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.

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. Treatment of financial guaranty insurance companies as qualifying insurance corporations under passive foreign investment company rules (a) In general Section 1297(f)(3) (C) Special rule for financial guaranty insurance companies (i) In general Notwithstanding subparagraphs (A)(ii) and (B), the applicable insurance liabilities of a financial guaranty insurance company shall include its unearned premium reserves if— (I) such company is prohibited under generally accepted accounting principles from reporting on its applicable financial statements reserves for losses and loss adjustment expenses with respect to a financial guaranty insurance or reinsurance contract except to the extent that such reserve amounts are expected to exceed the unearned premium reserves on the contract, (II) the applicable financial statement of such company reports financial guaranty exposure of at least 15-to-1, and (III) such company includes in its insurance liabilities only its unearned premium reserves relating to insurance written or assumed that is within the single risk limits set forth in subsection (D) of section 4 of the Financial Guaranty Insurance Guideline (modified by using total shareholder’s equity as reported on the applicable financial statement of the company rather than aggregate of the surplus to policyholders and contingency reserves). (ii) Financial guaranty insurance company For purposes of this subparagraph, the term financial guaranty insurance company (iii) Financial guaranty exposure For purposes of this subparagraph, the term financial guaranty exposure (I) the net debt service outstanding insured or reinsured by the company that is within the single risk limits set forth in the Financial Guaranty Insurance Guideline (as reported on such company’s applicable financial statement), to (II) the company’s total assets (as so reported). (iv) Financial Guaranty Insurance Guideline For purposes of this subparagraph, the term Financial Guaranty Insurance Guideline . (b) Reporting of certain items Section 1297(f)(4) of such Code is amended by adding at the end the following new subparagraph: (C) Clarification that certain items on applicable financial statement be separately reported with respect to corporation An amount described in paragraph (1)(B) or clause (i)(II), (i)(III), (iii)(I), or (iii)(II) of paragraph (3)(C) shall not be treated as reported on an applicable financial statement for purposes of this section unless such amount is separately reported on such statement with respect to the corporation referred to in paragraph (1). (D) Authority of Secretary to require reporting (i) In general Each United States person who owns an interest in a specified non-publicly traded foreign corporation and who takes the position that such corporation is not a passive foreign investment company shall report to the Secretary such information with respect to such corporation as the Secretary may require. (ii) Specified non-publicly traded foreign corporation For purposes of this subparagraph, the term specified non-publicly traded foreign corporation (I) which would be a passive foreign investment company if subsection (b)(2)(B) did not apply, and (II) no interest in which is traded on an established securities market. . (c) Effective date (1) In general Except as otherwise provided in this subsection, the amendments made by this section shall take effect as if included in section 14501 of Public Law 115–97 (2) Reporting The amendment made by subsection (b) shall apply to reports made after the date of the enactment of this Act.

Summary: This bill sets forth special tax rules for determining whether financial guaranty insurance companies are qualifying insurance corporations under the passive foreign investment company rules.