The IRS doesn't love it.
The courts have never agreed.

The IRS told itself it should fight this. Then didn't.

In December 2011, the IRS Office of Chief Counsel issued Chief Counsel Advice (CCA) 201151018. The CCA addressed a structured attorney fee arrangement substantially similar to the one in Childs and reached the opposite conclusion: that the attorney had constructively received the full fee at the moment of settlement, and that the structured payments were taxable up front.

The CCA explicitly disagreed with Childs but did not cite any post-Childs authority for its position. Its core argument was that the attorney, having negotiated the underlying settlement, had practical control over the fee outcome and therefore constructively received the fee at the moment of settlement — irrespective of the assignment.

A memo from one lawyer to another. Not a regulation. Not a ruling.

To understand why CCA 201151018 didn't end attorney fee structuring, you have to understand what a CCA actually is in the IRS hierarchy:

• Treasury Regulations — issued under §7805 notice-and-comment authority. Binding on IRS and taxpayers (subject to Chevron deference).
• Revenue Rulings — published positions of the IRS Commissioner. Binding on the IRS, can be relied on by taxpayers in good faith.
• Revenue Procedures — published administrative procedures. Similar weight to Rev. Ruls.
• Notices and Announcements — official IRS guidance, varying weight.
• Private Letter Rulings (PLR) — taxpayer-specific. Binding on the IRS as to that taxpayer only; non-precedential.
• Chief Counsel Advice (CCA) — internal legal advice from IRS counsel to IRS field agents. Cannot be cited as authority. Released publicly under §6110.

CCA 201151018 sits at the bottom of that ladder. It tells you what one IRS lawyer thought in 2011. It does not change the law and it does not bind anyone — including the IRS — outside the specific facts of the memo. Childs, by contrast, is binding Eleventh Circuit precedent and persuasive everywhere else.

If the IRS believed CCA 201151018, you'd expect litigation. There hasn't been any.

If the IRS were prepared to act on the position in CCA 201151018, you would expect to see, in the years since:

• Audit letters challenging structured attorney fees on the constructive-receipt theory.
• Tax Court petitions filed by attorneys whose deferrals were disallowed.
• A Revenue Ruling formalizing the CCA's position.
• Regulations under §451 addressing structured fees specifically.

None of those things have happened. The IRS has not, to public knowledge, audited a properly designed structured attorney fee and successfully recharacterized it as immediate income. There is no post-Childs court decision agreeing with the CCA's analysis. There has been no Rev. Rul. The most thorough running tally is maintained by Wood LLP, which publishes a regular update titled "Lawyers Are Structuring Fees Despite IRS Attack" — the title's been consistent through multiple editions for a reason.

The real modern question isn't Childs. It's §409A.

Section 409A was enacted in 2004 — a decade after Childs — and governs "non-qualified deferred compensation" arrangements. The penalty for falling inside §409A and failing its rules is severe: immediate inclusion of all deferred amounts in income, plus a 20% additional tax, plus interest. So the design question on every modern attorney-fee structure is: is this arrangement non-qualified deferred compensation, and if so, does it meet §409A's requirements?

The dominant practitioner view is that a properly designed attorney-fee structure falls outside §409A because:

• The "service recipient" is the defendant or defense carrier, not the law firm. The plaintiff's attorney is not a "service provider" to the firm in the §409A sense for purposes of the contingency fee.
• The structured arrangement is set up before the lawyer has a vested right to a lump sum, so there's no "deferral" of an already-earned amount in the §409A sense.
• Even where §409A might arguably apply, the arrangement is structured to comply (fixed payment schedule established before service is complete, no acceleration, no subsequent deferrals).

This is fact-specific. A solo lawyer with a contingency case operating through a single-member PLLC has a different §409A picture than a fee award structured into a 50-attorney firm's partner draws. The point is: the live debate is here, not on constructive receipt. Childs handles the constructive-receipt question. §409A is the modern overlay that good structures plan around.

Low. Not zero. Manageable.

In our experience and the published practitioner literature: the audit rate on properly designed structured attorney fees is low. When audits do come, they tend to focus on documentation (was the assignment really pre-settlement? are the assignment company papers in order?) rather than the underlying legal theory. Cases where the IRS has formally challenged structures have, when litigated, either settled before trial or resolved in favor of the taxpayer.

What materially raises audit risk:

• Structures designed after the settlement is already signed (the "retroactive" defect).
• Assignment papers signed weeks after the settlement closing.
• Self-dealing — the lawyer is also a beneficial owner of the assignment company.
• Payment streams that look like wages to the lawyer's own firm rather than annuity payments from a regulated carrier.

All of these are documentation and design failures, not problems with the underlying legal theory. The cure is to do it right.