I 

111TH CONGRESS 

1ST SESSION H. R. 3399 

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

of life insurance companies with other companies. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 30, 2009 

Mr. LARSON of Connecticut (for himself and Mr. TIBERI) 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 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 the Internal Revenue Code 

2 of 1986 is amended by striking subsection (c) (relat3 ing to special rule for application of certain losses 

4 against income of insurance companies taxed under 

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

6 (e), and (f) as subsections (c), (d), and (e), respec7 tively. 

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

9 striking subsection (c) and by redesignating sub10 sections (d), (e), and (f) as subsections (c), (d), and 

11 (e), respectively. 

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

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

14 1504(b)(4), and 1504(c)’’ and inserting ‘‘section 

15 1504(b)(3)’’. 

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

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

18 ‘‘1504(b)(2)’’. 

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

20 to read as follows: 

21 ‘‘(1) ITEMS OF COMPANIES OTHER THAN IN22 SURANCE COMPANIES.—If an affiliated group in23 cludes members which are and which are not taxed 

24 under section 801, all items of the members of such 

25 group which are not taxed under section 801 shall 


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1 not be taken into account in determining the amount 

2 of the tentative LICTI of members of such group 

3 which are taxed under section 801.’’. 

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

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

6 ‘‘1504(b)(2)’’. 

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

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

9 ‘‘paragraph (3)’’. 

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

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

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

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

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

15 ‘‘1504(b)(2)’’. 

16 (10) Section 953(d)(3) of such Code is amend17 ed by striking ‘‘1503(d)’’ and inserting ‘‘1503(c)’’. 

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

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

20 ‘‘1504(b)(2)’’. 

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

22 Code is amended by striking ‘‘1504(b)(3)’’ and in23 serting ‘‘1504(b)(2)’’. 

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

25 this section shall apply to— 


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1 (1) in the case of an affiliated group with re2 spect to which an election is in effect under section 

3 1504(c)(2) of the Internal Revenue Code of 1986 

4 (as in effect before the date of the enactment of this 

5 Act) for the first taxable year ending on or after the 

6 date of the enactment of this Act, taxable years be7 ginning after such date, and 

8 (2) in the case of an affiliated group the com9 mon parent of which elects (at such time and in 

10 such manner as the Secretary may provide) to have 

11 the amendments made by this section apply to any 

12 taxable year beginning after the date of the enact13 ment of this Act (and not described in paragraph 

14 (3)), such taxable year and all subsequent taxable 

15 years, and 

16 (3) in any other case, taxable years beginning 

17 after the date which is 3 years after the date of the 

18 enactment of this Act. 

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

20 AGAINST INCOME OF INSURANCE COMPA21 NIES. 

22 (a) PHASE-IN.— 

23 (1) IN GENERAL.—In the case of the first tax24 able year of an affiliated group to which the amendVerDate Nov 24 2008 23:17 Jul 31, 2009 Jkt 079200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3399.IH H3399

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1 ments made by section 1 apply and each of the 5 

2 succeeding taxable years, if— 

3 (A) an affiliated group includes 1 or more 

4 domestic insurance companies subject to tax 

5 under section 801 of the Internal Revenue Code 

6 of 1986, and 

7 (B) the consolidated taxable income of the 

8 members of the group not taxed under such 

9 section 801 results in a consolidated net oper10 ating loss for such taxable year, 

11 then, under regulations prescribed by the Secretary 

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

13 loss which cannot be absorbed in the applicable 

14 carryback periods against the taxable income of such 

15 members not taxed under such section 801 shall be 

16 taken into account in determining the consolidated 

17 taxable income of the affiliated group for such tax18 able year to the extent of the applicable percentage 

19 of such loss or the applicable percentage of the tax20 able income of the members taxed under such sec21 tion 801, whichever is less. The unused portion of 

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

23 the same limitations (but determined based on the 

24 applicable percentage with respect to the year to 

25 which carried and applicable to the sum of the loss 


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1 for the carryover year and the loss (or losses) car2 ried over to such year), in applicable carryover 

3 years. 

4 (2) APPLICABLE PERCENTAGE.—For purposes 

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

6 determined in accordance with the following table: 

In the case of: The applicable 

percentage is: 

The first taxable year ........................................................................ 40

The second taxable year ..................................................................... 50

The third taxable year ....................................................................... 60

The fourth taxable year ..................................................................... 70

The fifth taxable year ........................................................................ 80

The sixth taxable year ....................................................................... 90. 

7 (b) NO CARRYBACK BEFORE EFFECTIVE DATE.—To 

8 the extent that a consolidated net operating loss is allowed 

9 or increased by reason of this section or the amendments 

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

11 the case may be) may not be carried back to any taxable 

12 year before the first taxable year of the affiliated group 

13 to which the amendments made by section 1 apply. 

14 (c) NONTERMINATION OF GROUP.—No affiliated 

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

16 the amendments made by this Act. 

17 (d) SUBSIDIARY STOCK BASIS ADJUSTMENTS.—A 

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

19 corporation shall be adjusted upon consolidation to reflect 

20 the preconsolidation income, gain, deduction, loss, dis21 tributions, and other relevant amounts during a period 


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1 when such corporations were members of an affiliated 

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

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

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

5 not included in a consolidated return of such group by op6 eration of section 1504(c)(2)(A) of such Code (as in effect 

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

8 (e) WAIVER OF 5-YEAR WAITING PERIOD.—An auto9 matic waiver from the 5-year waiting period for reconsoli10 dation provided in section 1504(a)(3) of the Internal Rev11 enue Code of 1986 shall be granted to any corporation 

12 which was previously an includible corporation but was 

13 subsequently deemed a nonincludible corporation as a re14 sult of becoming a subsidiary of a corporation which was 

15 not an includible corporation solely by operation of section 

16 1504(c)(2) of such Code (as in effect on the day before 

17 the date of enactment of this Act), subject to such condi18 tions as the Secretary may prescribe. 

Æ 


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