A bill to amend the Internal Revenue Code of 1954 to allow the tax-exempt status of the interest of certain life insurance accounts to flow-through to policyholders.

Amends the Internal Revenue Code to permit holders of life insurance policies to receive tax free income under annuity contracts funded by segregated exempt-interest accounts in which 50 percent of the assets of such accounts consists of tax-exempt State or local government securities. Disallows tax deductions for expenses and interest incurred by life insurance companies in the maintenance of such exempt-interest asset accounts.