Litigation Finance Fee Lowered in New Version of Senate Tax Bill

A proposed new tax on the litigation finance industry was lowered by more than a fifth in a new version of the Senate Republican tax bill unveiled Saturday.

The tax on litigation finance proceeds proposed by Sen. Thom Tillis (R-NC) is 31.8%, down from 40.8% in the first version of the bill posted earlier this month.

The change is one of several in the new version of the bill that Senate leaders are making in a bid to try to meet a July 4 deadline for passage set by President Donald Trump. But proponents of the litigation finance industry, in which investors pay for lawsuits in order to get a piece of an award, say the proposed tax is still too high.

“We’re not satisfied,” said Paul Kong, executive director of the International Legal Finance Association. “This provision is clearly intended to target our industry and shut down corporate accountability, and fiddling with the tax rate doesn’t change that.”

Other provisions of the Tillis proposal are unchanged in the new bill version. It still includes language that would bar funders from offsetting their gains with losses, and it removes shields for tax exempt organizations.

The $16.1 billion litigation finance industry, which typically provides funds for large scale litigation and loans to law firms, had concerns that the bill could wipe out the sector. It’s taking measures to push back, including courting senators and deploying lobbyists in a bid to remove the provision.

Tillis had introduced the litigation finance proposal as a separate bill in May, saying he wanted to use the tax system to bring “transparency and accountability,” according to a statement he issued at the time.