I
107TH CONGRESS
1ST SESSION
H. R. 1755
To amend the Internal Revenue Code of 1986 to prevent the use of reinsur-
ance with foreign persons to enable domestic nonlife insurance companies
to evade United States income taxation.
IN THE HOUSE OF REPRESENTATIVES
MAY 8, 2001
Mrs. JOHNSON of Connecticut (for herself and Mr. NEAL of Massachusetts)
introduced the following bill; which was referred to the Committee on
Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to prevent
the use of reinsurance with foreign persons to enable
domestic nonlife insurance companies to evade United
States income taxation.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Reinsurance Tax Eq-
uity Act of 2001’’.
SEC. 2. PREVENTION OF EVASION OF UNITED STATES IN-
COME TAX ON NONLIFE INSURANCE COMPA-
NIES THROUGH USE OF REINSURANCE WITH
FOREIGN PERSONS.
(a) IN GENERAL.—Subparagraph (A) of section
832(b)(4) of the Internal Revenue Code of 1986 (relating
to insurance company taxable income) is amended to read
as follows:
‘‘(A) From the amount of gross premiums
written on insurance contracts during the tax-
able year, deduct return premiums and pre-
miums paid for reinsurance (except as provided
in paragraph (9)).’’
(b) TREATMENT OF REINSURANCE WITH RELATED
REINSURERS.—Subsection (b) of section 832 of such Code
is amended by adding at the end the following new para-
graph:
‘‘(9) DENIAL
OF
DEDUCTION
UNDER
PARA-
GRAPH (4) FOR REINSURANCE OF U.S. RISKS WITH
CERTAIN RELATED PERSONS.—
‘‘(A) IN GENERAL.—No deduction shall be
allowed under paragraph (4) for premiums paid
for the direct or indirect reinsurance of United
States risks with a related reinsurer.
‘‘(B) EXCEPTIONS.—This paragraph shall
not apply to any premium to the extent that—
‘‘(i) the income attributable to the re-
insurance to which such premium relates is
includible in the gross income of—
‘‘(I) such reinsurer, or
‘‘(II) 1 or more domestic cor-
porations or citizens or residents of
the United States, or
‘‘(ii) the related insurer establishes to
the satisfaction of the Secretary that the
taxable income (determined in accordance
with this section 832) attributable to such
reinsurance is subject to an effective rate
of income tax imposed by a foreign country
at a rate greater than 20 percent of the
maximum rate of tax specified in section
11.
‘‘(C) ELECTION
BY
REINSURER
TO
BE
TAXED ON INCOME.—Income of a related rein-
surer attributable to the reinsurance of United
States risks which is not otherwise includible in
gross income shall be treated as gross income
which is effectively connected with the conduct
of a trade or business in the United States if
such reinsurer—
‘‘(i) elects to so treat such income,
and
‘‘(ii) meets such requirements as the
Secretary shall prescribe to ensure that the
taxes imposed by this chapter on such in-
come are paid.
‘‘(D) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) UNITED STATES RISK.—The term
‘United States risk’ means any risk related
to property in the United States, or liabil-
ity arising out of activity in, or in connec-
tion with the lives or health of residents of,
the United States.
‘‘(ii) RELATED INSURER.—The term
‘related insurer’ means any reinsurer
owned or controlled directly or indirectly
by the same interests (within the meaning
of section 482) as the person making the
premium payment.’’
(c) TECHNICAL AMENDMENT.—Subparagraph (A) of
section 832(b)(5) of such Code is amended by inserting
after clause (iii) the following new clause:
‘‘(iv) To the results so obtained, add
reinsurance recovered from a related rein-
surer to the extent a deduction for the pre-
mium paid for the reinsurance was dis-
allowed under paragraph (9).’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to premiums paid after the date
that the Committee on Ways and Means of the House of
Representatives votes to report this bill.
Æ