H.R. 2884 -a bill titled "Victims of Terrorism Tax Relief Act of 2001" that President Bush signed into law on January 22,2002 -now provides 100% tax exemption for the recipients who must sell their structured settlement payments to address unanticipated financial needs.

As we have detailed elsewhere in a document titled Will I be taxed if I have to sell my structured settlement due to hardship?, this bill does require the recipients to conclusively demonstrate to the court that they are indeed faced with significant unanticipated hardships that would justify them to consider trading off their periodic payments revenue stream in lieu of a lump sum payment.

In other words, in order for a court to approve a factoring transaction being requested by a recipient, the burden of proof to demonstrate necessary and sufficient cause is upon the recipient.

As it is stipulated in the aforementioned bill, for the otherwise mandatory 40% tax to be waived off, the recipient must seek an approval -a court order from a judge. The aforementioned bill further requires that all such requests have to be in full compliance with all other applicable State and Federal laws.

This bill seems to strike a good balance between the needs of a recipient that is faced with unforeseen circumstances and challenges; and the need to prevent or discourage structured payment recipients from unnecessarily or irresponsibly selling (factoring or discounting) off and thereby jeopardizing the safety net provided by their structured settlement periodic payment plans.