II

106TH CONGRESS

1ST SESSION S. 1933

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

NOVEMBER 16, 1999

Mr. THOMPSON 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.

10 (b) CONFORMING AMENDMENTS.—
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1 (1) Section 1503 of such Code is amended by

2 striking subsection (c) (relating to special rule for

3 application of certain losses against income of insur4 ance companies taxed under section 801) and by re5 designating subsections (d), (e), and (f) as sub6 sections (b), (c), and (d), respectively.

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

8 striking subsection (c) and by redesignating sub9 sections (d), (e), and (f) as subsections (c), (d), and

10 (e), respectively.

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

12 this section shall apply to taxable years beginning after

13 December 31, 1998.

14 (d) PHASE-IN OF APPLICATION OF CERTAIN LOSSES

15 AGAINST INCOME OF INSURANCE COMPANIES.—For tax16 able years beginning after December 31, 1998, and before

17 January 1, 2005—

18 (1) IN GENERAL.—If—

19 (A) an affiliated group includes 1 or more

20 domestic insurance companies each of which is

21 subject to tax under section 801 of the Internal

22 Revenue Code of 1986,

23 (B) the common parent of such group has

24 elected to treat all such companies as includible

25 corporations, and
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1 (C) the consolidated taxable income of the

2 members of the group not taxed under such

3 section 801 results in a consolidated net oper4 ating loss for such taxable year,

5 then, under regulations prescribed by the Secretary

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

7 loss which cannot be absorbed in the applicable

8 carryback periods against the taxable income of such

9 members not taxed under such section 801 shall be

10 taken into account in determining the consolidated

11 taxable income of the affiliated group for such tax12 able year to the extent of the applicable percentage

13 of such loss or the applicable percentage of the tax14 able income of the members taxed under such sec15 tion 801, whichever is less. The unused portion of

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

17 the same limitations (applicable to the sum of the

18 loss for the carryover year and the loss (or losses)

19 carried over to such year), in applicable carryover

20 years.

21 (2) APPLICABLE PERCENTAGE.—For purposes

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

23 determined in accordance with the following table:

For taxable years beginning

in:

The applicable percentage is:

1999 ................................................................................................... 40

2000 ................................................................................................... 50

2001 ................................................................................................... 60
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For taxable years beginning

in:

The applicable percentage is:

2002 ................................................................................................... 70

2003 ................................................................................................... 80

2004 ................................................................................................... 90.

1 (e) ELECTION FOR PRE-2005 YEARS OF GROUPS

2 WITH INSURANCE COMPANIES.—For taxable years begin3 ning after December 31, 1998, and before January 1,

4 2005, the common parent of an affiliated group which in5 cludes 1 or more domestic insurance companies subject to

6 tax under section 801 of such Code may elect to treat all

7 such insurance companies as corporations which are not

8 includible corporations within the meaning of subsection

9 (b) of section 1504 of such Code, if, as of the date of

10 the enactment of this section—

11 (1) such affiliated group included 1 or more in12 surance companies subject to tax under section 801

13 of such Code, and

14 (2) no additional election was in effect under

15 section 1504(c)(2) of such Code (as in effect on the

16 day before the date of the enactment of this Act).

17 (f) NO CARRYBACK BEFORE JANUARY 1, 1999.—To

18 the extent that a consolidated net operating loss is allowed

19 or increased by reason of the amendments made by this

20 section, such loss may not be carried back to a taxable

21 year beginning before January 1, 1999.
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1 (g) NONTERMINATION OF GROUP.—No affiliated

2 group shall terminate solely as a result of the amendments

3 made by this section.

4 (h) SUBSIDIARY STOCK BASIS ADJUSTMENTS.—A

5 parent corporation’s basis in the stock of a subsidiary cor6 poration shall be adjusted to reflect the preconsolidation

7 income, gain, deduction and loss incurred during a period

8 when such corporations were members of an affiliated

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

10 of such Code as in effect on the day before the date of

11 enactment of this Act) but were not included in a consoli12 dated return of such group by operation of section

13 1504(c)(2)(A) of such Code (as in effect on the day before

14 the date of the enactment of this Act).

15 (i) WAIVER OF 5-YEAR WAITING PERIOD.—Under

16 regulations prescribed by the Secretary of the Treasury

17 or his delegate, an automatic waiver from the 5-year wait18 ing period for reconsolidation provided in section

19 1504(a)(3) of such Code shall be granted to any corpora20 tion which was previously an includible corporation but

21 was subsequently deemed a nonincludible corporation as

22 a result of becoming a subsidiary of a corporation which

23 was not an includible corporation solely by operation of
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1 section 1504(c)(2) of such Code (as in effect on the day

2 before the date of enactment of this Act).

Æ