Statement Re US Budget Reconciliation Bill
- None.
- Potential increase in statutory tax rate on litigation finance transactions if Senate bill passes
- Regulatory uncertainty could impact Burford's business model and profitability
- Increased costs for litigation financing could reduce demand for Burford's services
Insights
Senate draft bill proposes higher taxes on litigation finance; final outcome uncertain amid complex legislative process.
Burford Capital is facing potential regulatory headwinds as the US Senate's draft budget reconciliation bill includes provisions to increase the statutory tax rate on litigation finance transactions - the company's core business. While concerning, there are several mitigating factors worth noting. First, the House version of the bill makes no reference to litigation finance at all. Second, the provision's language lacks precision, making its potential impact difficult to assess even if enacted. Third, the legislative process remains in early stages with substantial uncertainty.
The reconciliation process requires both chambers to reconcile their differences through conference negotiations before a final vote. Given the "narrow margins" referenced regarding the bill's passage, there's significant political uncertainty about whether these provisions will survive in the final legislation, if one emerges at all. Burford's statement strategically emphasizes the economic benefits of litigation finance, arguing it helps businesses "invest in economic development, innovation, and job creation" rather than "expend limited resources on litigation."
This targeted approach to litigation finance in the Senate draft is noteworthy. Such regulatory attention often signals an industry's growing economic significance. However, it also represents a potential threat to Burford's business model if the higher tax rate materializes, as it could reduce profit margins or force the company to increase pricing to clients, potentially impacting demand. The ambiguity in the current language also creates compliance uncertainty that could require significant interpretation from the IRS, adding regulatory complexity even if enacted.
As has been widely reported, the US Congress is wrestling with a wide-ranging budget reconciliation process 鈥� "the One Big Beautiful Bill".聽The US House of Representatives has passed one version of a bill, totaling more than 1,000 pages.聽The US Senate released the proposed text of the tax-related provisions of its version late yesterday, which has not yet been reviewed for compliance with the Senate's reconciliation procedure nor been subject to a vote.聽 The tax provisions alone in the proposed Senate bill run to 549 pages; the entire Senate version of the bill is similarly over 1,000 pages.
The House version of the bill as passed makes no reference to litigation finance, while the Senate draft version includes a provision that aims to increase the statutory tax rate on litigation finance transactions.聽The provision's language is not sufficiently precise to enable Burford to assess its potential impact were it to be enacted in its current form, which would then need further interpretation from the US Internal Revenue Service. Given that the House and Senate bills are very different, if the Senate bill passes in its current form, the two bills will require extensive negotiation in a conference process between the House and the Senate to reach a single agreed bill (if such agreement is possible), and then both the House and Senate will need to vote again on the revised bill.聽Each step of the process involves political uncertainty about the contents of the final bill, if any. There has been extensive public reporting about the narrow margins associated with the ultimate passage of this bill and all that is clear today is that nothing is close to certain and it would be premature to predict any particular outcome.
Commercial legal finance levels the playing field for businesses, providing capital to pursue meritorious claims. Litigation finance allows businesses of all sizes to invest in economic development, innovation, and job creation in local communities, rather than expend limited resources on litigation. We are hopeful, as this labyrinthine process continues, that the US Congress will not set back the business growth and innovation that is fostered by the availability of our capital by making it more expensive for businesses to secure litigation financing.
About Burford Capital
Burford Capital is the leading global finance and asset management firm focused on law. Its businesses include and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the New York Stock Exchange (NYSE: BUR) and the London Stock Exchange (LSE: BUR) and works with companies and law firms around the world from its global network of offices.
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This press release does not constitute an offer to sell or the solicitation of an offer to buy any ordinary shares or other securities of Burford.
This press release does not constitute an offer of any Burford private fund. Burford Capital Investment Management LLC, which acts as the fund manager of all Burford private funds, is registered as an investment adviser with the US聽Securities and Exchange Commission. The information provided in this press release is for informational purposes only. Past performance is not indicative of future results. The information contained in this press release is not, and should not be construed as, an offer to sell or the solicitation of an offer to buy any securities (including interests or shares in any of Burford private funds). Any such offer or solicitation may be made only by means of a final confidential private placement memorandum and other offering documents.
Forward-looking statements
This press release contains "forward-looking statements" within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended, that are intended to be covered by the safe harbor provided for under these sections. In some cases, words such as "aim", "anticipate", "believe", "continue", "could", "estimate", "expect", "forecast", "guidance", "intend", "may", "plan", "potential", "predict", "projected", "should" or "will", or the negative of such terms or other comparable terminology, are intended to identify forward-looking statements. Although Buford believes that the assumptions, expectations, projections, intentions and beliefs about future results and events reflected in forward-looking statements have a reasonable basis and are expressed in good faith, forward-looking statements involve known and unknown risks, uncertainties and other factors, which could cause Burford's actual results and events to differ materially from (and be more negative than) future results and events expressed, projected or implied by these forward-looking statements. Factors that might cause future results and events to differ include, among others, those discussed in the "Risk Factors" section of Burford's Annual Report on Form 10-K for the year ended December 31, 2024 filed with the US Securities and Exchange Commission on March 3, 2025. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements contained in the periodic and current reports that Burford files with or furnishes to the US Securities and Exchange Commission. Many of these factors are beyond Burford's ability to control or predict, and new factors emerge from time to time. Furthermore, Burford cannot assess the impact of each such factor on its business or the extent to which any factor or combination of factors may cause actual results and events to be materially different from those contained in any forward-looking statement. Given these uncertainties, readers are cautioned not to place undue reliance on Burford's forward-looking statements.
All subsequent written and oral forward-looking statements attributable to Burford or to persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements speak only as of the date of this press release and, except as required by applicable law, Burford undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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SOURCE Burford Capital Limited
FAQ
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