S 2048 ISCommentsClose CommentsPermalink

112th CONGRESSCommentsClose CommentsPermalink

2d SessionCommentsClose CommentsPermalink

S. 2048CommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to clarify the tax treatment of certain life insurance contract transactions, and for other purposes.CommentsClose CommentsPermalink

IN THE SENATE OF THE UNITED STATESCommentsClose CommentsPermalink

January 31, 2012CommentsClose CommentsPermalink

Mr. CASEY introduced the following bill; which was read twice and referred to the Committee on FinanceCommentsClose CommentsPermalink

A BILLCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to clarify the tax treatment of certain life insurance contract transactions, and for other purposes.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. TAX REPORTING FOR LIFE SETTLEMENT TRANSACTIONS.

(a) In General- Subpart B of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:CommentsClose CommentsPermalink

‘SEC. 6050X. RETURNS RELATING TO CERTAIN LIFE INSURANCE CONTRACT TRANSACTIONS.

‘(a) Requirement of Reporting of Certain Payments-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Every person who acquires a life insurance contract or any interest in a life insurance contract in a reportable policy sale during any taxable year shall make a return for such taxable year (at such time and in such manner as the Secretary shall prescribe) setting forth--CommentsClose CommentsPermalink





‘(A) the name, address, and TIN of such person,CommentsClose CommentsPermalink





‘(B) the name, address, and TIN of each recipient of payment in the reportable policy sale,CommentsClose CommentsPermalink





‘(C) the date of such sale,CommentsClose CommentsPermalink





‘(D) the name of the issuer of the life insurance contract sold and the policy number of such contract, andCommentsClose CommentsPermalink





‘(E) the amount of each payment.CommentsClose CommentsPermalink





‘(2) STATEMENT TO BE FURNISHED TO PERSONS WITH RESPECT TO WHOM INFORMATION IS REQUIRED- Every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing--CommentsClose CommentsPermalink





‘(A) the name, address, and phone number of the information contact of the person required to make such return, andCommentsClose CommentsPermalink





‘(B) the information required to be shown on such return with respect to such person, except that in the case of an issuer of a life insurance contract, such statement is not required to include the information specified in paragraph (1)(E).CommentsClose CommentsPermalink





‘(b) Requirement of Reporting of Seller’s Basis in Life Insurance Contracts-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Upon receipt of the statement required under subsection (a)(2) or upon notice of a transfer of a life insurance contract to a foreign person, each issuer of a life insurance contract shall make a return (at such time and in such manner as the Secretary shall prescribe) setting forth--CommentsClose CommentsPermalink





‘(A) the name, address, and TIN of the seller who transfers any interest in such contract in such sale,CommentsClose CommentsPermalink





‘(B) the investment in the contract (as defined in section 72(e)(6)) with respect to such seller, andCommentsClose CommentsPermalink





‘(C) the policy number of such contract.CommentsClose CommentsPermalink





‘(2) STATEMENT TO BE FURNISHED TO PERSONS WITH RESPECT TO WHOM INFORMATION IS REQUIRED- Every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing--CommentsClose CommentsPermalink





‘(A) the name, address, and phone number of the information contact of the person required to make such return, andCommentsClose CommentsPermalink





‘(B) the information required to be shown on such return with respect to each seller whose name is required to be set forth in such return.CommentsClose CommentsPermalink





‘(c) Requirement of Reporting With Respect to Reportable Death Benefits-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Every person who makes a payment of reportable death benefits during any taxable year shall make a return for such taxable year (at such time and in such manner as the Secretary shall prescribe) setting forth--CommentsClose CommentsPermalink





‘(A) the name, address, and TIN of the person making such payment,CommentsClose CommentsPermalink





‘(B) the name, address, and TIN of each recipient of such payment,CommentsClose CommentsPermalink





‘(C) the date of each such payment, andCommentsClose CommentsPermalink





‘(D) the amount of each such payment.CommentsClose CommentsPermalink





‘(2) STATEMENT TO BE FURNISHED TO PERSONS WITH RESPECT TO WHOM INFORMATION IS REQUIRED- Every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing--CommentsClose CommentsPermalink





‘(A) the name, address, and phone number of the information contact of the person required to make such return, andCommentsClose CommentsPermalink





‘(B) the information required to be shown on such return with respect to each recipient of payment whose name is required to be set forth in such return.CommentsClose CommentsPermalink





‘(d) Definitions- For purposes of this section:CommentsClose CommentsPermalink





‘(1) PAYMENT- The term ‘payment’ means the amount of cash and the fair market value of any consideration transferred in a reportable policy sale.CommentsClose CommentsPermalink





‘(2) REPORTABLE POLICY SALE- The term ‘reportable policy sale’ has the meaning given such term in section 101(a)(3)(B).CommentsClose CommentsPermalink





‘(3) ISSUER- The term ‘issuer’ means any life insurance company that bears the risk with respect to a life insurance contract on the date any return or statement is required to be made under this section.CommentsClose CommentsPermalink





‘(4) REPORTABLE DEATH BENEFITS- The term ‘reportable death benefits’ means amounts paid by reason of the death of the insured under a life insurance contract that has been transferred in a reportable policy sale.’.CommentsClose CommentsPermalink





(b) Clerical Amendment- The table of sections for subpart B of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 6050W the following new item:CommentsClose CommentsPermalink





‘Sec. 6050X. Returns relating to certain life insurance contract transactions.’.CommentsClose CommentsPermalink





(c) Conforming Amendments-CommentsClose CommentsPermalink





(1) Subsection (d) of section 6724 of the Internal Revenue Code of 1986 is amended--CommentsClose CommentsPermalink





(A) by striking ‘or’ at the end of clause (xxiv) of paragraph (1)(B), by striking ‘and’ at the end of clause (xxv) of such paragraph and inserting ‘or’, and by inserting after such clause (xxv) the following new clause:CommentsClose CommentsPermalink





‘(xxvi) section 6050X (relating to returns relating to certain life insurance contract transactions), and’, andCommentsClose CommentsPermalink





(B) by striking ‘or’ at the end of subparagraph (GG) of paragraph (2), by striking the period at the end of subparagraph (HH) of such paragraph and inserting ‘, or’, and by inserting after such subparagraph (HH) the following new subparagraph:CommentsClose CommentsPermalink





‘(II) subsection (a)(2), (b)(2), or (c)(2) of section 6050X (relating to returns relating to certain life insurance contract transactions).’.CommentsClose CommentsPermalink





(2) Section 6047 of such Code is amended--CommentsClose CommentsPermalink





(A) by redesignating subsection (g) as subsection (h),CommentsClose CommentsPermalink





(B) by inserting after subsection (f) the following new subsection:CommentsClose CommentsPermalink





‘(g) Information Relating to Life Insurance Contract Transactions- This section shall not apply to any information which is required to be reported under section 6050X.’, andCommentsClose CommentsPermalink





(C) by adding at the end of subsection (h), as so redesignated, the following new paragraph:CommentsClose CommentsPermalink





‘(4) For provisions requiring reporting of information relating to certain life insurance contract transactions, see section 6050X.’.CommentsClose CommentsPermalink





(d) Effective Date- The amendments made by this section shall apply to--CommentsClose CommentsPermalink





(1) reportable policy sales after December 31, 2012, andCommentsClose CommentsPermalink





(2) reportable death benefits paid after December 31, 2012.CommentsClose CommentsPermalink

SEC. 2. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE CONTRACTS.

(a) In General- Paragraph (1) of section 1016(a) of the Internal Revenue Code of 1986 is amended by striking subparagraph (A) and all that follows and inserting the following:CommentsClose CommentsPermalink





‘(A) for--CommentsClose CommentsPermalink





‘(i) taxes or other carrying charges described in section 266; orCommentsClose CommentsPermalink





‘(ii) expenditures described in section 173 (relating to circulation expenditures),CommentsClose CommentsPermalink





for which deductions have been taken by the taxpayer in determining taxable income for the taxable year or prior taxable years; orCommentsClose CommentsPermalink





‘(B) for mortality, expense, or other reasonable charges incurred under an annuity or life insurance contract;’.CommentsClose CommentsPermalink





(b) Effective Date- The amendment made by this section shall apply to transactions entered into after August 25, 2009.CommentsClose CommentsPermalink

SEC. 3. EXCEPTION TO TRANSFER FOR VALUABLE CONSIDERATION RULES.

(a) In General- Subsection (a) of section 101 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





‘(3) EXCEPTION TO VALUABLE CONSIDERATION RULES FOR COMMERCIAL TRANSFERS-CommentsClose CommentsPermalink





‘(A) IN GENERAL- The second sentence of paragraph (2) shall not apply in the case of a transfer of a life insurance contract, or any interest therein, which is a reportable policy sale.CommentsClose CommentsPermalink





‘(B) REPORTABLE POLICY SALE- For purposes of this paragraph, the term ‘reportable policy sale’ means the acquisition of an interest in a life insurance contract, directly or indirectly, if the acquirer has no substantial family, business, or financial relationship with the insured apart from the acquirer’s interest in such life insurance contract. For purposes of the preceding sentence, the term ‘indirectly’ applies to the acquisition of an interest in a partnership, trust, or other entity that holds an interest in the life insurance contract.’.CommentsClose CommentsPermalink





(b) Conforming Amendment- Paragraph (1) of section 101(a) of the Internal Revenue Code of 1986 is amended by striking ‘paragraph (2)’ and inserting ‘paragraphs (2) and (3)’.CommentsClose CommentsPermalink





(c) Effective Date- The amendments made by this section shall apply to transfers after December 31, 2012.CommentsClose CommentsPermalink