I
105TH CONGRESS
1ST SESSION
H. R. 1652
To amend the Internal Revenue Code of 1986 to clarify the exemption
from the self-employment tax for termination payments received by
former life insurance salesmen.
IN THE HOUSE OF REPRESENTATIVES
MAY 16, 1997
Mr. WELLER 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 clarify
the exemption from the self-employment tax for termi-
nation payments received by former life insurance sales-
men.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. CLARIFICATION OF EXEMPTION FROM SELF-
EMPLOYMENT TAX FOR CERTAIN TERMI-
NATION PAYMENTS RECEIVED BY FORMER
LIFE INSURANCE SALESMEN.
(a) INTERNAL REVENUE CODE.—Section 1402 of the
Internal Revenue Code of 1986 (relating to definitions)
is amended by adding at the end the following new sub-
section:
‘‘(k) CODIFICATION
OF TREATMENT
OF CERTAIN
TERMINATION PAYMENTS RECEIVED BY FORMER LIFE
INSURANCE SALESMEN.—Nothing in subsection (a) shall
be construed as including in the net earnings from self-
employment of an individual any amount received during
the taxable year from a life insurance company on account
of services performed by such individual as a life insurance
salesman for such company if—
‘‘(1) such amount is received after termination
of such individual’s agreement to perform such serv-
ices for such company,
‘‘(2) such individual performs no services for
such company after such termination and before the
close of such taxable year, and
‘‘(3) the amount of such payment—
‘‘(A) depends solely on policies sold by
such individual during the last year of such
agreement and the extent to which such policies
remain in force for some period after such ter-
mination, and
‘‘(B) does not depend to any extent on
length of service or overall earnings from serv-
ices performed for such company.’’
(b) SOCIAL SECURITY ACT.—Section 211 of the So-
cial Security Act is amended by adding at the end the fol-
lowing new subsection:
‘‘Codification of Treatment of Certain Termination
Payments Received by Former Life Insurance Salesmen
‘‘(j) Nothing in subsection (a) shall be construed as
including in the net earnings from self-employment of an
individual any amount received during the taxable year
from a life insurance company on account of services per-
formed by such individual as a life insurance salesman for
such company if—
‘‘(1) such amount is received after termination
of such individual’s agreement to perform such serv-
ices for such company,
‘‘(2) such individual performs no services for
such company after such termination and before the
close of such taxable year, and
‘‘(3) the amount of such payment—
‘‘(A) depends solely on policies sold by
such individual during the last year of such
agreement and the extent to which such policies
remain in force for some period after such ter-
mination, and
‘‘(B) does not depend to any extent on
length of service or overall earnings from serv-
ices performed for such company.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning before,
on, or after the date of the enactment of this Act.
Æ