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 policy-holders.

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 consist 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.