Removing the Litigation Finance Tax from the “One Big Beautiful Bill Act” is a Win for Personal Injury Victims Across the Country

In the high-stakes world of personal injury law, justice often hinges on access—access to legal counsel, expert witnesses, and, crucially, financial resources that can sustain a plaintiff through months or even years of litigation. For a vast number of Americans injured due to someone else’s negligence, litigation finance provides a vital lifeline.

That’s why the recent decision to remove the proposed litigation finance tax from the final version of the One Big Beautiful Bill Act is a significant and welcome victory for personal injury victims and their families.

What Is Litigation Finance?

Litigation finance—also known as pre-settlement funding or legal funding—allows injured plaintiffs to borrow against their future legal settlement or award. These funds are often used to cover living expenses, medical bills, rent or mortgage payments, and other essentials while the legal process unfolds. Unlike traditional loans, these advances are non-recourse: if the plaintiff loses the case, they owe nothing.

For a person facing severe injuries and a mountain of bills, this can be the difference between enduring a lawsuit on solid footing or being forced into a premature and undervalued settlement simply because they can’t afford to wait.

What Was the Proposed Litigation Finance Tax?

In earlier drafts of the One Big Beautiful Bill Act, a provision was included that would have taxed “qualified litigation proceeds” as income. In short, the levy would have subjected litigation funders’ profits to a steep, standalone tax (as high as ~40%), later reduced to ~31.8%.

Many in the industry warned the levy would undercut the viability of litigation finance, a tool that typically helps plaintiffs (often individuals or small businesses) afford costly litigation. They argued that insurance companies—not consumers—would benefit, while average litigants would lose out.

Why Was It Removed?

Thanks to strong advocacy from legal aid organizations and patient rights groups, a growing chorus of bipartisan lawmakers saw the provision as unjust.  Ultimately the Senate Parliamentarian Elizabeth MacDonough determined the provision didn’t comply with Byrd Rule requirements under budget reconciliation, so it was struck from the bill. And that’s good news for several reasons.

1. It Protects Access to Justice
   Litigation finance is often the only path to court for those who are seriously injured but financially strapped. The vast majority of personal injury plaintiffs are not wealthy—they’re working-class people blindsided by medical emergencies and income loss. Taxing the financial support they rely on would have discouraged many funding companies from operating in the space, cutting off access to crucial resources. Removing the tax helps keep the doors of the courthouse open to everyday Americans.
2. It Prevents Further Victimization
   Injury victims are already navigating emotional trauma, physical pain, and economic hardship. Adding a tax burden on top of that would have amounted to punishing people for seeking relief from harm that wasn’t their fault. Taxing litigation advances is tantamount to taxing desperation. By scrapping this measure, lawmakers recognized that legal funding is a tool for survival, not a luxury.
3. It Levels the Playing Field
   Insurance companies and corporate defendants often use delay as a strategy—stretching cases out for months or years in the hope that plaintiffs will run out of money and settle for less. Litigation finance helps counter that strategy by giving plaintiffs the financial breathing room to fight for fair compensation. The proposed tax would have weakened that tool and tilted the playing field even further in favor of powerful defendants. Its removal helps restore some balance.
4. It Encourages a Competitive Legal Funding Market
   Had the tax gone into effect, many litigation finance companies might have exited the market or passed the tax burden onto consumers in the form of higher fees. This would have hurt the very people these services are designed to help. By removing the tax, the government is keeping the market viable and competitive, which benefits consumers through better terms and increased access.

Final Thoughts

The removal of the litigation finance tax from the One Big Beautiful Bill Act is more than a legislative tweak—it’s a moral decision in defense of fairness and justice. It acknowledges that the path to recovery after an injury is long, expensive, and filled with hurdles. It affirms the right of every American to pursue legal redress without being crushed by financial pressure.

For the millions of personal injury victims across the country, this is not just a political victory—it’s a deeply personal one. It means they can continue fighting for what they’re owed without being penalized for simply needing help along the way.

In a legal system already stacked in favor of the well-funded and well-connected, removing this tax was the right call. And for countless injured plaintiffs who rely on litigation finance to survive and seek justice, it couldn’t have come soon enough.