HR 3157 IHCommentsClose CommentsPermalink

112th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

H. R. 3157CommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to prevent the avoidance of tax by insurance companies through reinsurance with non-taxed affiliates.CommentsClose CommentsPermalink

IN THE HOUSE OF REPRESENTATIVESCommentsClose CommentsPermalink

October 12, 2011CommentsClose CommentsPermalink

Mr. NEAL (for himself and Mr. PASCRELL) introduced the following bill; which was referred to the Committee on Ways and MeansCommentsClose CommentsPermalink

A BILLCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to prevent the avoidance of tax by insurance companies through reinsurance with non-taxed affiliates.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. PREVENTION OF AVOIDANCE OF TAX THROUGH REINSURANCE WITH NON-TAXED AFFILIATES.

(a) In General- Part III of subchapter L of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:CommentsClose CommentsPermalink

‘SEC. 849. SPECIAL RULES FOR REINSURANCE OF NON-LIFE CONTRACTS WITH NON-TAXED AFFILIATES.

‘(a) In General- The taxable income under section 831(a) or the life insurance company taxable income under section 801(b) (as the case may be) of an insurance company shall be determined by not taking into account--CommentsClose CommentsPermalink





‘(1) any non-taxed reinsurance premium,CommentsClose CommentsPermalink





‘(2) any additional amount paid by such insurance company with respect to the reinsurance for which such non-taxed reinsurance premium is paid, to the extent such additional amount is properly allocable to such non-taxed reinsurance premium, andCommentsClose CommentsPermalink





‘(3) any return premium, ceding commission, reinsurance recovered, or other amount received by such insurance company with respect to the reinsurance for which such non-taxed reinsurance premium is paid, to the extent such return premium, ceding commission, reinsurance recovered, or other amount is properly allocable to such non-taxed reinsurance premium.CommentsClose CommentsPermalink





‘(b) Non-Taxed Reinsurance Premiums- For purposes of this section--CommentsClose CommentsPermalink





‘(1) IN GENERAL- The term ‘non-taxed reinsurance premium’ means any reinsurance premium paid directly or indirectly to an affiliated corporation with respect to reinsurance of risks (other than excepted risks), to the extent that the income attributable to the premium is not subject to tax under this subtitle (either as the income of the affiliated corporation or as amounts included in gross income by a United States shareholder under section 951).CommentsClose CommentsPermalink





‘(2) EXCEPTED RISKS- The term ‘excepted risks’ means any risk with respect to which reserves described in section 816(b)(1) are established.CommentsClose CommentsPermalink





‘(c) Affiliated Corporations- For purposes of this section, a corporation shall be treated as affiliated with an insurance company if both corporations would be members of the same controlled group of corporations (as defined in section 1563(a)) if section 1563 were applied--CommentsClose CommentsPermalink





‘(1) by substituting ‘at least 50 percent’ for ‘at least 80 percent’ each place it appears in subsection (a)(1), andCommentsClose CommentsPermalink





‘(2) without regard to subsections (a)(4), (b)(2)(C), (b)(2)(D), and (e)(3)(C).CommentsClose CommentsPermalink





‘(d) Election To Treat Reinsurance Income as Effectively Connected-CommentsClose CommentsPermalink





‘(1) IN GENERAL- A specified affiliated corporation may elect for any taxable year to treat specified reinsurance income as--CommentsClose CommentsPermalink





‘(A) income effectively connected with the conduct of a trade or business in the United States, andCommentsClose CommentsPermalink





‘(B) for purposes of any treaty between the United States and any foreign country, income attributable to a permanent establishment in the United States.CommentsClose CommentsPermalink





‘(2) EFFECT OF ELECTION- In the case of any specified reinsurance income with respect to which the election under this subsection applies--CommentsClose CommentsPermalink





‘(A) DEDUCTION ALLOWED FOR REINSURANCE PREMIUMS- For exemption from subsection (a), see definition of non-taxed reinsurance premiums in subsection (b).CommentsClose CommentsPermalink





‘(B) EXCEPTION FROM EXCISE TAX- The tax imposed by section 4371 shall not apply with respect to any income treated as effectively connected with the conduct of a trade or business in the United States under paragraph (1).CommentsClose CommentsPermalink





‘(C) TAXATION UNDER THIS SUBCHAPTER- Such income shall be subject to tax under this subchapter to the same extent and in the same manner as if such income were the income of a domestic insurance company.CommentsClose CommentsPermalink





‘(D) COORDINATION WITH FOREIGN TAX CREDIT PROVISIONS- For purposes of subpart A of part III of subchapter N and sections 78 and 960--CommentsClose CommentsPermalink





‘(i) such specified reinsurance income shall be treated as derived from sources without the United States, andCommentsClose CommentsPermalink





‘(ii) subsections (a), (b), and (c) of section 904 and sections 902, 907, and 960 shall be applied separately with respect to each item of such income.CommentsClose CommentsPermalink





The Secretary may issue regulations or other guidance which provide that related items of specified reinsurance income may be aggregated for purposes of applying clause (ii).CommentsClose CommentsPermalink





‘(3) SPECIFIED AFFILIATED CORPORATION- For purposes of this subsection, the term ‘specified affiliated corporation’ means any affiliated corporation which is a foreign corporation and which meets such requirements as the Secretary shall prescribe to ensure that tax on the specified reinsurance income of such corporation is properly determined and paid.CommentsClose CommentsPermalink





‘(4) SPECIFIED REINSURANCE INCOME- For purposes of this paragraph, the term ‘specified reinsurance income’ means all income of a specified affiliated corporation which is attributable to reinsurance with respect to which subsection (a) would (but for the election under this subsection) apply.CommentsClose CommentsPermalink





‘(5) RULES RELATED TO ELECTION- Any election under paragraph (1) shall--CommentsClose CommentsPermalink





‘(A) be made at such time and in such form and manner as the Secretary may provide, andCommentsClose CommentsPermalink





‘(B) apply for the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.CommentsClose CommentsPermalink





‘(e) Regulations- The Secretary shall prescribe such regulations or other guidance as may be appropriate to carry out, or to prevent the avoidance of the purposes of, this section, including regulations or other guidance 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





(b) Clerical Amendment- The table of sections for part III of subchapter L of chapter 1 of such Code is amended by adding at the end the following new item:CommentsClose CommentsPermalink





‘Sec. 849. Special rules for reinsurance of non-life contracts with non-taxed affiliates.’.CommentsClose CommentsPermalink





(c) Effective Date- The amendment made by this section shall apply to taxable years beginning after December 31, 2011.CommentsClose CommentsPermalink