Last week the United States Court of Appeals for the DC Circuit issued an opinion that has gone through the structured settlement primary market like wildfire. In the Murphy v. IRS case, the court considered whether damages received as compensation for injuries of mental distress and loss of reputation should be taxed, or if they should be included in those personal injuries that are considered non-taxable under IRC 104(a)(2). I won=t go into too much detail on the technical decisions here (rely on an expert like Robert Wood for his opinion as reported on the Settlement Channel). Suffice to say that the court overturned the trial court finding, going against the IRS and conventional thinking in this area, declaring that such damages should be non-taxable.

This case matters to those in the primary structured settlement market B brokers, insurers and attorneys B because it opens the door to using structured settlements for these types of injuries, and perhaps more if the logic of the Murphy decision is followed in future cases, adopted by the IRS, or makes its way into a change of the tax code. Traditional structured settlements can only be used in cases involving non-taxable damages. Therefore, a consequence of Murphy is that as more damages are considered tax-free, more structured settlements can be written, if the primary market seizes this opportunity.

This is a good thing. Structured settlements are an important tool for settling lawsuits, and are beneficial to all involved. Consumers, specifically personal injury victims and their families, will benefit from the Murphy decision, in an obvious and direct way by receiving these damages tax free: But, they also benefit by now having the choice to take these as structured settlements. And, because life sometimes changes after settlement in ways that could not be predicted, some of these new structured settlement payees may become factoring customers. That is why the Murphy decision is being watched and discussed by the settlement factoring industry as well.

In addition to purchasing structured settlement payments that are tax free, Settlement Capital also is able to purchase future payments from "non-qualified" or taxable settlements, in addition to structured attorney’s fees. If you know of someone who would like to sell settlement or annuity payments, please contact us.