(a) Definition. A registry account may be a designated or qualified settlement fund only if:
(1) there has been a settlement agreement in the case;
(2) the court has entered an order establishing or approving a deposit into the registry
as a settlement fund; and
(3) the liability resolved by the settlement agreement is of a kind described in 26
U.S.C. § 468B or 26 C.F.R. § 1.468B-1(c).
The depositing party shall identify whether the funds should be treated as a designated or
qualified settlement fund and must identify any such deposit made with the court.
(b) Procedure for Establishment of Fund. When the court establishes or approves a
designated or qualified settlement fund that will be held in the registry, the court will also
designate or approve a person outside the court as the administrator responsible for obtaining
the tax identification number for the fund, filing all fiduciary tax returns, paying any tax, and
satisfying any reporting or withholding requirements on fund disbursement. The court will
either approve the person that the settlement agreement names as administrator or designate
the party that deposited the funds into court. Any person whose liability will be terminated by
rule or statute may not serve as the administrator.
(c) Interest Income. The depository institution shall report all interest income on a
designated or qualified settlement fund for the current year, using the fund’s own employer
identification number. This includes any interest income assessed by the court as a registry
fund fee. The tax identification numbers of the parties and the court shall not be used with
respect to a designated or qualified settlement fund.
(d) Withdrawal. As with any disbursement from a registry account, a court order is
required for any withdrawal of funds from a registry account to pay or withhold tax pursuant
to 28 U.S.C. § 2042. Registry fund disbursements greater than $500,000 must be made by
electronic funds transfer.
(e) Assistance to Administrator. The court will make available to the administrator any
pertinent information needed for fulfillment of fiduciary duties.
(§§ (a), (b) and (d) amended 12/1/21)
