‘‘(ii) the term ‘qualifying administra-
tive regulations’ means regulations promul-
gated by a State agency which, either
alone or in conjunction with the qualifying
legislation, impose obligations on compa-
nies regularly engaged in purchasing or
taking assignments of life insurance con-
tracts on lives of insureds who are termi-
nally ill individuals or who have dread dis-
eases in the areas described in clause (i)
and authorize the enforcement of those ob-
ligations in the manner provided in clause
(i).
‘‘(D) TRANSITION RULE.—In the case of
taxable years beginning before January 1,
1994, a corporation conducting its business
substantially in accordance with the qualifying
legislation enacted by any State or with qualify-
ing administrative regulations promulgated by
any State agency shall be treated as satisfying
the requirements of subparagraph (C) regard-
less of whether the corporation conducts its
business in that State.’’
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to taxable years begin-
ning after December 31, 1989; except that, in the
case of amounts received pursuant to a sale or as-
signment described in section 101(g)(4) of the Inter-
nal Revenue Code of 1986 (as added by paragraph
(1)), such amendment shall only apply to amounts
received after January 1, 1994.’’
(b) TAX
TREATMENT
OF
COMPANIES
ISSUING
QUALIFIED TERMINAL ILLNESS OR DREAD DISEASE RID-
ERS.—
(1) QUALIFIED TERMINAL ILLNESS OR DREAD
DISEASE
RIDER
TREATED
AS
LIFE
INSURANCE.—
Section 818 (relating to other definitions and special
rules) is amended by adding at the end thereof the
following new subsection:
‘‘(g) QUALIFIED TERMINAL ILLNESS OR DREAD DIS-
EASE RIDER TREATED AS LIFE INSURANCE.—For pur-
poses of this part—
‘‘(1) IN GENERAL.—Any reference to life insur-
ance shall be treated as including a reference to a
qualified terminal illness or dread disease rider.
‘‘(2) QUALIFIED TERMINAL ILLNESS OR DREAD
DISEASE RIDER.—For purposes of this subsection,
the term ‘qualified terminal, illness or dread disease
rider’ means any rider or addendum on, or other
provision of, a life insurance contract which provides
for payments to an individual upon the insured be-
coming a terminally ill individual (as defined in sec-
tion 101(g)(2) or having a dread illness (as defined
in section 102(g)(3)).’’
(2) DEFINITIONS
OF
LIFE
INSURANCE
AND
MODIFIED ENDOWMENT CONTRACTS.—For purposes
of applying section 7702 or 7702A of the Internal
Revenue Code of 1986 to any contract (or determin-
ing whether either such section applies to such con-
tract), the issuance of a qualified terminal illness or
dread disease rider (as defined in section 818(g)(2)
of such Code) with respect to any contract shall not
be treated as a modification or material change of
such contract.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning before, on, or after December 31, 1989.
(c) APPLICANTS OR RECIPIENTS UNDER PUBLIC AS-
SISTANCE PROGRAMS NOT TO BE REQUIRED TO MAKE
ELECTION RESPECTING ACCELERATED DEATH BENE-
FITS UNDER LIFE INSURANCE POLICIES.—
(1) IN GENERAL.—Part A of title XI of the So-
cial Security Act (42 U.S.C. 1301 et seq.) is amend-
ed by adding at the end thereof the following new
section:
‘‘TREATMENT OF ACCELERATED DEATH BENEFITS
‘‘SEC. 1143. (a) IN GENERAL.—Notwithstanding any
other provision of law, no individual who is an applicant
for or recipient of aid or assistance under a State plan
approved under title IV, X, XIV, XVI, or XIX, of assist-
ance funded by payments under title V or XX, or of bene-
fits under the Supplemental Security Income program es-
tablished by title XVI shall—
‘‘(1) be required, as a condition of eligibility for
(or of continuing to receive) such aid, assistance, or
benefits, to make an election to receive an acceler-
ated death benefit under a policy of life insurance,
or
‘‘(2) by reason of failure to make such an elec-
tion, be denied (or suffer a reduction in the amount
of) such aid, assistance, or benefits.
‘‘(b) ACCELERATED DEATH BENEFIT.—For pur-
poses of this section, the term ‘accelerated death benefit’
means any payment made under the terms of a life insur-
ance policy, while the insured individual is alive, as a re-
sult of a recalculation of the insured individual’s life ex-
pectancy.’’
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall take effect on January 1,
1990.