorbed into the normal                                                               
workload.                                                                                                                       
                                                                                                                                
CHAIR SEEKINS said he believes the legislation has merit.                                                                       
                                                                                                                                
SENATOR  THERRIAULT  asked if  the  federal  law prohibiting  any                                                               
transfers was in place until the state stepped in.                                                                              
                                                                                                                                
MR. LABOLLE  replied that is  correct and referenced the  Tax Law                                                               
in Chapter 55 of Public Law 107-134, Section (a).                                                                               
                                                                                                                                
SENATOR THERRIAULT  motioned to pass CSHB  64(JUD) from committee                                                               
with attached fiscal notes. There was  no objection and it was so                                                               
ordered.