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H.R.3424 - To amend the Internal Revenue Code of 1986 to disallow the deduction for excess non-taxed reinsurance premiums with respect to United States risks paid to affiliates.
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SECTION 1. DISALLOWANCE OF DEDUCTION FOR EXCESS NON-TAXED REINSURANCE PREMIUMS PAID TO AFFILIATES.
‘(A) IN GENERAL- No deduction shall be allowed under paragraph (4) for so much of the affiliated non-taxed reinsurance premiums paid by a covered insurance company during the taxable year as exceeds the sum of--CommentsClose CommentsPermalink
‘(i) IN GENERAL- The term ‘affiliated non-taxed reinsurance premium’ means any reinsurance premium paid directly or indirectly to an affiliated corporation if, with respect to such affiliated corporation, such premium is neither subpart F income (as defined in section 952) nor subject to tax under this subtitle.CommentsClose CommentsPermalink
‘(ii) NETTING OF PREMIUMS PAID TO COVERED INSURANCE COMPANY BY AFFILIATES- The amount of premiums which would (but for this clause) be treated as affiliated non-taxed reinsurance premiums with respect to any affiliated corporation for any taxable year shall be reduced (but not below zero) by any reinsurance premiums paid directly or indirectly to the covered insurance company by such affiliated corporation during such taxable year.CommentsClose CommentsPermalink
‘(iii) PREMIUMS TREATED AS NON-TAXED TO EXTENT OF TREATY REDUCTION- Rules similar to the rules of section 163(j)(5)(B) shall apply for purposes of determining the extent to which tax is imposed by this subtitle with respect to any premium.CommentsClose CommentsPermalink
‘(I) the product of the gross premiums written by such covered insurance company on insurance contracts during the taxable year multiplied by the industry fraction for such taxable year, overCommentsClose CommentsPermalink
‘(ii) INDUSTRY FRACTION- In the case of any taxable year beginning in a calendar year, the term ‘industry fraction’ means the fraction, determined by the Secretary on the basis of published aggregate data from annual statements of insurance companies--CommentsClose CommentsPermalink
‘(I) the numerator of which is the aggregate reinsurance premiums paid by covered insurance companies to non-affiliated corporations during the second preceding calendar year, andCommentsClose CommentsPermalink
‘(II) subparagraph (A) shall be applied separately to each such line of business by taking into account the industry fraction determined with respect to such line of business.CommentsClose CommentsPermalink
‘(D) QUALIFIED CEDING COMMISSION- For purposes of this paragraph, the term ‘qualified ceding commission’ means, with respect to the affiliated non-taxed reinsurance premiums paid by a covered insurance company during any taxable year, the product of--CommentsClose CommentsPermalink
‘(II) waives all benefits granted by the United States under any treaty between the United States and any foreign country with respect to specified reinsurance income with respect to which the election under clause (i) applies, andCommentsClose CommentsPermalink
‘(iii) SPECIFIED REINSURANCE INCOME- For purposes of this subparagraph, the term ‘specified reinsurance income’ means, with respect to any specified affiliated corporation for any taxable year--CommentsClose CommentsPermalink
‘(I) all reinsurance premiums which would (but for the election made under this subparagraph) be affiliated non-taxed reinsurance premiums and which are received by such corporation during such taxable year directly or indirectly from covered insurance companies with respect to which such corporation is affiliated, andCommentsClose CommentsPermalink
‘(II) so much of the net investment income (within the meaning of section 842(b)) for such taxable year as is allocable to reinsurance premiums with respect to which an election under clause (i) applies for such taxable year or any prior taxable year.CommentsClose CommentsPermalink
‘(ii) TREATMENT OF CONTROLLED GROUP- All domestic members of a controlled group of corporations (as defined in section 1563) of which a covered insurance company is a member shall be treated as one corporation.CommentsClose CommentsPermalink
‘(iii) AFFILIATED CORPORATIONS- A corporation shall be treated as affiliated with a covered insurance company if both corporations are members of the same controlled group of corporations, as defined in section 1563(a) except that--CommentsClose CommentsPermalink
‘(iv) TREATMENT OF REINSURANCE ASSUMED BY COVERED INSURANCE COMPANY- Reinsurance ceded by a non-affiliated corporation to a covered insurance company shall be taken into account in the same manner as premiums written by such covered insurance company.CommentsClose CommentsPermalink
‘(G) REGULATIONS- The Secretary shall prescribe such regulations as may be appropriate to carry out or to prevent the avoidance of the purposes of this paragraph, including regulations which provide for the application of this section to alternative reinsurance transactions, fronting transactions, conduit and reciprocal transactions, and any economically equivalent transactions.’.CommentsClose CommentsPermalink