Insurance Tax Fairness Act of 1994

Summary: Insurance Tax Fairness Act of 1994 - Amends the Internal Revenue Code to revise the method for determining the limitation on the deduction of policyholder dividends by mutual life insurance companies. 
Exempts small life insurance companies from the required capitalization of certain policy acquisition expenses. 
Expresses the sense of the Congress that revenues resulting from this Act be dedicated to the funding of programs benefiting the nutrition, early education, housing, and family support of the Nation's children.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Insurance Tax Fairness Act of 
1994''.

SEC. 2. REVISION OF LIMITATION ON DEDUCTION OF POLICYHOLDER DIVIDENDS 
              BY MUTUAL LIFE INSURANCE COMPANIES.

    (a) In General.--Paragraph (2) of section 808(c) of the Internal 
Revenue Code of 1986 (relating to reduction in case of mutual 
companies) is amended to read as follows:
            ``(2) Limitation in case of mutual companies.--
                    ``(A) In general.--In the case of a mutual life 
                insurance company, the amount allowed as a deduction 
                under paragraph (1) for any taxable year shall not 
                exceed the lesser of--
                            ``(i) 90 percent of the policyholder 
                        dividends paid or accrued by such company 
                        during such taxable year, or
                            ``(ii) 30 percent of the life insurance 
                        company taxable income of such company for such 
                        taxable year (determined without regard to any 
                        deduction for policyholder dividends).
                In no event shall the limitation under this 
                subparagraph for any taxable year be less than 
                $35,000,000.
                    ``(B) Treatment of stock companies owned by mutual 
                life insurance companies.--Solely for purposes of this 
                paragraph, a stock life insurance company shall be 
                treated as a mutual life insurance company if stock 
                possessing--
                            ``(i) at least 80 percent of the total 
                        combined voting power of all classes of stock 
                        of such stock life insurance company entitled 
                        to vote, or
                            ``(ii) at least 80 percent of the total 
                        value of shares of all classes of stock of such 
                        stock life insurance company,
                is owned at any time during the calendar year directly 
                (or through the application of section 318) by one or 
                more mutual life insurance companies).''
    (b) Repeal of Section 809.--
            (1) Section 809 of such Code is hereby repealed.
            (2) Subparagraph (B) of section 807(a)(2) of such Code is 
        amended to read as follows:
                    ``(B) the amount of the policyholders' share of 
                tax-exempt interest,''.
            (3) Subparagraph (B) of section 807(b)(1) of such Code is 
        amended to read as follows:
                    ``(B) the amount of the policyholders' share of 
                tax-exempt interest,''.
            (4) Subparagraph (A) of section 812(b)(3) of such Code is 
        amended by striking ``sections 808 and 809'' and inserting 
        ``section 808''.
            (5) Subsection (c) of section 817 of such Code is amended 
        by striking ``(other than section 809)''.
            (6) Subsection (c) of section 842 of such Code is amended 
        by striking paragraph (3) and by redesignating paragraph (4) as 
        paragraph (3).
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 1993.
            (2) Recomputation under section 809(f) not affected.--The 
        amendments made by this section shall not affect the 
        application of section 809(f) of the Internal Revenue Code of 
        1986 (as in effect before its repeal by subsection (b)) in 
        respect of any taxable year beginning before January 1, 1994.
            (3) Limitation on loss carrybacks.--In the case of a life 
        insurance company subject to the limitation under section 
        808(b)(2) of such Code, no capital loss arising in a taxable 
        year beginning after December 31, 1993, may be carried to a 
        taxable year beginning before January 1, 1994.

SEC. 3. SMALL LIFE INSURANCE COMPANIES EXEMPT FROM REQUIRED 
              CAPITALIZATION OF CERTAIN POLICY ACQUISITION EXPENSES.

    Section 848 of the Internal Revenue Code of 1986 (relating to 
capitalization of certain policy acquisition expenses) is amended by 
adding at the end the following new subsection:
    ``(k) Exemption for Small Life Insurance Companies.--This section 
shall not require any small life insurance company (as defined in 
section 806) to capitalize any specified policy acquisition expenses 
for any taxable year beginning after December 31, 1993.''

SEC. 4. SENSE OF CONGRESS RELATING TO USE OF INCREASED REVENUES.

    It is the sense of the Congress that any increase in revenues to 
the Treasury resulting from the amendments made by this Act shall be 
dedicated to the funding of programs benefiting the nutrition, early 
education, housing, and family support of the Nation's children.