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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4510 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 4510

  To amend the Internal Revenue Code of 1986 to revise the limitation 
  applicable to mutual life insurance companies on the deduction for 
  policyholder dividends and to exempt small life insurance companies 
    from the required capitalization of certain policy acquisition 
                               expenses.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              May 26, 1994

    Mr. Filner (for himself, Mr. Becerra, Mr. Berman, Mr. Brown of 
California, Ms. Furse, Mr. Hastings, Ms. McKinney, Mrs. Mink of Hawaii, 
  Ms. Norton, Mrs. Unsoeld, Ms. Velazquez, Ms. Waters, and Mr. Watt) 
 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 revise the limitation 
  applicable to mutual life insurance companies on the deduction for 
  policyholder dividends and to exempt small life insurance companies 
    from the required capitalization of certain policy acquisition 
                               expenses.

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

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.

                                 <all>
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