Tackling Predatory Litigation Funding Act

HR3512, titled the 'Tackling Predatory Litigation Funding Act,' was introduced in the House on May 20, 2025, and subsequently referred to the House Committee on Ways and Means. This bill aims to amend the Internal Revenue Code of 1986 by establishing a new tax on income derived from litigation that is received by third-party entities providing financing for such litigation. The proposed tax would be applied at the entity level for pass-through entities and would be equal to the highest individual income tax rate plus 3.8 percentage points. The bill does not authorize or appropriate any direct funding; instead, it imposes a new tax. The mechanism is a direct levy on the revenue stream of litigation finance firms. This would reduce the net returns for these funders, making litigation finance a less attractive investment. The tax applies to any third party, including individuals, corporations, partnerships, or sovereign wealth funds, that receives funds pursuant to a litigation financing agreement and is not an attorney representing a party to the civil action. Structural losers under this proposed legislation would be firms heavily involved in third-party litigation funding. While Blackstone ($BX), KKR ($KKR), and Apollo Global Management ($APO) are diversified alternative asset managers, they have exposure to various investment strategies, including those that might involve or be adjacent to litigation finance. A significant tax on this income stream could negatively impact their profitability in this specific area. The bill has a companion bill, S1821, in the Senate, which indicates a coordinated legislative effort and potentially higher momentum than a standalone bill. Looking at recent market data, Blackstone ($BX) is currently at $112.24, showing a 7-day change of +0.57% but a 30-day change of -2.86%. KKR ($KKR) is at $91.05, with a 7-day change of +0.76% and a 30-day change of -4.75%. Apollo Global Management ($APO) is at $106.11, experiencing a 7-day change of -3.49% and a 30-day change of -4.61%. While these movements are not directly attributable to HR3512, the broader negative trend over the past 30 days for these alternative asset managers could reflect general market sentiment or other factors affecting the finance sector. The bill is in an early stage, having only been referred to committee, meaning it still needs to pass through committee, potentially be voted on by the House, then go through a similar process in the Senate, and finally be signed by the President. Given its early stage, the legislative path for HR3512 is long. It must first gain traction in the House Committee on Ways and Means, then potentially move to a floor vote. If passed by the House, it would then proceed to the Senate, where its companion bill, S1821, is already referred to the Committee on Finance. The presence of a companion bill suggests a more robust effort to advance this policy, but passage is not guaranteed. The next key legislative step would be a committee hearing or markup in the House Ways and Means Committee.