Sponsors (47)
The bill clarifies and tightens tax treatment and reporting of settlement fund payments—improving IRS administration and public transparency—while increasing tax liabilities, reducing privacy for claimants, and imposing new compliance costs and penalties on trustees and recipients.
Taxpayers who receive specified settlement payments: will have clearer, statutory tax treatment and reporting so recipients know which payments are taxable and how they will be treated for tax purposes.
IRS and tax administrators: gain explicit statutory authority, cross-references, and consolidated data on settlement payments to improve enforcement, reduce underreporting, and simplify administration.
Recipients and the public: will have faster public access to returns and clearer recipient statements identifying taxable amounts, enabling public oversight and helping recipients file accurate returns.
Taxpayers receiving settlement payments: face a new tax on specified settlement fund payments and lose the ability to deduct those payments under section 275(a)(6), increasing the after-tax cost of settlements.
Recipients of settlements and claimants in sensitive matters: risk public disclosure of names and payment amounts because returns are made publicly available, which could violate privacy and deter people from pursuing settlements.
Trustees, fiduciaries, and settlement administrators: must collect extra information, prepare returns, furnish statements to each recipient, and face administrative costs and operational burdens to comply with new reporting rules.
Based on analysis of 3 sections of legislative text.
Imposes a new tax on specified settlement fund payments, requires fiduciary reporting to the IRS and recipients, and adds penalties for noncompliance.
Official title: To amend the Internal Revenue Code of 1986 to impose a tax on specified settlement fund payments, and for other purposes.
Introduced May 19, 2026 by Michael Thompson · Last progress May 19, 2026
Creates a new federal tax on certain settlement distributions paid from so-called “specified settlement funds,” requires fiduciaries (trustees/administrators) who make those payments to report payee names and amounts to the IRS and to recipients, and imposes new penalties for failure to pay the tax or to file the required reports. The tax, reporting requirement, and new penalties apply to amounts paid on or after May 20, 2026, and Treasury must make reports publicly available within one month of receipt.