Private Letter Rulings (PLRs) issued by the Internal Revenue Service provide valuable interpretive guidance on the tax treatment of structured settlements, qualified assignments, and qualified funding assets. Although PLRs apply only to the taxpayer requesting them, they offer consistent insight into how the IRS views structured settlement arrangements under IRC §104(a)(2) and IRC §130.
Over several decades, PLRs have addressed key issues including:
- exclusion of periodic payments
- constructive receipt
- assignment company assumption of liability
- commutation provisions
- cost‑of‑living adjustments
- indexed payment structures
- requirements for qualified funding assets
The following PLRs represent actual IRS rulings directly relevant to structured settlements.
Foundational Structured Settlement PLRs
- PLR (May 21, 1979) — Settlement payments “not subject to assignment, transfer, commutation, or encumbrance”; no constructive receipt.
- PLR 79‑22003 — Early confirmation of §104(a)(2) exclusion for periodic payments.
- PLR 80‑15203 — Assignment of liability and use of annuities to fund periodic payments.
- PLR 81‑22003 — Clarified tax treatment of structured settlement periodic payments.
- PLR 83‑22003 — Reinforced IRS acceptance of assignment company assumption of liability.
- PLR 83‑3035 — Disclosure of annuity cost or present value does not create constructive receipt.
- PLR 8435154 (June 1, 1984) — Anti‑assignment clause upheld; payments remain tax‑free.
- PLR 8527050 (Apr. 9, 1985) — Anti‑alienation clause upheld; payments excludable under §104(a)(2).
- PLR 84‑22003 — Addressed compliance with IRC §130 following its enactment in 1982.
Commutation, COLAs, Indexed Payments, and Non‑Standard Structures
- PLR 90‑01021 — Commutation provisions and their impact on §130 qualification.
- PLR 92‑07041 — Cost‑of‑living adjustments and indexed payment structures.
- PLR 97‑30034 — Non‑standard payment schedules within §130.
- PLR 119273‑97 — Lump sum from sale of structured settlement payment rights retains original §104 tax character.
Qualified Funding Assets and Origin‑of‑Claim Doctrine
- PLR 2003‑06020 — Requirements for qualified funding assets under §130(d).
- PLR 200836019 — Employment‑related non‑qualified structured settlement; periodic payments taxable.
- PLR 200903073 — Origin‑of‑claim doctrine; §104(a)(1)/(a)(2) exclusion essential for qualified assignment under §130(c)(2)(D).
- PLR 200918001 — Assignment company may restructure obligations without violating §130.
- PLR 2009‑30033 — Hybrid qualified/non‑qualified structured settlement arrangements.
Modern Indexed and Interest‑Rate‑Linked Structured Settlement PLRs
These rulings validate modern indexed and interest‑rate‑linked structured settlement products, confirming that payments remain fixed and determinable under §130.
- PLR 201435006 — Pacific Life ILAPA; hardship commutation possibility does not affect §130 qualification.
- PLR 201950004 — Wrongful life.
- PLR 202127039 — Corebridge IRLSS interest‑rate‑linked structured settlement product.
- PLR 202152003 — Independent Life iStructure indexed structured settlement product.
- PLR 109799‑23 — Prudential Income Advantage indexed structured settlement product.
- PLR 112873‑25 — Pacific Life Payout Plus indexed structured settlement product.
Conclusion
The Law Evolves, but its foundation endures
Private Letter Rulings have played a significant role in shaping the tax and compliance landscape for structured settlements. Although PLRs apply only to the taxpayer requesting them, they provide decades of consistent IRS interpretation supporting the statutory framework of IRC §104(a)(2) and IRC §130, reinforcing the stability and reliability of structured settlement arrangements.
Disclaimer: Private Letter Rulings (PLRs) reflect the IRS’s analysis of specific fact patterns submitted by individual taxpayers. They apply solely to the taxpayer who requested the ruling and are not precedent under IRC §6110(k)(3). This post provides general information and should not be construed as tax, legal, or financial advice. Structured settlement decisions should be made with qualified professionals familiar with the claimant’s specific circumstances.
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