Do qualified assignments with security interest override the economic benefit doctrine?
The economic benefit doctrine was intended to be overridden, according to the IRS, when Congress amended section 130 of the Code in 1988 to allow security position ahead of general creditors. The original language of section 130(c)(2)(C) read: “the assignee does not provide to the recipient of such payments rights against the assignee which are greater than those of a general creditor.” The Technical and Miscellaneous Revenue Act [P.L. 100-647 at ยง 6079(b)(1)(A)] changed the language to disregard “any provision of such assignment which grants the recipient rights as a creditor greater than those of a general creditor.” The House Report explained the reason for this change as follows: “Recipients of periodic payments under structured settlement arrangements should not have their rights as creditors limited by provisions of tax law.” Normally, the right to assume ownership of an annuity contract would trigger the economic benefit doctrine. While the Code does not specifically say so, the
