Offshore Reinsurance Tax Fairness Act

To amend the Internal Revenue Code of 1986 to restrict the insurance business exception to passive foreign investment company rules. 1. Short title This Act may be cited as the Offshore Reinsurance Tax Fairness Act 2. Restriction on insurance business exception to passive foreign investment company rules (a) In general Section 1297(b)(2)(B) (B) derived in the active conduct of an insurance business by a qualifying insurance corporation (as defined in subsection (f)), . (b) Qualifying insurance corporation defined Section 1297 (f) Qualifying insurance corporation For purposes of subsection (b)(2)(B)— (1) In general The term qualifying insurance corporation (A) which would be subject to tax under subchapter L if such corporation were a domestic corporation, and (B) the applicable insurance liabilities of which constitute more than 25 percent of its total assets, determined on the basis of such liabilities and assets as reported on the corporation’s applicable financial statement for the last year ending with or within the taxable year. (2) Alternative facts and circumstances test for certain corporations If a corporation fails to qualify as a qualified insurance corporation under paragraph (1) solely because the percentage determined under paragraph (1)(B) is 25 percent or less, a United States person that owns stock in such corporation may elect to treat such stock as stock of a qualifying insurance corporation if— (A) the percentage so determined for the corporation is at least 10 percent, and (B) under regulations provided by the Secretary, based on the applicable facts and circumstances— (i) the corporation is predominantly engaged in an insurance business, and (ii) such failure is due solely to temporary circumstances involving such insurance business. (3) Applicable insurance liabilities For purposes of this subsection— (A) In general The term applicable insurance liabilities (i) loss and loss adjustment expenses, and (ii) reserves (other than deficiency, contingency, or unearned premium reserves) for life and health insurance risks and life and health insurance claims with respect to contracts providing coverage for mortality or morbidity risks. (B) Limitations on amount of liabilities Any amount determined under clause (i) or (ii) of subparagraph (A) shall not exceed the lesser of such amount— (i) as reported to the applicable insurance regulatory body in the applicable financial statement described in paragraph (4)(A) (or, if less, the amount required by applicable law or regulation), or (ii) as determined under regulations prescribed by the Secretary. (4) Other definitions and rules For purposes of this subsection— (A) Applicable financial statement The term applicable financial statement (i) is made on the basis of generally accepted accounting principles, (ii) is made on the basis of international financial reporting standards, but only if there is no statement that meets the requirement of clause (i), or (iii) except as otherwise provided by the Secretary in regulations, is the annual statement which is required to be filed with the applicable insurance regulatory body, but only if there is no statement which meets the requirements of clause (i) or (ii). (B) Applicable insurance regulatory body The term applicable insurance regulatory body . (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2015.

Summary: Offshore Reinsurance Tax Fairness Act Amends the Internal Revenue Code to define "qualifying insurance corporation," for purposes of the insurance business exception to passive foreign investment company rules, as a foreign corporation: (1) that would be subject to U.S. taxation if it were a domestic corporation, and (2) the applicable insurance liabilities of which constitute more than 25% of its total assets. Allows an alternative facts and circumstances test for insurance corporations whose applicable insurance liabilities are not at least 25% of total assets if such percentage is at least 10% and the corporation is predominantly engaged in an insurance business.