Structured Settlement Protection Act was enacted to discourage structured settlement payments factoring transactions trade. It was introduced to protect structured settlements and the injured victims from the problems caused by a growing trade commonly known as structured settlement factoring.

By imposing a stringent excise tax on persons who acquire structured settlement payments in factoring transactions, the Congress was trying to curb the structured settlement transactions trade that was (generally) being perceived to be against the very legislative intent that created structured settlements in the first place.

Purchases of structured settlement payments by factoring companies was not only considered to be directly subverting the Congressional policy underlying structured settlements, it was generally being believed that those transactions were not in the best interest of most injured persons.

As the result of the above concerns, amendment were introduced to modify the applicable tax code so as to impose stringent excise tax on individuals who acquire structured settlement payments in factoring transactions. In order to accommodate those rare, but genuine cases involving recipients experiencing genuine, unanticipated court-approved hardships, provisions were included to allow exemption for those rare cases from aforementioned excise tax penalty.

The amendments to the tax code sought to impose on the factoring companies (i.e. entities that directly or indirectly acquires structured settlement payments from the injured victims) an excise tax equal to 50 percent of the difference between (a) the total amount of the structured settlement payments purchased by the factoring company, and (b) the (discounted) lump sum amount actually being paid by the factoring company to the injured party.

The aforementioned excise was to apply to all factoring transactions involving structured settlements -not only to tort cases, but also to periodic payment plans involving workers' compensation cases.