I
103D CONGRESS
1ST SESSION
H. R. 1242
To amend the Internal Revenue Code of 1986 to provide for fair treatment
of small property and casualty insurance companies.
IN THE HOUSE OF REPRESENTATIVES
MARCH 4, 1993
Mr. THOMAS of California (for himself, Mr. MATSUI, Mr. SUNDQUIST, Mr.
PACKARD, Mr. BUNNING, Mr. COX, Mr. JACOBS, Mr. MINETA, and Mr.
HANCOCK) introduced the following bill; which was referred to the Com-
mittee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
for fair treatment of small property and casualty insur-
ance companies.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Small Property and Casualty Insurance Company Equity
Act of 1993’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
SEC. 2. SMALL COMPANY DEDUCTION.
(a) Section 832(c) is amended by striking ‘‘and’’ at
the end of paragraph (12), by striking the period at the
end of paragraph (13) and inserting ‘‘; and’’, and by
adding at the end thereof the following new paragraph:
‘‘(14) the small insurance company deduction
allowed by subsection (h).’’
(b) Section 832 is amended by adding at the end
thereof the following new subsections:
‘‘(h) SMALL INSURANCE COMPANY DEDUCTION.—In
the case of taxable years beginning after December 31,
1992—
‘‘(1) IN GENERAL.—There shall be allowed as a
deduction for the taxable year 60 percent of so much
of the tentative taxable income for such taxable year
as does not exceed $3,000,000 (hereinafter in this
section referred to as the ‘small insurance company
deduction’).
‘‘(2) PHASEOUT
BETWEEN
$3,000,000
AND
$15,000,000.—The amount of the small insurance
company deduction determined under paragraph (1)
for any taxable year shall be reduced (but not below
‘‘(B) CERTAIN ACTIVITIES TREATED AS IN-
SURANCE BUSINESSES.—For purposes of sub-
paragraph (A), any activity which is not an in-
surance business shall be treated as an insur-
ance business if—
‘‘(i) it is of a type traditionally carried
on by insurance companies for investment
purposes, but only if the carrying on of
such activity (other than in the case of real
estate) does not constitute the active con-
duct of a trade or business, or
‘‘(ii) it involves the performance of ad-
ministrative services in connection with
plans providing property or casualty insur-
ance benefits.
‘‘(C) LIMITATION
OF
AMOUNT
OF
LOSS
FROM
NONINSURANCE
BUSINESS
WHICH
MAY
OFFSET
INCOME
FROM
INSURANCE
BUSI-
NESS.—In computing the taxable income of any
insurance company subject to tax imposed by
section 831, any loss from a noninsurance busi-
ness shall be limited under the principles of sec-
tion 1503(c).
‘‘(j) SPECIAL RULE FOR CONTROLLED GROUPS.—
‘‘(1) SMALL INSURANCE COMPANY DEDUCTION
DETERMINED ON CONTROLLED GROUP BASIS.—For
purposes of subsections (h) and (i)—
‘‘(A) all insurance companies which are
members of the same controlled group shall be
treated as 1 insurance company, and
‘‘(B) any small insurance company deduc-
tion determined with respect to such group
shall be allocated among the insurance compa-
nies which are members of such group in
proportion to their respective tentative taxable
incomes.
‘‘(2) NONINSURANCE MEMBERS INCLUDED FOR
ASSET TEST.—For purposes of subsection (h)(3), all
members of the same controlled group (whether or
not insurance companies) shall be treated as 1
company.
‘‘(3) CONTROLLED
GROUP.—For purposes of
this subsection, the term ‘controlled group’ means
any controlled group of corporations (as defined in
section 1563(a)); except that subsections (a)(4) and
(b)(2)(D) of section 1563 shall not apply.
‘‘(4) ADJUSTMENTS TO PREVENT EXCESS DET-
RIMENT OR BENEFIT.—Under regulations prescribed
by the Secretary, proper adjustments shall be made
in the application of this subsection to prevent any
excess detriment or benefit (whether from year-to-
year or otherwise) arising from the application of
this subsection.’’
SEC. 3. EFFECTIVE DATE.
The amendments made by this Act shall apply to tax-
able years beginning after December 31, 1992.
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