II 

114TH CONGRESS 

1ST SESSION S. 1687 

To amend the Internal Revenue Code of 1986 to restrict the insurance 

business exception to passive foreign investment company rules. 

IN THE SENATE OF THE UNITED STATES 

JUNE 25, 2015 

Mr. WYDEN 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 restrict 

the insurance business exception to 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, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Offshore Reinsurance 

5 Tax Fairness Act’’. 


asabaliauskas on DSK5VPTVN1PROD with BILLS
2 

•S 1687 IS

1 SEC. 2. RESTRICTION ON INSURANCE BUSINESS EXCEP2 TION TO PASSIVE FOREIGN INVESTMENT 

3 COMPANY RULES. 

4 (a) IN GENERAL.—Section 1297(b)(2)(B) of the In5 ternal Revenue Code of 1986 is amended to read as fol6 lows: 

7 ‘‘(B) derived in the active conduct of an in8 surance business by a qualifying insurance cor9 poration (as defined in subsection (f)),’’. 

10 (b) QUALIFYING INSURANCE CORPORATION DE11 FINED.—Section 1297 of the Internal Revenue Code of 

12 1986 is amended by adding at the end the following new 

13 subsection: 

14 ‘‘(f) QUALIFYING INSURANCE CORPORATION.—For 

15 purposes of subsection (b)(2)(B)— 

16 ‘‘(1) IN GENERAL.—The term ‘qualifying insur17 ance corporation’ means, with respect to any taxable 

18 year, a foreign corporation— 

19 ‘‘(A) which would be subject to tax under 

20 subchapter L if such corporation were a domes21 tic corporation, and 

22 ‘‘(B) the applicable insurance liabilities of 

23 which constitute more than 25 percent of its 

24 total assets, determined on the basis of such li25 abilities and assets as reported on the corporaVerDate Sep 11 2014 23:05 Jun 30, 2015 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1687.IS S1687

asabaliauskas on DSK5VPTVN1PROD with BILLS
3 

•S 1687 IS

1 tion’s applicable financial statement for the last 

2 year ending with or within the taxable year. 

3 ‘‘(2) ALTERNATIVE FACTS AND CIR4 CUMSTANCES TEST FOR CERTAIN CORPORATIONS.— 

5 If a corporation fails to qualify as a qualified insur6 ance corporation under paragraph (1) solely because 

7 the percentage determined under paragraph (1)(B) 

8 is 25 percent or less, a United States person that 

9 owns stock in such corporation may elect to treat 

10 such stock as stock of a qualifying insurance cor11 poration if— 

12 ‘‘(A) the percentage so determined for the 

13 corporation is at least 10 percent, and 

14 ‘‘(B) under regulations provided by the 

15 Secretary, based on the applicable facts and cir16 cumstances— 

17 ‘‘(i) the corporation is predominantly 

18 engaged in an insurance business, and 

19 ‘‘(ii) such failure is due solely to tem20 porary circumstances involving such insur21 ance business. 

22 ‘‘(3) APPLICABLE INSURANCE LIABILITIES.— 

23 For purposes of this subsection— 

24 ‘‘(A) IN GENERAL.—The term ‘applicable 

25 insurance liabilities’ means, with respect to any 


asabaliauskas on DSK5VPTVN1PROD with BILLS
4 

•S 1687 IS

1 life or property and casualty insurance busi2 ness— 

3 ‘‘(i) loss and loss adjustment ex4 penses, and 

5 ‘‘(ii) reserves (other than deficiency, 

6 contingency, or unearned premium re7 serves) for life and health insurance risks 

8 and life and health insurance claims with 

9 respect to contracts providing coverage for 

10 mortality or morbidity risks. 

11 ‘‘(B) LIMITATIONS ON AMOUNT OF LIABIL12 ITIES.—Any amount determined under clause 

13 (i) or (ii) of subparagraph (A) shall not exceed 

14 the lesser of such amount— 

15 ‘‘(i) as reported to the applicable in16 surance regulatory body in the applicable 

17 financial statement described in paragraph 

18 (4)(A) (or, if less, the amount required by 

19 applicable law or regulation), or 

20 ‘‘(ii) as determined under regulations 

21 prescribed by the Secretary. 

22 ‘‘(4) OTHER DEFINITIONS AND RULES.—For 

23 purposes of this subsection— 

24 ‘‘(A) APPLICABLE FINANCIAL STATE25 MENT.—The term ‘applicable financial stateVerDate Sep 11 2014 23:05 Jun 30, 2015 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1687.IS S1687

asabaliauskas on DSK5VPTVN1PROD with BILLS
5 

•S 1687 IS

1 ment’ means a statement for financial reporting 

2 purposes which— 

3 ‘‘(i) is made on the basis of generally 

4 accepted accounting principles, 

5 ‘‘(ii) is made on the basis of inter6 national financial reporting standards, but 

7 only if there is no statement that meets 

8 the requirement of clause (i), or 

9 ‘‘(iii) except as otherwise provided by 

10 the Secretary in regulations, is the annual 

11 statement which is required to be filed 

12 with the applicable insurance regulatory 

13 body, but only if there is no statement 

14 which meets the requirements of clause (i) 

15 or (ii). 

16 ‘‘(B) APPLICABLE INSURANCE REGU17 LATORY BODY.—The term ‘applicable insurance 

18 regulatory body’ means, with respect to any in19 surance business, the entity established by law 

20 to license, authorize, or regulate such business 

21 and to which the statement described in sub22 paragraph (A) is provided.’’. 


asabaliauskas on DSK5VPTVN1PROD with BILLS
6 

•S 1687 IS

1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2015. 

Æ 


asabaliauskas on DSK5VPTVN1PROD with BILLS