Оpinion piece calls on Congress to close foreign litigation funding tax loophole

Foreign investors who finance lawsuits in the United States and take a share of the winnings are paying little or no American tax on those gains, according to an opinion piece by Paul Teller published on Fox News. Teller argues that the arrangement is unfair to taxpayers and should be stopped by Congress.

The mechanism works like this, as Teller describes it. Plaintiffs who win lawsuits must report their winnings as ordinary income and pay tax on them. The share that goes to foreign underwriters who financed the case, however, is treated as a capital gain. Teller writes that foreign investors often owe zero US tax on such gains, leaving the American tax base with a shortfall while the cases themselves proceed inside US courts.

Teller points to Treasury Secretary Scott Bessent, who criticized the practice at a hearing on Capitol Hill. Bessent described foreign lawsuit financing as a « malignancy » on the judicial system, a characterization Teller cites in support of his argument. Teller also contends that the practice raises costs for consumers and businesses, though the notes supplied for this report do not detail how those costs are calculated.

As a remedy, Teller proposes closing the loophole through a reconciliation bill, the budget procedure that allows certain tax and spending measures to pass the Senate with a simple majority. He notes that Congress has about five more session weeks this year, a narrow window for such legislation. House Republican leaders have also said they want another reconciliation bill this year, which Teller presents as an opening for the change. If Congress stalls, he suggests that the executive branch could act on its own.

The timing matters because Congress is returning for a lame-duck session after the midterm elections, with a crowded agenda. Current government funding expires on December 11, raising the prospect of a shutdown. Some Democrats may seek to use the Iran war as leverage in spending negotiations, and a House Republican has said he expects a short-term funding extension into early next year. Other priorities for the period include the farm bill, transportation, a tax package and the debt ceiling, which is expected to become pressing in January.

Leadership is also in flux. Republican leadership contests are underway, including races involving Thune and Scalise or Jordan, and Hakeem Jeffries is expected to become House Speaker. Teller's proposal would have to compete with these items, and the broader legislative picture remains uncertain. Other efforts, including the SAVE America Act, which is being pursued through reconciliation with uncertain Senate support, and permitting reform, which depends on Democratic backing, face similar hurdles.

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Caroline Mercer

World News Correspondent

Caroline Mercer covers public affairs, politics, business, culture and daily news for Core Memo. The role focuses on verification, context, and clear explanations for readers.

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