with respect to reinsurance of risks (other than ex-
cepted risks), to the extent that the income attrib-
utable to the premium is not subject to tax under 
this subtitle (either as the income of the affiliated 
corporation or as amounts included in gross income 
by a United States shareholder under section 951). 
‘‘(2) EXCEPTED
RISKS.—The term ‘excepted 
risks’ means any risk with respect to which reserves 
described in section 816(b)(1) are established. 
‘‘(c) AFFILIATED CORPORATIONS.—For purposes of 
this section, a corporation shall be treated as affiliated 
with an insurance company if both corporations would be 
members of the same controlled group of corporations (as 
defined in section 1563(a)) if section 1563 were applied— 
‘‘(1) by substituting ‘at least 50 percent’ for ‘at 
least 80 percent’ each place it appears in subsection 
(a)(1), and 
‘‘(2) without regard to subsections (a)(4), 
(b)(2)(C), (b)(2)(D), and (e)(3)(C). 
‘‘(d) ELECTION TO TREAT REINSURANCE INCOME AS 
EFFECTIVELY CONNECTED.— 
‘‘(1) IN GENERAL.—A specified affiliated cor-
poration may elect for any taxable year to treat 
specified reinsurance income as— 
VerDate Mar 15 2010 
03:00 Oct 13, 2011
Jkt 019200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H3157.IH
H3157
tjames on DSK6SPTVN1PROD with BILLS
‘‘(A) income effectively connected with the 
conduct of a trade or business in the United 
States, and 
‘‘(B) for purposes of any treaty between 
the United States and any foreign country, in-
come attributable to a permanent establishment 
in the United States. 
‘‘(2) EFFECT OF ELECTION.—In the case of 
any specified reinsurance income with respect to 
which the election under this subsection applies— 
‘‘(A) DEDUCTION ALLOWED FOR REINSUR-
ANCE
PREMIUMS.—For exemption from sub-
section (a), see definition of non-taxed reinsur-
ance premiums in subsection (b). 
‘‘(B) EXCEPTION FROM EXCISE TAX.—The 
tax imposed by section 4371 shall not apply 
with respect to any income treated as effectively 
connected with the conduct of a trade or busi-
ness in the United States under paragraph (1). 
‘‘(C) 
TAXATION
UNDER
THIS
SUB-
CHAPTER.—Such income shall be subject to tax 
under this subchapter to the same extent and 
in the same manner as if such income were the 
income of a domestic insurance company. 
VerDate Mar 15 2010 
03:00 Oct 13, 2011
Jkt 019200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\H3157.IH
H3157
tjames on DSK6SPTVN1PROD with BILLS
‘‘(D) COORDINATION WITH FOREIGN TAX 
CREDIT PROVISIONS.—For purposes of subpart 
A of part III of subchapter N and sections 78 
and 960— 
‘‘(i) such specified reinsurance income 
shall be treated as derived from sources 
without the United States, and 
‘‘(ii) subsections (a), (b), and (c) of 
section 904 and sections 902, 907, and 
960 shall be applied separately with re-
spect to each item of such income. 
The Secretary may issue regulations or other 
guidance which provide that related items of 
specified reinsurance income may be aggregated 
for purposes of applying clause (ii). 
‘‘(3) SPECIFIED AFFILIATED CORPORATION.— 
For purposes of this subsection, the term ‘specified 
affiliated corporation’ means any affiliated corpora-
tion which is a foreign corporation and which meets 
such requirements as the Secretary shall prescribe to 
ensure that tax on the specified reinsurance income 
of such corporation is properly determined and paid. 
‘‘(4) SPECIFIED
REINSURANCE
INCOME.—For 
purposes of this paragraph, the term ‘specified rein-
surance income’ means all income of a specified af-
VerDate Mar 15 2010 
03:00 Oct 13, 2011
Jkt 019200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\H3157.IH
H3157
tjames on DSK6SPTVN1PROD with BILLS
filiated corporation which is attributable to reinsur-
ance with respect to which subsection (a) would (but 
for the election under this subsection) apply. 
‘‘(5) RULES
RELATED
TO
ELECTION.—Any 
election under paragraph (1) shall— 
‘‘(A) be made at such time and in such 
form and manner as the Secretary may provide, 
and 
‘‘(B) apply for the taxable year for which 
made and all subsequent taxable years unless 
revoked with the consent of the Secretary. 
‘‘(e) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be appropriate 
to carry out, or to prevent the avoidance of the purposes 
of, this section, including regulations or other guidance 
which provide for the application of this section to alter-
native reinsurance transactions, fronting transactions, 
conduit and reciprocal transactions, and any economically 
equivalent transactions.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part III of subchapter L of chapter 1 of such Code 
is amended by adding at the end the following new item: 
‘‘Sec. 849. Special rules for reinsurance of non-life contracts with non-taxed af-
filiates.’’. 
VerDate Mar 15 2010 
03:00 Oct 13, 2011
Jkt 019200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6211
E:\BILLS\H3157.IH
H3157
tjames on DSK6SPTVN1PROD with BILLS
(c) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2011. 
Æ 
VerDate Mar 15 2010 
03:00 Oct 13, 2011
Jkt 019200
PO 00000
Frm 00007
Fmt 6652
Sfmt 6301
E:\BILLS\H3157.IH
H3157
tjames on DSK6SPTVN1PROD with BILLS