SECTION 1. CONSOLIDATION OF LIFE INSURANCE COMPANIES WITH OTHER 
              COMPANIES PERMITTED.

    (a) In General.--Section 1504(b) of the Internal Revenue Code of 
1986 (defining includible corporation) is amended by striking paragraph 
(2) and by redesignating paragraphs (3) through (8) as paragraphs (2) 
through (7), respectively.
    (b) Conforming Amendments.--
            (1) Section 1503 of the Internal Revenue Code of 1986 is 
        amended by striking subsection (c) (relating to special rule 
        for application of certain losses against income of insurance 
        companies taxed under section 801) and by redesignating 
        subsections (d), (e), and (f) as subsections (b), (c), and (d), 
        respectively.
            (2) Section 1504 of such Code is amended by striking 
        subsection (c) and by redesignating subsections (d), (e), and 
        (f) as subsections (c), (d), and (e), respectively.
            (3) Section 243(b)(2)(A) of such Code is amended by 
        striking ``sections 1504(b)(2), 1504(b)(4), and 1504(c)'' and 
        inserting ``section 1504(b)(3)''.
            (4) Section 805(a)(4)(E) of such Code is amended by 
        striking ``1504(b)(3)'' and inserting ``1504(b)(2)''.
            (5) Section 818(e)(1) of such Code is amended to read as 
        follows:
            ``(1) Items of companies other than insurance companies.--
        If an affiliated group includes members which are and which are 
        not taxed under section 801, all items of the members of such 
        group which are not taxed under section 801 shall not be taken 
        into account in determining the amount of the tentative LICTI 
        of members of such group which are taxed under section 801.''.
            (6) Section 832(b)(5)(D)(ii)(II) of such Code is amended by 
        striking ``1504(b)(3)'' and inserting ``1504(b)(2)''.
            (7) Section 864(e)(5)(A) of such Code is amended by 
        striking ``paragraph (4)'' and inserting ``paragraph (3)''.
            (8) Section 936(i)(5)(A) of such Code is amended by 
        striking ``section 1504(b)(3) or (4)'' and inserting ``section 
        1504(b)(2) or (3)''.
            (9) Section 952(c)(1)(B)(vii)(II) of such Code is amended 
        by striking ``1504(b)(3)'' and inserting ``1504(b)(2)''.
            (10) Section 953(d)(3) of such Code is amended by striking 
        ``1503(d)'' and inserting ``1503(c)''.
            (11) Section 954(h)(4)(F)(ii) of such Code is amended by 
        striking ``1504(b)(3)'' and inserting ``1504(b)(2)''.
            (12) Section 6166(b)(10)(B)(ii)(V) of such Code is amended 
        by striking ``1504(b)(3)'' and inserting ``1504(b)(2)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2006.

SEC. 2. PHASE-IN OF APPLICATION OF CERTAIN LOSSES AGAINST INCOME OF 
              INSURANCE COMPANIES.

    (a) Phase-in.--
            (1) In general.--For taxable years beginning after December 
        31, 2006, and before January 1, 2013, if--
                    (A) an affiliated group includes 1 or more domestic 
                insurance companies subject to tax under section 801 of 
                the Internal Revenue Code of 1986, and
                    (B) the consolidated taxable income of the members 
                of the group not taxed under such section 801 results 
                in a consolidated net operating loss for such taxable 
                year,
        then, under regulations prescribed by the Secretary of the 
        Treasury or his delegate, the amount of such loss which cannot 
        be absorbed in the applicable carryback periods against the 
        taxable income of such members not taxed under such section 801 
        shall be taken into account in determining the consolidated 
        taxable income of the affiliated group for such taxable year to 
        the extent of the applicable percentage of such loss or the 
        applicable percentage of the taxable income of the members 
        taxed under such section 801, whichever is less. The unused 
        portion of such loss shall be available as a carryover, subject 
        to the same limitations (but determined based on the applicable 
        percentage with respect to the year to which carried and 
        applicable to the sum of the loss for the carryover year and 
        the loss (or losses) carried over to such year), in applicable 
        carryover years.
            (2) Applicable percentage.--For purposes of paragraph (1), 
        the applicable percentage shall be determined in accordance 
        with the following table:

                                                         The applicable
    For taxable years beginning in:                      percentage is:
        2007...................................................     40 
        2008...................................................     50 
        2009...................................................     60 
        2010...................................................     70 
        2011...................................................     80 
        2012...................................................     90.
    (b) No Carryback Before January 1, 2007.--To the extent that a 
consolidated net operating loss is allowed or increased by reason of 
this section or the amendments made by this Act, such loss (or increase 
in such loss, as the case may be) may not be carried back to a taxable 
year beginning before January 1, 2007.
    (c) Nontermination of Group.--No affiliated group shall terminate 
solely as a result of this section or the amendments made by this Act.
    (d) Subsidiary Stock Basis Adjustments.--A member corporation's 
basis in the stock of a subsidiary corporation shall be adjusted upon 
consolidation to reflect the preconsolidation income, gain, deduction, 
loss, distributions, and other relevant amounts during a period when 
such corporations were members of an affiliated group (determined 
without regard to section 1504(b)(2) of the Internal Revenue Code of 
1986 as in effect on the day before the date of enactment of this Act) 
but were not included in a consolidated return of such group by 
operation of section 1504(c)(2)(A) of such Code (as in effect on the 
day before the date of the enactment of this Act).
    (e) Waiver of 5-Year Waiting Period.--An automatic waiver from the 
5-year waiting period for reconsolidation provided in section 
1504(a)(3) of the Internal Revenue Code of 1986 shall be granted to any 
corporation which was previously an includible corporation but was 
subsequently deemed a nonincludible corporation as a result of becoming 
a subsidiary of a corporation which was not an includible corporation 
solely by operation of section 1504(c)(2) of such Code (as in effect on 
the day before the date of enactment of this Act), subject to such 
conditions as the Secretary may prescribe.
Amends the Internal Revenue Code to allow affiliated life and non-life insurance companies to file consolidated tax returns.

Allows: (1) a phasein, between 2007 and 2013, of the full application of losses of affiliated non-life insurance companies against the taxable income of an affiliated life insurance company; and (2) an automatic waiver of the five-year waiting period applicable to affiliated non-life insurance companies for offset of their losses against life insurance company income.
A bill to amend the Internal Revenue Code of 1986 to permit the consolidation of life insurance companies with other companies.