Sponsors (3)
The bill raises revenue and transparency by taxing settlement payments, requiring reporting, and strengthening enforcement, but it reduces recipients' net recoveries, increases privacy and legal risks, and imposes new compliance costs on trustees and payors.
People who receive settlement or trust-fund payments will have those payments formally subject to a new dedicated tax, raising federal revenue from these transactions.
Trustees, payors, and payees will face new reporting and written-statement requirements that increase transparency and help recipients correctly report taxable settlement income and avoid underpayment.
The bill adds criminal penalties for willful failure to pay or evade the settlement-related tax, strengthening enforcement and deterring deliberate noncompliance.
People who receive settlement payments will get smaller net recoveries because those payments are newly taxed and related deductions are disallowed.
Public disclosure of settlement-related returns within one month could make settlement amounts and potentially payee identities publicly available, risking privacy and reputational harm for recipients.
Stronger criminal penalties increase legal risk for recipients and payors and raise compliance costs (including potential prosecution or imprisonment for willful nonpayment or evasion).
Based on analysis of 3 sections of legislative text.
Imposes a new tax on specified settlement fund payments, disallows related deductions, requires fiduciaries to report payee names/amounts publicly, and creates civil and criminal penalties.
Official title: Amend the Internal Revenue Code of 1986 to impose a tax on specified settlement fund payments, and for other purposes.
Introduced May 21, 2026 by Ronald Lee Wyden · Last progress May 21, 2026
Imposes a new federal tax on certain payments from settlement funds and requires trustees or fiduciaries who make those payments to report payee details to the IRS, with the IRS required to make the returns public within one month. The law disallows related deductions, creates a criminal penalty for willful failure to pay or evade the new tax, and imposes a civil penalty for failure to file required reports. The tax and reporting rules apply to amounts paid on or after May 20, 2026; criminal and civil penalties apply for taxable years ending on or after that date. The bill changes income-tax deduction rules, adds a new Chapter to the Internal Revenue Code for the tax, and mandates public disclosure of filing information submitted by trustees and fiduciaries.