‘‘(B) QUALIFYING EVENT.—For purposes
of subparagraph (A), the term ‘qualifying event’
means any event that satisfies clauses (i) and
(ii).
‘‘(i) EVENT.—An event satisfies this
clause if the event is 1 or more of the fol-
lowing:
‘‘(I) Windstorm (hurricane, cy-
clone, or tornado).
‘‘(II) Earthquake (including any
fire following).
‘‘(III) Winter catastrophe (snow,
ice, or freezing).
‘‘(IV) Fire.
‘‘(V) Tsunami.
‘‘(VI) Flood.
‘‘(VII) Volcanic eruption.
‘‘(VIII) Hail.
‘‘(ii) CATASTROPHE
DESIGNATION.—
An event satisfies this clause if the event—
‘‘(I) is designated a catastrophe
by Property Claim Services or its suc-
cessor organization,
‘‘(II) is declared by the President
to be an emergency or disaster, or
‘‘(III) is declared to be an emer-
gency or disaster in a similar declara-
tion by the chief executive official of a
State, possession, or territory of the
United States, or the District of Co-
lumbia.
‘‘(9) FUND CAP.—
‘‘(A) IN GENERAL.—The term ‘fund cap’
for a taxable year is the sum of the separate
lines of business caps for each of the qualified
lines of business specified in the table contained
in subparagraph (C) (as modified under sub-
paragraphs (D) and (E)).
‘‘(B) SEPARATE
LINES
OF
BUSINESS
CAP.—For purposes of subparagraph (A), the
separate lines of business cap, with respect to
a qualified line of business specified in the table
contained in subparagraph (C), is the product
of—
‘‘(i) net written premiums reported in
the annual statement for the calendar year
preceding the taxable year in such line of
business, multiplied by
‘‘(ii) the fund cap multiplier applica-
ble to such qualified line of business.
‘‘(C) QUALIFIED LINES OF BUSINESS AND
THEIR RESPECTIVE FUND CAP MULTIPLIERS.—
For purposes of this paragraph, the qualified
lines of business and fund cap multipliers speci-
fied in this subparagraph are those specified in
the following table:
‘‘Line of Business on Annual
Fund Cap
Statement Blank:
Multiplier:
Fire ...............................................................................
0.25
Allied ............................................................................
1.25
Farmowners Multiple Peril ..........................................
0.25
Homeowners Multiple Peril ..........................................
0.75
Commercial Multi Peril (non-liability portion) .............
0.50
Earthquake ...................................................................
13.00
Inland Marine ...............................................................
0.25.
‘‘(D) SUBSEQUENT
MODIFICATIONS
OF
THE ANNUAL STATEMENT BLANK.—If, with re-
spect to any taxable year beginning after the ef-
fective date of this subsection, the annual state-
ment blank required to be filed is amended to
replace, combine, or otherwise modify any of
the qualified lines of business specified in sub-
paragraph (C), then for such taxable year sub-
paragraph (C) shall be applied in a manner
such that the fund cap shall be the same
amount as if such reporting modification had
not been made.
‘‘(E) 
20-YEAR
PHASE-IN.—Notwith-
standing subparagraph (C), the fund cap for a
taxable year shall be the amount determined
under subparagraph (C), as adjusted pursuant
to subparagraph (D) (if applicable), multiplied
by the phase-in percentage indicated in the fol-
lowing table:
Phase-in percentage to be
‘‘Taxable year
applied to fund cap computed
beginning in:
under subparagraphs (A) and (B):
2000 ...................................................................
5 percent
2001 ...................................................................
10 percent
2002 ...................................................................
15 percent
2003 ...................................................................
20 percent
2004 ...................................................................
25 percent
2005 ...................................................................
30 percent
2006 ...................................................................
35 percent
2007 ...................................................................
40 percent
2008 ...................................................................
45 percent
2009 ...................................................................
50 percent
2010 ...................................................................
55 percent
2011 ...................................................................
60 percent
2012 ...................................................................
65 percent
2013 ...................................................................
70 percent
2014 ...................................................................
75 percent
2015 ...................................................................
80 percent
2016 ...................................................................
85 percent
2017 ...................................................................
90 percent
2018 ...................................................................
95 percent
2019 and later ................................................... 100 percent.
‘‘(10) TREATMENT
OF
INVESTMENT
INCOME
AND GAIN OR LOSS.—
‘‘(A) CONTRIBUTIONS IN KIND.—A trans-
fer of property other than money to a fund
shall be treated as a sale or exchange of such
property for an amount equal to its fair market
value as of the date of transfer, and appro-
priate adjustment shall be made to the basis of
such property. Section 267 shall apply to any
loss realized upon such a transfer.
‘‘(B) DISTRIBUTIONS IN KIND.—A transfer
of property other than money by a fund to the
qualified insurance company shall not be treat-
ed as a sale or exchange or other disposition of
such property. The basis of such property im-
mediately after such transfer shall be the great-
er of the basis of such property immediately be-
fore such transfer or the fair market value of
such property on the date of such transfer.
‘‘(C) INCOME WITH RESPECT TO FUND AS-
SETS.—Items of income of the type described in
paragraphs (1)(B), (1)(C), and (2) of sub-
section (b) that are derived from the assets held
in a fund, as well as losses from the sale or
other disposition of such assets, shall be consid-
ered items of income, gain, or loss of the quali-
fied insurance company. Notwithstanding para-
graph (1)(F) of subsection (b), distributions of
net income to the qualified insurance company
pursuant to paragraph (1)(B)(ii) of this sub-
section shall not cause such income to be taken
into account a second time.
‘‘(11) NET INCOME; NET INVESTMENT LOSS.—
For purposes of paragraph (1)(B)(ii), the net in-
come derived from the assets in the fund for the tax-
able year shall be the items of income and gain for
the taxable year, less the items of loss for the tax-
able year, derived from such assets, as described in
paragraph (10)(C). For purposes of paragraph (7),
there is a net investment loss for the taxable year
to the extent that the items of loss described in the
preceding sentence exceed the items of income and
gain described in the preceding sentence.
‘‘(12) ANNUAL STATEMENT.—For purposes of
this subsection, the term ‘annual statement’ shall
have the meaning set forth in section 846(f)(3).
‘‘(13) EXCLUSION OF PREMIUMS AND LOSSES
ON
CERTAIN
PUERTO
RICAN
RISKS.—Notwith-
standing any other provision of this subsection, pre-
miums and losses with respect to risks covered by a
catastrophe reserve established under the laws or
regulations of the Commonwealth of Puerto Rico
shall not be taken into account under this subsection
in determining the amount of the fund cap or the
amount of qualified losses.
‘‘(14) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary or ap-
propriate to carry out the purposes of this sub-
section, including regulations—