The Provision Targeted at Personal Injury Lawyers Just Perished! (Phew!)

The Senate just killed my next story for Attorney at Law Magazine. And that’s a good thing!

Because I was going to write about how the One Big Beautiful Bill was going to raise  the tax on litigation finance from twenty, to thirty percent. More than once, Congress has learned that pissing off Wall Street isn’t necessarily a good idea. This is one of those times.

Buried in the so-called One Big Beautiful Bill Act was a provision that would have taxed litigation finance earnings at 31.8 percent. Not profits. Not general investment returns. Just this one specific type of funding where capital providers bankroll lawsuits—often on behalf of individuals and small businesses—who couldn’t otherwise afford to fight.

The target, we’re told, was wealthy investors. The fallout would have landed squarely on plaintiffs’ attorneys and the people they represent. The everyday American.

Had it passed, the tax would have gutted the economics of litigation finance. Fewer funders would take the risk. Fewer attorneys would get backing. And fewer everyday citizens would have access to the courts when going up against billion-dollar corporations with endless legal budgets.

It wouldn’t just hurt the financiers. It would choke off one of the few tools that balances the scales in civil litigation. Plaintiffs’ attorneys rely on this capital to take contingency cases, invest the time and resources to build them, and wait years for resolution. Without it, firms shrink. Risk evaporates. Justice gets a lot more expensive (as if our system isn’t already rigged for the rich, anyway) and for many people, completely out of reach.

Fortunately, The Little Guy had the Big Wallets on Wall St. behind them on this one, so the Senate parliamentarian ruled the provision couldn’t be included. A Relief for Litigation Funders? It was more than that. It was a save for a legal model that’s become essential in holding powerful interests accountable.

This wasn’t just bad policy. Like so many of the policies we’re witnessing right now, it was downright dangerous. It threatened to collapse a bridge between Main Street and the courthouse.

Maybe next time, lawmakers will think twice before nuking an entire segment of the legal system in an effort to squeeze a few investors. And maybe someone will remind them that pissing off a hundred thousand lawyers in one go is rarely a winning strategy.

Especially when those lawyers represent the rest of us.

Frederick Shelton is a Market Advisor and Consultant to law firms, legal MSO's and funds on subjects which include legal AI, ABS models, MSO's and M&A. He can be reached at fs@sheltonsteele.com