TV Ad Targets Litigation Funders Amid 41% Tax Proposal
A shadowy new television ad has thrown fresh fuel on the fire surrounding third-party litigation funding, signaling a sharp escalation in efforts to reshape the industry’s tax treatment. The 60-second spot, airing nationally, takes aim at litigation financiers and the plaintiffs’ bar, aligning with a Republican-backed push to impose a steep 41% tax on litigation finance profits through an upcoming federal appropriations bill.
According to Bloomberg Law, the ad features dramatic visuals and pointed messaging designed to raise public concern about the role and influence of litigation funders in the civil justice system. While the ad does not disclose its sponsor, its timing and tone suggest it is part of a coordinated campaign to build momentum behind proposed tax reforms that would treat funder profits as ordinary income rather than capital gains.
At the heart of the policy debate is whether litigation funders should continue to benefit from preferential tax rates typically reserved for long-term investment income. Proponents of the tax hike argue that funders are not passive investors but active participants in the legal process who should face a higher tax burden. Critics, meanwhile, warn that the proposal would discourage funding for meritorious claims and restrict access to justice, especially in costly litigation where plaintiffs cannot afford to proceed without external financing.
The ad spot represents a new front in the political battle over litigation finance, which has faced increasing scrutiny from lawmakers, regulators, and industry opponents. It follows recent moves by groups like the American Property Casualty Insurance Association, which have endorsed similar tax reforms aimed at reining in the sector.