Offshore Reinsurance Tax Fairness Act

Summary: Offshore Reinsurance Tax Fairness Act Amends the Internal Revenue Code to define &quot;qualifying insurance corporation,&quot; for purposes of the insurance business exception to passive foreign investment company rules, as a foreign corporation: (1) that would be subject to U.S. taxation if it were a domestic corporation, and (2) the applicable insurance liabilities of which constitute more than 25% of its total assets. Allows an alternative facts and circumstances test for insurance corporations whose applicable insurance liabilities are not at least 25% of total assets if such percentage is at least 10% and the corporation is predominantly engaged in an insurance business. 

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Offshore Reinsurance Tax Fairness 
Act''.

SEC. 2. RESTRICTION ON INSURANCE BUSINESS EXCEPTION TO PASSIVE FOREIGN 
              INVESTMENT COMPANY RULES.

    (a) In General.--Section 1297(b)(2)(B) of the Internal Revenue Code 
of 1986 is amended to read as follows:
                    ``(B) derived in the active conduct of an insurance 
                business by a qualifying insurance corporation (as 
                defined in subsection (f)),''.
    (b) Qualifying Insurance Corporation Defined.--Section 1297 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new subsection:
    ``(f) Qualifying Insurance Corporation.--For purposes of subsection 
(b)(2)(B)--
            ``(1) In general.--The term `qualifying insurance 
        corporation' means, with respect to any taxable year, a foreign 
        corporation--
                    ``(A) which would be subject to tax under 
                subchapter L if such corporation were a domestic 
                corporation, and
                    ``(B) the applicable insurance liabilities of which 
                constitute more than 25 percent of its total assets, 
                determined on the basis of such liabilities and assets 
                as reported on the corporation's applicable financial 
                statement for the last year ending with or within the 
                taxable year.
            ``(2) Alternative facts and circumstances test for certain 
        corporations.--If a corporation fails to qualify as a qualified 
        insurance corporation under paragraph (1) solely because the 
        percentage determined under paragraph (1)(B) is 25 percent or 
        less, a United States person that owns stock in such 
        corporation may elect to treat such stock as stock of a 
        qualifying insurance corporation if--
                    ``(A) the percentage so determined for the 
                corporation is at least 10 percent, and
                    ``(B) under regulations provided by the Secretary, 
                based on the applicable facts and circumstances--
                            ``(i) the corporation is predominantly 
                        engaged in an insurance business, and
                            ``(ii) such failure is due solely to 
                        temporary circumstances involving such 
                        insurance business.
            ``(3) Applicable insurance liabilities.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `applicable insurance 
                liabilities' means, with respect to any life or 
                property and casualty insurance business--
                            ``(i) loss and loss adjustment expenses, 
                        and
                            ``(ii) reserves (other than deficiency, 
                        contingency, or unearned premium reserves) for 
                        life and health insurance risks and life and 
                        health insurance claims with respect to 
                        contracts providing coverage for mortality or 
                        morbidity risks.
                    ``(B) Limitations on amount of liabilities.--Any 
                amount determined under clause (i) or (ii) of 
                subparagraph (A) shall not exceed the lesser of such 
                amount--
                            ``(i) as reported to the applicable 
                        insurance regulatory body in the applicable 
                        financial statement described in paragraph 
                        (4)(A) (or, if less, the amount required by 
                        applicable law or regulation), or
                            ``(ii) as determined under regulations 
                        prescribed by the Secretary.
            ``(4) Other definitions and rules.--For purposes of this 
        subsection--
                    ``(A) Applicable financial statement.--The term 
                `applicable financial statement' means a statement for 
                financial reporting purposes which--
                            ``(i) is made on the basis of generally 
                        accepted accounting principles,
                            ``(ii) is made on the basis of 
                        international financial reporting standards, 
                        but only if there is no statement that meets 
                        the requirement of clause (i), or
                            ``(iii) except as otherwise provided by the 
                        Secretary in regulations, is the annual 
                        statement which is required to be filed with 
                        the applicable insurance regulatory body, but 
                        only if there is no statement which meets the 
                        requirements of clause (i) or (ii).
                    ``(B) Applicable insurance regulatory body.--The 
                term `applicable insurance regulatory body' means, with 
                respect to any insurance business, the entity 
                established by law to license, authorize, or regulate 
                such business and to which the statement described in 
                subparagraph (A) is provided.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2015.