The Tackling Predatory Litigation Funding Act establishes a new federal tax on profits earned by third-party companies that finance lawsuits in exchange for a share of settlement or judgment proceeds. The tax applies to non-attorney entities that provide funds to parties or law firms under written financing agreements and receive a direct interest in case outcomes. The tax rate equals the highest individual income tax rate plus 3.8 percentage points, with withholding requirements at 50 percent of that rate when settlements are paid. The bill exempts smaller financing deals (under $10,000) and traditional loans with interest rates capped at 7 percent or twice the 30-year Treasury rate, whichever is greater. The law takes effect for tax years beginning after December 31, 2025.
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