I 

117TH CONGRESS 

1ST SESSION H. R. 2951 

To direct the Secretary of the Treasury to modify Treasury Regulations 

relating to insurance-dedicated exchange-traded funds. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 30, 2021 

Mr. WENSTRUP (for himself and Mr. SUOZZI) introduced the following bill; 

which was referred to the Committee on Ways and Means 

A BILL 

To direct the Secretary of the Treasury to modify Treasury 

Regulations relating to insurance-dedicated exchangetraded funds. 

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

3 SECTION 1. INSURANCE-DEDICATED EXCHANGE-TRADED 

4 FUNDS. 

5 (a) IN GENERAL.—Not later than the date which is 

6 5 years after the date of the enactment of this Act, the 

7 Secretary of the Treasury (or the Secretary’s delegate) 

8 shall amend the regulation issued by the Department of 

9 the Treasury relating to ‘‘Income Tax; Diversification Re10 quirements for Variable Annuity, Endowment, and Life 


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1 Insurance Contracts’’, 54 Fed. Reg. 8728 (March 2, 

2 1989), and make any necessary corresponding amend3 ments to other regulations, in order to facilitate the use 

4 of exchange-traded funds as investment options under 

5 variable contracts within the meaning of section 817(d) 

6 of the Internal Revenue Code of 1986, in accordance with 

7 subsections (b) and (c) of this section. 

8 (b) DESIGNATE CERTAIN AUTHORIZED PARTICI9 PANTS AND MARKET MAKERS AS ELIGIBLE INVESTORS.— 

10 The Secretary of the Treasury (or the Secretary’s dele11 gate) shall amend Treas. Reg. section 1.817–5(f)(3) to 

12 provide that satisfaction of the requirements in Treas. 

13 Reg. section 1.817–5(f)(2)(i) with respect to an exchange14 traded fund shall not be prevented by reason of beneficial 

15 interests in such a fund being held by 1 or more author16 ized participants or market makers. 

17 (c) DEFINE RELEVANT TERMS.—In amending Treas. 

18 Reg. section 1.817–5(f)(3) in accordance with subsections 

19 (b) of this section, the Secretary of the Treasury (or the 

20 Secretary’s delegate) shall provide definitions consistent 

21 with the following: 

22 (1) EXCHANGE-TRADED FUND.—The term ‘‘ex23 change-traded fund’’ means a regulated investment 

24 company, partnership, or trust— 


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1 (A) that is registered with the Securities 

2 and Exchange Commission as an open-end in3 vestment company or a unit investment trust; 

4 (B) the shares of which can be purchased 

5 or redeemed directly from the fund only by an 

6 authorized participant; and 

7 (C) the shares of which are traded 

8 throughout the day on a national stock ex9 change at market prices that may or may not 

10 be the same as the net asset value of the 

11 shares. 

12 (2) AUTHORIZED PARTICIPANT.—The term 

13 ‘‘authorized participant’’ means a financial institu14 tion that is a member or participant of a clearing 

15 agency registered under section 17A(b) of the Secu16 rities Exchange Act of 1934 that enters into a con17 tractual relationship with an exchange-traded fund 

18 pursuant to which the financial institution is per19 mitted to purchase and redeem shares directly from 

20 the fund and to sell such shares to third parties, but 

21 only if the contractual arrangement or applicable law 

22 precludes the financial institution from— 

23 (A) purchasing the shares for its own in24 vestment purposes rather than for the exclusive 


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1 purpose of creating and redeeming such shares 

2 on behalf of third parties; and 

3 (B) selling the shares to third parties who 

4 are not market makers or otherwise described 

5 in Treas. Reg. section 1.817–5(f) (1) and (3). 

6 (3) MARKET MAKER.—The term ‘‘market 

7 maker’’ means a financial institution that is a reg8 istered broker or dealer under section 15(b) of the 

9 Securities Exchange Act of 1934 that maintains li10 quidity for an exchange-traded fund on a national 

11 stock exchange by being always ready to buy and sell 

12 shares of such fund on the market, but only if the 

13 financial institution is contractually or legally pre14 cluded from selling or buying such shares to or from 

15 persons who are not authorized participants or oth16 erwise described in Treas. Reg. section 1.817–5(f) 

17 (2) and (3). 

18 (d) EFFECTIVE DATE.—Subsections (b) and (c) shall 

19 apply to segregated asset account investments made on 

20 or after the date that is 5 years after the date of the enact21 ment of this Act. 

Æ 


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