II 

109TH CONGRESS 

1ST SESSION S. 1293 

To amend the Internal Revenue Code of 1986 to permit the consolidation 

of life insurance companies with other companies. 

IN THE SENATE OF THE UNITED STATES 

JUNE 23, 2005 

Mr. BUNNING (for himself, Mr. CONRAD, Mr. LOTT, Mr. SMITH, and Mrs. 

LINCOLN) introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL

To amend the Internal Revenue Code of 1986 to permit 

the consolidation of life insurance companies with other 

companies.

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

3 SECTION 1. CONSOLIDATION OF LIFE INSURANCE COMPA4 NIES WITH OTHER COMPANIES PERMITTED. 

5 (a) IN GENERAL.—Section 1504(b) of the Internal 

6 Revenue Code of 1986 (defining includible corporation) is 

7 amended by striking paragraph (2) and by redesignating 

8 paragraphs (3) through (8) as paragraphs (2) through 

9 (7), respectively. 
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1 (b) CONFORMING AMENDMENTS.— 

2 (1) Section 1503 of the Internal Revenue Code 

3 of 1986 is amended by striking subsection (c) (relat4 ing to special rule for application of certain losses 

5 against income of insurance companies taxed under 

6 section 801) and by redesignating subsections (d), 

7 (e), and (f) as subsections (b), (c), and (d), respec8 tively. 

9 (2) Section 1504 of such Code is amended by 

10 striking subsection (c) and by redesignating sub11 sections (d), (e), and (f) as subsections (c), (d), and 

12 (e), respectively. 

13 (3) Section 243(b)(2)(A) of such Code is 

14 amended by striking ‘‘sections 1504(b)(2), 

15 1504(b)(4), and 1504(c)’’ and inserting ‘‘section 

16 1504(b)(3)’’. 

17 (4) Section 805(a)(4)(E) of such Code is 

18 amended by striking ‘‘1504(b)(3)’’ and inserting 

19 ‘‘1504(b)(2)’’. 

20 (5) Section 818(e)(1) of such Code is amended 

21 to read as follows: 

22 ‘‘(1) ITEMS OF COMPANIES OTHER THAN IN23 SURANCE COMPANIES.—If an affiliated group in24 cludes members which are and which are not taxed 

25 under section 801, all items of the members of such 
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1 group which are not taxed under section 801 shall 

2 not be taken into account in determining the amount 

3 of the tentative LICTI of members of such group 

4 which are taxed under section 801.’’. 

5 (6) Section 832(b)(5)(D)(ii)(II) of such Code is 

6 amended by striking ‘‘1504(b)(3)’’ and inserting 

7 ‘‘1504(b)(2)’’. 

8 (7) Section 864(e)(5)(A) of such Code is 

9 amended by striking ‘‘paragraph (4)’’ and inserting 

10 ‘‘paragraph (3)’’. 

11 (8) Section 936(i)(5)(A) of such Code is 

12 amended by striking ‘‘section 1504(b)(3) or (4)’’ 

13 and inserting ‘‘section 1504(b)(2) or (3)’’. 

14 (9) Section 952(c)(1)(B)(vii)(II) of such Code 

15 is amended by striking ‘‘1504(b)(3)’’ and inserting 

16 ‘‘1504(b)(2)’’. 

17 (10) Section 953(d)(3) of such Code is amend18 ed by striking ‘‘1503(d)’’ and inserting ‘‘1503(c)’’. 

19 (11) Section 954(h)(4)(F)(ii) of such Code is 

20 amended by striking ‘‘1504(b)(3)’’ and inserting 

21 ‘‘1504(b)(2)’’. 

22 (12) Section 6166(b)(10)(B)(ii)(V) of such 

23 Code is amended by striking ‘‘1504(b)(3)’’ and in24 serting ‘‘1504(b)(2)’’. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2004. 

4 SEC. 2. PHASE-IN OF APPLICATION OF CERTAIN LOSSES 

5 AGAINST INCOME OF INSURANCE COMPA6 NIES. 

7 (a) PHASE-IN.— 

8 (1) IN GENERAL.—For taxable years beginning 

9 after December 31, 2004, and before January 1, 

10 2011, if— 

11 (A) an affiliated group includes 1 or more 

12 domestic insurance companies subject to tax 

13 under section 801 of the Internal Revenue Code 

14 of 1986, and 

15 (B) the consolidated taxable income of the 

16 members of the group not taxed under such 

17 section 801 results in a consolidated net oper18 ating loss for such taxable year, 

19 then, under regulations prescribed by the Secretary 

20 of the Treasury or his delegate, the amount of such 

21 loss which cannot be absorbed in the applicable 

22 carryback periods against the taxable income of such 

23 members not taxed under such section 801 shall be 

24 taken into account in determining the consolidated 

25 taxable income of the affiliated group for such tax-
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1 able year to the extent of the applicable percentage 

2 of such loss or the applicable percentage of the tax3 able income of the members taxed under such sec4 tion 801, whichever is less. The unused portion of 

5 such loss shall be available as a carryover, subject to 

6 the same limitations (but determined based on the 

7 applicable percentage with respect to the year to 

8 which carried and applicable to the sum of the loss 

9 for the carryover year and the loss (or losses) car10 ried over to such year), in applicable carryover 

11 years. 

12 (2) APPLICABLE PERCENTAGE.—For purposes 

13 of paragraph (1), the applicable percentage shall be 

14 determined in accordance with the following table: 

The applicable 

For taxable years beginning in: percentage is: 

2005 ................................................................................................... 40

2006 ................................................................................................... 50

2007 ................................................................................................... 60

2008 ................................................................................................... 70

2009 ................................................................................................... 80

2010 ................................................................................................... 90. 

15 (b) NO CARRYBACK BEFORE JANUARY 1, 2005.—To 

16 the extent that a consolidated net operating loss is allowed 

17 or increased by reason of this section or the amendments 

18 made by this Act, such loss (or increase in such loss, as 

19 the case may be) may not be carried back to a taxable 

20 year beginning before January 1, 2005. 
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1 (c) NONTERMINATION OF GROUP.—No affiliated 

2 group shall terminate solely as a result of this section or 

3 the amendments made by this Act. 

4 (d) SUBSIDIARY STOCK BASIS ADJUSTMENTS.—A 

5 member corporation’s basis in the stock of a subsidiary 

6 corporation shall be adjusted upon consolidation to reflect 

7 the preconsolidation income, gain, deduction, loss, dis8 tributions, and other relevant amounts during a period 

9 when such corporations were members of an affiliated 

10 group (determined without regard to section 1504(b)(2) 

11 of the Internal Revenue Code of 1986 as in effect on the 

12 day before the date of enactment of this Act) but were 

13 not included in a consolidated return of such group by op14 eration of section 1504(c)(2)(A) of such Code (as in effect 

15 on the day before the date of the enactment of this Act). 

16 (e) WAIVER OF 5-YEAR WAITING PERIOD.—An auto17 matic waiver from the 5-year waiting period for reconsoli18 dation provided in section 1504(a)(3) of the Internal Rev19 enue Code of 1986 shall be granted to any corporation 

20 which was previously an includible corporation but was 

21 subsequently deemed a nonincludible corporation as a re22 sult of becoming a subsidiary of a corporation which was 

23 not an includible corporation solely by operation of section 

24 1504(c)(2) of such Code (as in effect on the day before 
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1 the date of enactment of this Act), subject to such condi2 tions as the Secretary may prescribe.

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