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Victims of Terrorism Relief Act of 2001

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Appendix Q(1) — Victims of Terrorism Relief Act of 2001

Internal Revenue Code Section 5891

Sec. 5891. Structured Settlement Factoring Transactions.

(a) Imposition of Tax—There is hereby imposed on any person who acquires directly or indirectly structured settlement payment rights in a structured settlement factoring transaction a tax equal to 40 percent of the factoring discount as determined under subsection (c)(4) with respect to such factoring transaction.

(b) Exception for Certain Approved Transactions—

(1) In General—The tax under subsection (a) shall not apply in the case of a structured settlement factoring transaction in which the transfer of structured settlement payment rights is approved in advance in a qualified order.

(2) Qualified Order—For purposes of this section, the term "qualified order" means a final order, judgment, or decree which—

(A) finds that the transfer described in paragraph (1)—

(i) does not contravene any Federal or State statute or the order of any court or responsible administrative authority, and

(ii) is in the best interest of the payee, taking into account the welfare and support of the payee's dependents, and

(B) is issued—

(i) under the authority of an applicable State statute by an applicable State court, or

(ii) by the responsible administrative authority (if any) which has exclusive jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement.

(3) Applicable State Statute—For purposes of this section, the term "applicable State statute" means a statute providing for the entry of an order, judgment, or decree described in paragraph (2)(A) which is enacted by—

(A) the State in which the payee of the structured settlement is domiciled, or

(B) if there is no statute described in subparagraph (A), the State in which either the party to the structured settlement (including an assignee under a qualified assignment under section 130) or the person issuing the funding asset for the structured settlement is domiciled or has its principal place of business.

(4) Applicable State Court—For purposes of this section—

(A) In General—The term "applicable State court" means, with respect to any applicable State statute, a court of the State which enacted such statute.

(B) Special Rule—In the case of an applicable State statute described in paragraph (3)(B), such term also includes a court of the State in which the payee of the structured settlement is domiciled.

(5) Qualified Order Dispositive—A qualified order shall be treated as dispositive for purposes of the exception under this subsection.

(c) Definitions—For purposes of this section—

(1) Structured Settlement—The term "structured settlement" means an arrangement—

(A) which is established by—

(i) suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104(a)(2), or

(ii) agreement for the periodic payment of compensation under any workers' compensation law excludable from the gross income of the recipient under section 104(a)(1), and

(B) under which the periodic payments are—

(i) of the character described in subparagraphs (A) and (B) of section 130(c)(2), and

(ii) payable by a person who is a party to the suit or agreement or to the workers' compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130.

(2) Structured Settlement Payment Rights—The term "structured settlement payment rights" means rights to receive payments under a structured settlement.

(3) Structured Settlement Factoring Transaction—

(A) In General—The term "structured settlement factoring transaction" means a transfer of structured settlement payment rights (including portions of structured settlement payments) made for consideration by means of sale, assignment, pledge, or other form of encumbrance or alienation for consideration.

(B) Exception—Such term shall not include—

(i) the creation or perfection of a security interest in structured settlement payment rights under a blanket security agreement entered into with an insured depository institution in the absence of any action to redirect the structured settlement payments to such institution (or agent or successor thereof) or otherwise to enforce such blanket security interest as against the structured settlement payment rights, or

(ii) a subsequent transfer of structured settlement payment rights acquired in a structured settlement factoring transaction.

(4) Factoring Discount—The term "factoring discount" means an amount equal to the excess of—

(A) the aggregate undiscounted amount of structured settlement payments being acquired in the structured settlement factoring transaction, over

(B) the total amount actually paid by the acquirer to the person from whom such structured settlement payments are acquired.

(5) Responsible Administrative Authority—The term "responsible administrative authority" means the administrative authority which had jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement.

(6) State—The term "State" includes the Commonwealth of Puerto Rico and any possession of the United States.

(d) Coordination with Other Provisions—

(1) In General—If the applicable requirements of sections 72, 104(a)(1), 104(a)(2), 130, and 461(h) were satisfied at the time the structured settlement involving structured settlement payment rights was entered into, the subsequent occurrence of a structured settlement factoring transaction shall not affect the application of the provisions of such sections to the parties to the structured settlement (including an assignee under a qualified assignment under section 130) in any taxable year.

(2) No Withholding of Tax—The provisions of section 3405 regarding withholding of tax shall not apply to the person making the payments in the event of a structured settlement factoring transaction.

(e) Clerical Amendment—The table of chapters for subtitle E is amended by adding at the end the following new item: Chapter 55. Structured settlement factoring transactions.

(f) Effective Dates—

(1) In General—The amendments made by this section (other than the provisions of section 5891(d) of the Internal Revenue Code of 1986, as added by this section) shall apply to structured settlement factoring transactions (as defined in section 5891(c) of such Code (as so added)) entered into on or after the 30th day following the date of the enactment of this Act.

(2) Clarification of Existing Law—Section 5891(d) of such Code (as so added) shall apply to structured settlement factoring transactions (as defined in section 5891(c) of such Code (as so added)) entered into before, on, or after such 30th day.

(3) Transition Rule—In the case of a structured settlement factoring transaction entered into during the period beginning on the 30th day following the date of the enactment of this Act and ending on July 1, 2002, no tax shall be imposed under section 5891(a) of such Code if—

(A) the structured settlement payee is domiciled in a State (or possession of the United States) which has not enacted a statute providing that the structured settlement factoring transaction is ineffective unless the transaction has been approved by an order, judgment, or decree of a court (or where applicable, a responsible administrative authority) which finds that such transaction—

(i) does not contravene any Federal or State statute or the order of any court (or responsible administrative authority); and

(ii) is in the best interest of the structured settlement payee or is appropriate in light of a hardship faced by the payee; and

(B) the person acquiring the structured settlement payment rights discloses to the structured settlement payee in advance of the structured settlement factoring transaction the amounts and due dates of the payments to be transferred, the aggregate amount to be transferred, the consideration to be received by the structured settlement payee for the transferred payments, the discounted present value of the transferred payments (including the present value as determined in the manner described in section 7520 of such Code), and the expenses required under the terms of the structured settlement factoring transaction to be paid by the structured settlement payee or deducted from the proceeds of such transaction.

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What the Victims of Terrorism Relief Act of 2001 Covers

The Victims of Terrorism Relief Act of 2001 is federal legislation enacted to provide financial assistance and other forms of relief to U.S. nationals and eligible dependents who suffer physical injury, death, or economic loss as a result of terrorist acts. The statute establishes eligibility criteria, administrative procedures, and a claims process for determining compensable losses, and it coordinates benefits with other federal or state programs. Practitioners, claimants, and intermediaries use the Act to understand entitlement, document required evidence, and pursue reimbursement or compensation under the federal relief framework.

Why the Act Matters for Claimants and Counsel

The Act creates a statutory pathway for eligible victims and survivors to seek compensation for losses tied to terrorism, clarifies administrative procedures, and reduces overlap with other federal benefits. It supports timely claims review and establishes standards for documentation and eligibility determinations.

Why the Act Matters for Claimants and Counsel

Core elements to understand about the Act

Understanding the Act's structure helps claimants prepare evidence, determine eligibility, and follow administrative procedures. The items below summarize typical legal and procedural elements you will encounter.

Eligibility

Defines who qualifies based on injury, death, or economic loss tied to terrorist acts; eligibility often requires proof of causation, residency or citizenship, and adherence to filing rules set by the administering agency.

Compensable Losses

Describes covered categories such as medical expenses, lost earnings, and funeral costs; documentation must show amounts paid or owed and how each loss directly results from the qualifying incident.

Claims Process

Specifies application steps, required forms, evidence submission, and agency review procedures; timely and complete filings reduce administrative delays and support quicker determinations.

Evidentiary Standards

Requires supporting documents such as medical reports, police or incident reports, and financial records; agencies typically assess sufficiency and authenticity when adjudicating claims.

Review and Appeals

Includes administrative review and appeal mechanisms; agencies provide reasons for denials and set deadlines for appeals or requests for reconsideration under procedural rules.

Coordination with Benefits

Addresses how federal compensation interacts with insurance and other public benefits; agencies may reduce awards to account for payments from other sources.

Who commonly engages with the Act

Primary users include individuals affected by terrorism, family members pursuing survivor claims, attorneys handling victim compensation, and nonprofit advocacy organizations assisting claimants.

  • Individual claimants and survivors seeking compensation, medical cost reimbursement, or death benefits under the Act.
  • Legal representatives preparing and submitting claims, compiling evidence, and advising on eligibility.
  • Nonprofit advocates and victim assistance programs providing intake and documentation support.

Agencies administering relief, forensic providers, and benefits coordinators also consult the Act when verifying claims, coordinating payments, and resolving conflicts with other benefit sources.

Typical roles involved in a claim

Claimant

An individual injured in a terrorist attack or an immediate family member filing for wrongful death or economic loss claims. The claimant typically gathers medical records, proof of identity, incident reports, and financial documentation to substantiate compensation requests under the Act.

Legal Representative

Attorneys or accredited representatives who prepare claim forms, collect supporting evidence, and communicate with administering agencies. They evaluate eligibility, advise on statutory limits, and may file appeals or supplemental claims on behalf of clients while ensuring compliance with procedural rules.

Essential claimant and claim data to collect

Claimant Name: Full legal name as on ID
Date of Birth: Enter as MM/DD/YYYY format
Incident Date: Exact date of event, MM/DD/YYYY
Social Security Number: Provide full SSN for identity verification
Proof of Injury: Medical records, hospital bills, physician statements
Supporting Financial Records: Pay stubs, tax returns, invoices showing loss

Step-by-step: Preparing and submitting a claim

Prepare documentation, confirm eligibility, and follow the administering agency's submission procedures. The steps below outline typical actions for compiling and filing a claim under the Act.

  • 01
    Gather records: Collect IDs, medical records, incident reports, and financial documentation.
  • 02
    Verify eligibility: Confirm qualifying incident and claimant relationship or injury.
  • 03
    Complete forms: Fill required application fields accurately; use MM/DD/YYYY dates.
  • 04
    Submit and track: File per agency instructions and retain proof of submission.

Setting up an electronic claims workflow

Configure an electronic workflow to match the Act's procedural requirements: signer order, authentication level, retention, and delivery settings.

Field Configuration
Document format PDF (preferred) or DOCX accepted
Signer Order Specify sequential or parallel signing order
Authentication Email link, SMS code, or KBA options
Retention Policy Retain signed records per federal and agency rules

Typical electronic submission flow for claims

Typical electronic submission workflow for claim documents includes uploading, applying signature fields, authenticating signers, and retaining a signed record and audit trail.

  • Upload documents: Submit PDFs or DOCX with attachments
  • Add signature fields: Place signature, date, and initials fields
  • Authenticate signer: Use email, SMS, or stronger ID verification
  • Archive audit trail: Store signed PDF and activity log securely

Platform and format considerations for electronic evidence

Ensure chosen platform supports required document formats, secure transmission, and audit trails consistent with federal and agency recordkeeping expectations.

  • Supported formats: PDF, DOCX, PDF/A formats
  • Integrations: Salesforce, NetSuite, Google Workspace integrations
  • Authentication options: Email, SMS, KBA, 2FA

Verify the receiving agency accepts electronic formats and signatures, confirm any notarization or witness requirements, and maintain encrypted archives. Use platforms that provide audit logs and exportable signed records for administrative appeals or audits.

eSignature vendor comparison for submitting claim documents

Comparison of common eSignature vendors and features relevant when submitting claims or supporting documents; signNow is listed first per vendor order requirements.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial, no credit card Varies by plan Varies by plan Varies by plan Varies by plan
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No
Envelope Cap No envelope cap 100 envelopes/user/year Varies by plan Varies by plan Varies by plan

Key processing milestones for a typical claim

Claims generally pass through intake, evidence review, decision, and appeal stages; tracking each stage helps manage expectations and meet deadlines.

01

Claim Intake

Agency receives application and assigns a file number

02

Evidence Review

Agency verifies documentation and requests supplemental records

03

Decision Issued

Agency issues approval, partial award, or denial with reasons

04

Appeal Window

Claimant may seek reconsideration or appeal per agency rules

Timing considerations and submission expectations

Specific filing deadlines and response windows vary by administering agency and statutory language; observe agency notices for exact dates and timeframes.

Filing deadlines:

No universal deadline; agencies set specific filing windows

Acknowledgment timeline:

Agencies typically acknowledge receipt per their procedures

Supplement requests:

Respond promptly to document requests to avoid delays

Appeals timeframe:

Deadlines for appeals vary by agency and are jurisdictional

Record retention:

Keep originals until final administrative resolution and appeals complete

Principal risks and potential penalties

Perjury Prosecution: False claims may trigger criminal charges
Denial Risk: Insufficient evidence may lead to claim denial
Missed Deadlines: Late filings can forfeit appeal rights
Identity Mismatch: Inaccurate names or IDs delay verification
Privacy Breach: Improper handling of PHI risks HIPAA violations
Improper Notarization: Invalid acknowledgements can void affidavits

Common pitfalls to avoid when preparing a claim

  • Submitting incomplete medical or financial records is the most common cause of processing delays and evidentiary requests from agencies.
  • Using inconsistent legal names or failing to include suffixes and aliases can prevent identity verification and prolong adjudication.
  • Failing to obtain required authorizations for medical records or not using certified copies can lead to evidence being rejected.
  • Neglecting to confirm notarization or witness requirements for sworn statements can render key documents administratively deficient.

Tips for accurate and efficient claim preparation

Adopt consistent naming, organized evidence, and secure electronic workflows to reduce processing time and support robust administrative records.

Use consistent legal names
Always enter the claimant's full legal name exactly as on government-issued ID across every form and attachment to avoid identity mismatches during verification.
Organize supporting evidence
Create a document index and assemble certified copies when available. Label each attachment and include an evidentiary cover sheet referencing the claim file number.
Prefer auditable eSubmission
When the agency accepts electronic filings, use platforms that provide signed PDFs, timestamps, and exportable audit trails to document chain of custody.
Consult counsel for complexity
For contested claims, large losses, or coordination issues with insurance, seek legal review early to preserve rights and adhere to procedural timelines.

Frequently asked questions about filing claims

Answers to common questions about eligibility, documentation, electronic submission, and appeals for claims under the Victims of Terrorism Relief Act of 2001.


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