Amends the Internal Revenue Code to exclude from the taxable income of a life insurance company or other insurance company: (1) any non-taxed reinsurance premium; (2) any additional amount paid by an insurance company with respect to the reinsurance for which such non-taxed reinsurance premium is paid; and (3) any return premium, ceding commission, reinsurance recovered, or other amount received by an insurance company with respect to the reinsurance for which such non-taxed reinsurance premium is paid.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2054 Introduced in House (IH)]
113th CONGRESS
1st Session
H. R. 2054
To amend the Internal Revenue Code of 1986 to prevent the avoidance of
tax by insurance companies through reinsurance with non-taxed
affiliates.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 20, 2013
Mr. Neal (for himself and Mr. Pascrell) introduced the following bill;
which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to prevent the avoidance of
tax by insurance companies through reinsurance with non-taxed
affiliates.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
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:
``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--
``(1) any non-taxed reinsurance premium,
``(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, and
``(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.
``(b) Non-Taxed Reinsurance Premiums.--For purposes of this
section--
``(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).
``(2) Excepted risks.--The term `excepted risks' means any
risk with respect to which reserves described in section
816(b)(1) are established.
``(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--
``(1) by substituting `at least 50 percent' for `at least
80 percent' each place it appears in subsection (a)(1), and
``(2) without regard to subsections (a)(4), (b)(2)(C),
(b)(2)(D), and (e)(3)(C).
``(d) Election To Treat Reinsurance Income as Effectively
Connected.--
``(1) In general.--A specified affiliated corporation may
elect for any taxable year to treat specified reinsurance
income as--
``(A) income effectively connected with the conduct
of a trade or business in the United States, and
``(B) for purposes of any treaty between the United
States and any foreign country, income attributable to
a permanent establishment in the United States.
``(2) Effect of election.--In the case of any specified
reinsurance income with respect to which the election under
this subsection applies--
``(A) Deduction allowed for reinsurance premiums.--
For exemption from subsection (a), see definition of
non-taxed reinsurance premiums in subsection (b).
``(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).
``(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.
``(D) Coordination with foreign tax credit
provisions.--For purposes of subpart A of part III of
subchapter N and sections 78 and 960--
``(i) such specified reinsurance income
shall be treated as derived from sources
without the United States, and
``(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.
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).
``(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.
``(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.
``(5) Rules related to election.--Any election under
paragraph (1) shall--
``(A) be made at such time and in such form and
manner as the Secretary may provide, and
``(B) apply for the taxable year for which made and
all subsequent taxable years unless revoked with the
consent of the Secretary.
``(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.''.
(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:
``Sec. 849. Special rules for reinsurance of non-life contracts with
non-taxed affiliates.''.
(c) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2013.
<all>
Introduced in House
Introduced in House
Sponsor introductory remarks on measure. (CR E702-703)
Referred to the House Committee on Ways and Means.
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