I 

114TH CONGRESS 

2D SESSION H. R. 5973 

To amend the Internal Revenue Code of 1986 to clarify the tax treatment 

of certain life insurance contract transactions, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 8, 2016 

Mr. TIBERI (for himself and Mr. KIND) 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 clarify 

the tax treatment of certain life insurance contract transactions, and for other purposes. 

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

3 SECTION 1. TAX REPORTING FOR LIFE SETTLEMENT 

4 TRANSACTIONS. 

5 (a) IN GENERAL.—Subpart B of part III of sub6 chapter A of chapter 61 of the Internal Revenue Code of 

7 1986 is amended by adding at the end the following new 

8 section: 


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1 ‘‘SEC. 6050X. RETURNS RELATING TO CERTAIN LIFE INSUR2 ANCE CONTRACT TRANSACTIONS. 

3 ‘‘(a) REQUIREMENT OF REPORTING OF CERTAIN

4 PAYMENTS.— 

5 ‘‘(1) IN GENERAL.—Every person who acquires 

6 a life insurance contract or any interest in a life in7 surance contract in a reportable policy sale during 

8 any taxable year shall make a return for such tax9 able year (at such time and in such manner as the 

10 Secretary shall prescribe) setting forth— 

11 ‘‘(A) the name, address, and TIN of such 

12 person, 

13 ‘‘(B) the name, address, and TIN of each 

14 recipient of payment in the reportable policy 

15 sale, 

16 ‘‘(C) the date of such sale, 

17 ‘‘(D) the name of the issuer of the life in18 surance contract sold and the policy number of 

19 such contract, and 

20 ‘‘(E) the amount of each payment. 

21 ‘‘(2) STATEMENT TO BE FURNISHED TO PER22 SONS WITH RESPECT TO WHOM INFORMATION IS RE23 QUIRED.—Every person required to make a return 

24 under this subsection shall furnish to each person 

25 whose name is required to be set forth in such re26 turn a written statement showing— 


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1 ‘‘(A) the name, address, and phone num2 ber of the information contact of the person re3 quired to make such return, and 

4 ‘‘(B) the information required to be shown 

5 on such return with respect to such person, ex6 cept that in the case of an issuer of a life insur7 ance contract, such statement is not required to 

8 include the information specified in paragraph 

9 (1)(E). 

10 ‘‘(b) REQUIREMENT OF REPORTING OF SELLER’S

11 BASIS IN LIFE INSURANCE CONTRACTS.— 

12 ‘‘(1) IN GENERAL.—Upon receipt of the state13 ment required under subsection (a)(2) or upon no14 tice of a transfer of a life insurance contract to a 

15 foreign person, each issuer of a life insurance con16 tract shall make a return (at such time and in such 

17 manner as the Secretary shall prescribe) setting 

18 forth— 

19 ‘‘(A) the name, address, and TIN of the 

20 seller who transfers any interest in such con21 tract in such sale, 

22 ‘‘(B) the investment in the contract (as de23 fined in section 72(e)(6)) with respect to such 

24 seller, and 

25 ‘‘(C) the policy number of such contract. 


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1 ‘‘(2) STATEMENT TO BE FURNISHED TO PER2 SONS WITH RESPECT TO WHOM INFORMATION IS RE3 QUIRED.—Every person required to make a return 

4 under this subsection shall furnish to each person 

5 whose name is required to be set forth in such re6 turn a written statement showing— 

7 ‘‘(A) the name, address, and phone num8 ber of the information contact of the person re9 quired to make such return, and 

10 ‘‘(B) the information required to be shown 

11 on such return with respect to each seller whose 

12 name is required to be set forth in such return. 

13 ‘‘(c) REQUIREMENT OF REPORTING WITH RESPECT

14 TO REPORTABLE DEATH BENEFITS.— 

15 ‘‘(1) IN GENERAL.—Every person who makes a 

16 payment of reportable death benefits during any tax17 able year shall make a return for such taxable year 

18 (at such time and in such manner as the Secretary 

19 shall prescribe) setting forth— 

20 ‘‘(A) the name, address, and TIN of the 

21 person making such payment, 

22 ‘‘(B) the name, address, and TIN of each 

23 recipient of such payment, 

24 ‘‘(C) the date of each such payment, and 

25 ‘‘(D) the amount of each such payment. 


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1 ‘‘(2) STATEMENT TO BE FURNISHED TO PER2 SONS WITH RESPECT TO WHOM INFORMATION IS RE3 QUIRED.—Every person required to make a return 

4 under this subsection shall furnish to each person 

5 whose name is required to be set forth in such re6 turn a written statement showing— 

7 ‘‘(A) the name, address, and phone num8 ber of the information contact of the person re9 quired to make such return, and 

10 ‘‘(B) the information required to be shown 

11 on such return with respect to each recipient of 

12 payment whose name is required to be set forth 

13 in such return. 

14 ‘‘(d) DEFINITIONS.—For purposes of this section: 

15 ‘‘(1) PAYMENT.—The term ‘payment’ means 

16 the amount of cash and the fair market value of any 

17 consideration transferred in a reportable policy sale. 

18 ‘‘(2) REPORTABLE POLICY SALE.—The term 

19 ‘reportable policy sale’ has the meaning given such 

20 term in section 101(a)(3)(B). 

21 ‘‘(3) ISSUER.—The term ‘issuer’ means any life 

22 insurance company that bears the risk with respect 

23 to a life insurance contract on the date any return 

24 or statement is required to be made under this sec25 tion. 


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1 ‘‘(4) REPORTABLE DEATH BENEFITS.—The 

2 term ‘reportable death benefits’ means amounts paid 

3 by reason of the death of the insured under a life 

4 insurance contract that has been transferred in a re5 portable policy sale with respect to which, a state6 ment is required to be furnished under subsection 

7 (a)(2), or a notice of a transfer of a life insurance 

8 contract to a foreign person has been received.’’. 

9 (b) CLERICAL AMENDMENT.—The table of sections 

10 for subpart B of part III of subchapter A of chapter 61 

11 of the Internal Revenue Code of 1986 is amended by in12 serting after the item relating to section 6050W the fol13 lowing new item: 

‘‘Sec. 6050X. Returns relating to certain life insurance contract transactions.’’. 

14 (c) CONFORMING AMENDMENTS.— 

15 (1) Section 6724(d)(1)(B) of the Internal Rev16 enue Code of 1986 is amended by striking ‘‘or’’ at 

17 the end of clause (xxiv), by adding ‘‘or’’ at the end 

18 of clause (xxv), and by inserting after clause (xxv) 

19 the following new clause: 

20 ‘‘(xxvi) section 6050X (relating to re21 turns relating to certain life insurance con22 tract transactions),’’. 

23 (2) Section 6724(d)(2) of such Code is amend24 ed by striking ‘‘or’’ at the end of subparagraph 

25 (HH), by striking the period at the end of subparaVerDate Sep 11 2014 02:16 Sep 13, 2016 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5973.IH H5973

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1 graph (II) and inserting ‘‘, or’’, and by inserting 

2 after subparagraph (II) the following new subpara3 graph: 

4 ‘‘(JJ) subsection (a)(2), (b)(2), or (c)(2) of 

5 section 6050X (relating to returns relating to 

6 certain life insurance contract transactions).’’. 

7 (3) Section 6047 of such Code is amended— 

8 (A) by redesignating subsection (g) as sub9 section (h), 

10 (B) by inserting after subsection (f) the 

11 following new subsection: 

12 ‘‘(g) INFORMATION RELATING TO LIFE INSURANCE

13 CONTRACT TRANSACTIONS.—This section shall not apply 

14 to any information which is required to be reported under 

15 section 6050X.’’, and 

16 (C) by adding at the end of subsection (h), 

17 as so redesignated, the following new para18 graph: 

19 ‘‘(4) For provisions requiring reporting of infor20 mation relating to certain life insurance contract 

21 transactions, see section 6050X.’’. 

22 (d) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to— 

24 (1) reportable policy sales after December 31, 

25 2016, and 


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1 (2) reportable death benefits paid after Decem2 ber 31, 2016. 

3 SEC. 2. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE 

4 CONTRACTS. 

5 (a) IN GENERAL.—Paragraph (1) of section 1016(a) 

6 of the Internal Revenue Code of 1986 is amended by strik7 ing subparagraph (A) and all that follows and inserting 

8 the following: 

9 ‘‘(A) for— 

10 ‘‘(i) taxes or other carrying charges 

11 described in section 266, or 

12 ‘‘(ii) expenditures described in section 

13 173 (relating to circulation expenditures), 

14 for which deductions have been taken by the 

15 taxpayer in determining taxable income for the 

16 taxable year or prior taxable years, or 

17 ‘‘(B) for mortality, expense, or other rea18 sonable charges incurred under an annuity or 

19 life insurance contract.’’. 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 this section shall apply to transactions entered into after 

22 August 25, 2009. 


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1 SEC. 3. EXCEPTION TO TRANSFER FOR VALUABLE CONSID2 ERATION RULES. 

3 (a) IN GENERAL.—Subsection (a) of section 101 of 

4 the Internal Revenue Code of 1986 is amended by adding 

5 at the end the following new paragraph: 

6 ‘‘(3) EXCEPTION TO VALUABLE CONSIDERATION

7 RULES FOR COMMERCIAL TRANSFERS.— 

8 ‘‘(A) IN GENERAL.—The second sentence 

9 of paragraph (2) shall not apply in the case of 

10 a transfer of a life insurance contract, or any 

11 interest therein, which is a reportable policy 

12 sale. 

13 ‘‘(B) REPORTABLE POLICY SALE.— 

14 ‘‘(i) IN GENERAL.—For purposes of 

15 this paragraph, the term ‘reportable policy 

16 sale’ means the acquisition of an interest 

17 in a life insurance contract, directly or in18 directly, if the acquirer has no substantial 

19 family, business, or financial relationship 

20 with the insured apart from the acquirer’s 

21 interest in such life insurance contract. 

22 ‘‘(ii) INDIRECT ACQUISITIONS.—For 

23 purposes of clause (i), the term ‘indirectly’ 

24 applies to the acquisition of an interest in 

25 a partnership, trust, or other entity that 


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1 holds an interest in the life insurance con2 tract unless— 

3 ‘‘(I) the insured of the life insur4 ance contract is an existing or former 

5 employee, officer, director, 5-percent 

6 owner, or independent contractor of 

7 the acquired entity or its subsidiaries 

8 or predecessors, and 

9 ‘‘(II) no more than 50 percent of 

10 the gross value of the assets of the ac11 quired entity consists of life insurance 

12 contracts or the parties demonstrate 

13 to the satisfaction of the Secretary 

14 that the acquisition of the life insur15 ance is not the principal purpose of 

16 the acquired entity. 

17 ‘‘(iii) DETERMINATION OF GROSS

18 VALUE OF ASSETS.—For purposes of 

19 clause (ii), the term ‘gross value of assets’ 

20 means, with respect to any acquired entity, 

21 the sum of— 

22 ‘‘(I) in the case of assets of the 

23 acquired entity which are life insur24 ance policies or annuity or endowment 

25 contracts, the unborrowed policy cash 


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1 values of such policies and contracts, 

2 and 

3 ‘‘(II) in the case of assets of the 

4 acquired entity not described in sub5 clause (I), the adjusted bases (within 

6 the meaning of section 1016) of such 

7 assets.’’. 

8 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

9 section 101(a) of the Internal Revenue Code of 1986 is 

10 amended by striking ‘‘paragraph (2)’’ and inserting ‘‘para11 graphs (2) and (3)’’. 

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

13 this section shall apply to transfers after December 31, 

14 2016. 

Æ 


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