The American Property Casualty Insurance Association (APCIA) has voiced support for the Tackling Predatory Litigation Funding Act, calling for its inclusion in the pending reconciliation package currently under consideration by Congress.
The proposed litigation, introduced by Sen. Thom Tillis and Rep. Kevin Hern, would change the way profits from third-party litigation funding (TPLF) are taxed. Under current law, investors in TPLF may receive favorable tax treatment, with domestic investors typically paying capital gains tax and many foreign investors paying little or no US tax on their returns.
In a statement attributed to Sam Whitfield, APCIA’s senior vice president of federal government relations, the association said the bill would apply a specific tax to profits earned through TPLF, aligning them with how legal awards received by claimants are currently taxed. The statement said this change would address what the organization sees as tax inconsistencies that allow investors with a financial stake in litigation to avoid standard tax obligations.
The legislation proposes treating proceeds from TPLF as ordinary income for tax purposes, rather than as capital gains.
According to APCIA, this approach is aimed at addressing complex funding structures, particularly those used by foreign investors, which may fall outside the reach of existing tax rules.
APCIA also said the proposed tax would apply to the activity of litigation funding rather than to the funding entities themselves. As a result, nonprofit organizations, such as those classified under Section 501(c)(3), which may support litigation for public interest purposes, would not be affected.
The association credited Sen. Tillis and Rep. Hern for their leadership on the issue and urged lawmakers to include the measure in the reconciliation package.
A coalition of trade associations and companies also submitted a letter to the bill’s sponsors expressing support for the legislation.
APCIA is a national trade group representing home, auto, and commercial insurers. Its membership includes companies of varying sizes and structures operating across the US and internationally. The organization advocates for policies that support private-sector insurance markets.
