A Tax on Justice: Paul Kong Slams Bill Targeting Litigation Finance

ILFA News | Washington Reporter
June 17th, 2025

Paul Kong, Executive Director of ILFA, wrote an op-ed in the Washington Reporter on the misguided push to impose a punitive tax on litigation finance, arguing that the proposed legislation would actually harm American retirees, small businesses, and the principle of equal access to justice.

In his response to the Wall Street Journal’s endorsement of Sen. Thom Tillis (R., N.C.) and Rep. Kevin Hern’s (R., Okla.) Tackling Predatory Litigation Funding Act, Kong dismantles the claim that litigation finance benefits from a so-called “anti-growth loophole” favoring “foreign investors.” He asserts that no such loophole exists and that the bill’s real effect would be to retroactively penalize institutional investors — including pension funds for law enforcement, public employees, and religious institutions — by stripping them of their tax-exempt status.

Kong defends commercial litigation finance as a vital tool that empowers individuals and businesses to pursue legitimate claims against powerful corporations – all the while offering uncorrelated returns to institutional investors. He emphasizes that the industry is pro-justice and pro-market, with rigorous internal vetting that weeds out meritless lawsuits. Moreover, the industry has been reviewed and cleared by oversight bodies like the Government Accountability Office and the Delaware Judiciary.

He warns that the bill, under the guise of fiscal policy, is a thinly veiled attempt to suppress litigation funding and shield corporate wrongdoers from accountability. The proposed tax structure, he argues, is not only punitive, but also unprecedented and economically counterproductive — defying principles of pass-through taxation and likely to shrink the industry and, ironically, reduce taxable litigation recoveries.

Kong concludes by urging lawmakers to reject ideological attacks disguised as tax reform. He calls for equal treatment of litigation finance under existing tax law, warning that the bill sets a dangerous precedent that could open the door to politically motivated taxation of any disfavored industry.