II 

117TH CONGRESS 

1ST SESSION S. 3217 

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 SENATE OF THE UNITED STATES 

NOVEMBER 17, 2021 

Mr. MENENDEZ 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 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 RULES FOR FINANCIAL

9 GUARANTY 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 losses and loss 

23 adjustment expenses are expected to 

24 exceed the unearned premium reserves 

25 on the 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 or State or local bond expo5 sure of at least 9-to-1 (8-to-1 in the 

6 case of a taxable year of such com7 pany which ends on or before Decem8 ber 31, 2018), and 

9 ‘‘(III) such company includes in 

10 its insurance liabilities only its un11 earned premium reserves relating to 

12 insurance written or assumed that is 

13 within the single risk limits set forth 

14 in subsection (D) of section 4 of the 

15 Financial Guaranty Insurance Guide16 line (modified by using total share17 holder’s equity as reported on the ap18 plicable financial statement of the 

19 company rather than aggregate of the 

20 surplus to policyholders and contin21 gency reserves). 

22 ‘‘(ii) APPLICATION OF ALTERNATIVE

23 FACTS AND CIRCUMSTANCES TEST.—A fi24 nancial guaranty insurance company shall 


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1 be treated as satisfying the requirements 

2 of paragraph (2)(B). 

3 ‘‘(iii) FINANCIAL GUARANTY INSUR4 ANCE COMPANY.—For purposes of this 

5 subparagraph, the term ‘financial guaranty 

6 insurance company’ means any insurance 

7 company the sole business of which is writ8 ing or reinsuring financial guaranty insur9 ance (as defined in subsection (A) of sec10 tion 1 of the Financial Guaranty Insurance 

11 Guideline) which is permitted under sub12 section (B) of section 4 of such Guideline. 

13 ‘‘(iv) FINANCIAL GUARANTY EXPO14 SURE.—For purposes of this subpara15 graph, the term ‘financial guaranty expo16 sure’ means the ratio of— 

17 ‘‘(I) the net debt service out18 standing insured or reinsured by the 

19 company that is within the single risk 

20 limits set forth in the Financial Guar21 anty Insurance Guideline (as reported 

22 on such company’s applicable financial 

23 statement), to 

24 ‘‘(II) the company’s total assets 

25 (as so reported). 


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1 ‘‘(v) STATE OR LOCAL BOND EXPO2 SURE.—For purposes of this subpara3 graph, the term ‘State or local bond expo4 sure’ means the ratio of— 

5 ‘‘(I) the net unpaid principal of 

6 State or local bonds (as defined in 

7 section 103(c)(1)) insured or rein8 sured by the company that is within 

9 the single risk limits set forth in the 

10 Financial Guaranty Insurance Guide11 line (as reported on such company’s 

12 applicable financial statement), to 

13 ‘‘(II) the company’s total assets 

14 (as so reported).’’ 

15 ‘‘(vi) FINANCIAL GUARANTY INSUR16 ANCE GUIDELINE.—For purposes of this 

17 subparagraph— 

18 ‘‘(I) IN GENERAL.—The term 

19 ‘Financial Guaranty Insurance Guide20 line’ means the October 2008 model 

21 regulation that was adopted by the 

22 National Association of Insurance 

23 Commissioners on December 4, 2007. 

24 ‘‘(II) DETERMINATIONS MADE BY

25 SECRETARY.—The determination of 


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1 whether any provision of the Financial 

2 Guaranty Insurance Guideline has 

3 been satisfied shall be made by the 

4 Secretary.’’. 

5 (b) REPORTING OF CERTAIN ITEMS.—Section 

6 1297(f)(4) of such Code is amended by adding at the end 

7 the following new subparagraph: 

8 ‘‘(C) CLARIFICATION THAT CERTAIN ITEMS

9 ON APPLICABLE FINANCIAL STATEMENT BE

10 SEPARATELY REPORTED WITH RESPECT TO

11 CORPORATION.—An amount described in para12 graph (1)(B) or clause (i)(II), (i)(III), (iv)(I), 

13 (iv)(II), (v)(I), or (v)(II) of paragraph (3)(C) 

14 shall be treated as reported on an applicable fi15 nancial statement for purposes of this section 

16 if— 

17 ‘‘(i) such amount is separately re18 ported on such statement with respect to 

19 the corporation referred to in paragraph 

20 (1), or 

21 ‘‘(ii) such amount is separately deter22 mined for purposes of calculating an 

23 amount which is reported on such state24 ment. 


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1 ‘‘(D) AUTHORITY OF SECRETARY TO RE2 QUIRE REPORTING.— 

3 ‘‘(i) IN GENERAL.—Each United 

4 States person who owns an interest in a 

5 specified non-publicly traded foreign cor6 poration and who takes the position that 

7 such corporation is not a passive foreign 

8 investment company shall report to the 

9 Secretary such information with respect to 

10 such corporation as the Secretary may re11 quire. 

12 ‘‘(ii) SPECIFIED NON-PUBLICLY TRAD13 ED FOREIGN CORPORATION.—For purposes 

14 of this subparagraph, the term ‘specified 

15 non-publicly traded foreign corporation’ 

16 means any foreign corporation— 

17 ‘‘(I) which would be a passive 

18 foreign investment company if sub19 section (b)(2)(B) did not apply, and 

20 ‘‘(II) no interest in which is trad21 ed on an established securities mar22 ket.’’. 

23 (c) EFFECTIVE DATE.— 

24 (1) IN GENERAL.—Except as otherwise pro25 vided in this subsection, the amendments made by 


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1 this section shall take effect as if included in section 

2 14501 of Public Law 115–97. 

3 (2) REPORTING.—The amendment made by 

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

5 date of the enactment of this Act. 

Æ 


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