I 

116TH CONGRESS 

2D SESSION H. R. 5746 

To amend the Internal Revenue Code of 1986 to provide special rules for 

purposes of determining if financial guaranty insurance companies are 

qualifying insurance corporations under the passive foreign investment 

company rules. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 3, 2020 

Ms. MOORE (for herself and Mr. SMITH of Nebraska) introduced the following 

bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

special rules for purposes of determining if financial 

guaranty insurance companies are qualifying insurance 

corporations under the passive foreign investment company rules. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. TREATMENT OF FINANCIAL GUARANTY INSUR2 ANCE COMPANIES AS QUALIFYING INSUR3 ANCE CORPORATIONS UNDER PASSIVE FOR4 EIGN INVESTMENT COMPANY RULES. 

5 (a) IN GENERAL.—Section 1297(f)(3) of the Internal 

6 Revenue Code of 1986 is amended by adding at the end 

7 the following new subparagraph: 

8 ‘‘(C) SPECIAL RULE FOR FINANCIAL GUAR9 ANTY INSURANCE COMPANIES.— 

10 ‘‘(i) IN GENERAL.—Notwithstanding 

11 subparagraphs (A)(ii) and (B), the applica12 ble insurance liabilities of a financial guar13 anty insurance company shall include its 

14 unearned premium reserves if— 

15 ‘‘(I) such company is prohibited 

16 under generally accepted accounting 

17 principles from reporting on its appli18 cable financial statements reserves for 

19 losses and loss adjustment expenses 

20 with respect to a financial guaranty 

21 insurance or reinsurance contract ex22 cept to the extent that such reserve 

23 amounts are expected to exceed the 

24 unearned premium reserves on the 

25 contract, 


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1 ‘‘(II) the applicable financial 

2 statement of such company reports fi3 nancial guaranty exposure of at least 

4 15-to-1, and 

5 ‘‘(III) such company includes in 

6 its insurance liabilities only its un7 earned premium reserves relating to 

8 insurance written or assumed that is 

9 within the single risk limits set forth 

10 in subsection (D) of section 4 of the 

11 Financial Guaranty Insurance Guide12 line (modified by using total share13 holder’s equity as reported on the ap14 plicable financial statement of the 

15 company rather than aggregate of the 

16 surplus to policyholders and contin17 gency reserves). 

18 ‘‘(ii) FINANCIAL GUARANTY INSUR19 ANCE COMPANY.—For purposes of this 

20 subparagraph, the term ‘financial guaranty 

21 insurance company’ means any insurance 

22 company the sole business of which is writ23 ing or reinsuring financial guaranty insur24 ance (as defined in subsection (A) of sec25 tion 1 of the Financial Guaranty Insurance 


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1 Guideline) which is permitted under sub2 section (B) of section 4 of such Guideline. 

3 ‘‘(iii) FINANCIAL GUARANTY EXPO4 SURE.—For purposes of this subpara5 graph, the term ‘financial guaranty expo6 sure’ means the ratio of— 

7 ‘‘(I) the net debt service out8 standing insured or reinsured by the 

9 company that is within the single risk 

10 limits set forth in the Financial Guar11 anty Insurance Guideline (as reported 

12 on such company’s applicable financial 

13 statement), to 

14 ‘‘(II) the company’s total assets 

15 (as so reported). 

16 ‘‘(iv) FINANCIAL GUARANTY INSUR17 ANCE GUIDELINE.—For purposes of this 

18 subparagraph, the term ‘Financial Guar19 anty Insurance Guideline’ means the Octo20 ber 2008 model regulation that was adopt21 ed by the National Association of Insur22 ance Commissioners on December 4, 

23 2007.’’. 


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1 (b) REPORTING OF CERTAIN ITEMS.—Section 

2 1297(f)(4) of such Code is amended by adding at the end 

3 the following new subparagraph: 

4 ‘‘(C) CLARIFICATION THAT CERTAIN ITEMS

5 ON APPLICABLE FINANCIAL STATEMENT BE

6 SEPARATELY REPORTED WITH RESPECT TO

7 CORPORATION.—An amount described in para8 graph (1)(B) or clause (i)(II), (i)(III), (iii)(I), 

9 or (iii)(II) of paragraph (3)(C) shall not be 

10 treated as reported on an applicable financial 

11 statement for purposes of this section unless 

12 such amount is separately reported on such 

13 statement with respect to the corporation re14 ferred to in paragraph (1). 

15 ‘‘(D) AUTHORITY OF SECRETARY TO RE16 QUIRE REPORTING.— 

17 ‘‘(i) IN GENERAL.—Each United 

18 States person who owns an interest in a 

19 specified non-publicly traded foreign cor20 poration and who takes the position that 

21 such corporation is not a passive foreign 

22 investment company shall report to the 

23 Secretary such information with respect to 

24 such corporation as the Secretary may re25 quire. 


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1 ‘‘(ii) SPECIFIED NON-PUBLICLY TRAD2 ED FOREIGN CORPORATION.—For purposes 

3 of this subparagraph, the term ‘specified 

4 non-publicly traded foreign corporation’ 

5 means any foreign corporation— 

6 ‘‘(I) which would be a passive 

7 foreign investment company if sub8 section (b)(2)(B) did not apply, and 

9 ‘‘(II) no interest in which is trad10 ed on an established securities mar11 ket.’’. 

12 (c) EFFECTIVE DATE.— 

13 (1) IN GENERAL.—Except as otherwise pro14 vided in this subsection, the amendments made by 

15 this section shall take effect as if included in section 

16 14501 of Public Law 115–97. 

17 (2) REPORTING.—The amendment made by 

18 subsection (b) shall apply to reports made after the 

19 date of the enactment of this Act. 

Æ 


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