Legal Definitions - Anti-Assignment Act

The Anti-Assignment Act is a federal law in the United States that generally prohibits individuals or organizations from transferring or selling their financial claims against the U.S. government to another party. In simpler terms, if the government owes you money or a benefit, you typically cannot assign your right to receive that payment or benefit to someone else. The government prefers to deal directly with the original claimant.

Here are some examples illustrating how the Anti-Assignment Act applies:

• Government Contractor Payment: Imagine a software development company, CodeWorks Inc., completes a complex project for the Department of Homeland Security and is awaiting a final payment of $1 million. Facing immediate operational costs, CodeWorks Inc. attempts to sell its right to this $1 million payment to a financial institution, QuickCash Lenders, in exchange for an immediate, slightly smaller sum. The Anti-Assignment Act would generally prevent CodeWorks Inc. from legally assigning its claim for payment against the Department of Homeland Security (a U.S. government entity) to QuickCash Lenders. The government is obligated to pay CodeWorks Inc. directly.

• Federal Tax Refund: Consider a situation where a taxpayer, Mr. Henderson, is due a $3,000 income tax refund from the Internal Revenue Service (IRS). Mr. Henderson owes his friend, Ms. Davis, $2,500. To settle his debt, Mr. Henderson tries to formally assign his right to receive the $3,000 tax refund directly to Ms. Davis, instructing the IRS to send the refund check to her instead of him. The Anti-Assignment Act would typically prevent Mr. Henderson from assigning his claim for a tax refund against the IRS (a U.S. government agency) to Ms. Davis. The IRS will issue the refund directly to Mr. Henderson, the original claimant.

• Legal Settlement Against a Federal Agency: Suppose a small environmental consulting firm, EcoSolutions LLC, wins a lawsuit against the Department of the Interior for breach of contract, and a federal court orders the Department to pay EcoSolutions LLC $250,000 in damages. EcoSolutions LLC, needing capital to expand its operations, tries to sell its right to collect this $250,000 judgment from the Department of the Interior to an investment firm specializing in purchasing legal settlements. Under the Anti-Assignment Act, EcoSolutions LLC would generally be prohibited from assigning its claim for payment against the Department of the Interior (a U.S. government agency) to the investment firm. The government is required to pay EcoSolutions LLC directly.