‘‘(II) as does not exceed the rate 
of Federal excise tax imposed by sec-
tion 4371(3) on a premium paid on a 
contract of reinsurance issued by any 
foreign insurer or reinsurer. 
‘‘(3) QUALIFIED
CONTRIBUTION.—The term 
‘qualified contribution’ means a contribution to a 
fund established by a qualified insurance company of 
not more than the total of net premiums or other 
payments received during a taxable year for coverage 
of qualified losses, but only to the extent such con-
tribution, when added to all previous contributions 
to the fund (including net investment earnings of the 
fund) and after subtracting all qualified distribu-
tions from the fund, does not exceed the amount 
reasonably at risk for the payment of qualified losses 
insured through the fund, less reinsurance on those 
risks, as determined actuarially on a multi-year 
basis. 
‘‘(4) QUALIFIED
DISTRIBUTION.—The term 
‘qualified distribution’ means any amount paid or 
distributed for— 
‘‘(A) any payment of a qualified loss pur-
suant to an insurance contract or contract of 
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reinsurance issued by the qualified insurance 
company, 
‘‘(B) any payment made to reinsure or oth-
erwise spread the risk of catastrophe loss writ-
ten by the qualified insurance company, 
‘‘(C) 
any 
excess 
balance 
drawdown 
amount, 
‘‘(D) any administrative expenses directly 
related to the maintenance and investment of 
the fund, and 
‘‘(E) any claims investigation and adjust-
ments relating to a qualified loss. 
‘‘(5) QUALIFIED
LOSS.—The term ‘qualified 
loss’ means an insured loss on a United States risk 
that satisfies subparagraphs (A) and (B). 
‘‘(A) EVENT.—An insured loss satisfies 
this subparagraph if the loss is attributable to 
one or more of the following events: 
‘‘(i) Wind (including hurricanes and 
tornados). 
‘‘(ii) Earthquake (including any fire 
following). 
‘‘(iii) Flood. 
‘‘(iv) Tsunami or tidal wave. 
‘‘(v) Volcanic eruption. 
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‘‘(vi) Fire. 
‘‘(vii) Hail. 
‘‘(viii) Snow, ice, freezing, or other 
winter catastrophes. 
‘‘(ix) Pandemic or other public health 
catastrophe. 
‘‘(B) CATASTROPHE DESIGNATION OR MIN-
IMUM AGGREGATE INSURED LOSS.—An insured 
loss, with respect to an event described in sub-
paragraph (A), satisfies this subparagraph if at 
least one of the following occurs: 
‘‘(i) Total insured losses from the 
event, or from more than one event hap-
pening simultaneously or immediately fol-
lowing, exceeds $1,000,000,000 on an in-
dustry-wide basis. 
‘‘(ii) The President of the United 
States declares a disaster or state of emer-
gency because of the event. 
‘‘(iii) The Governor or chief executive 
of a State, possession or territory of the 
United States, or of the District of Colum-
bia, declares a disaster or state of emer-
gency because of such event. 
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‘‘(iv) The Property Claims Services 
unit of Insurance Services Office, Inc., de-
clares a catastrophic industry-wide loss be-
cause of one or more events. 
‘‘(6) EXCESS BALANCE DRAWDOWN AMOUNT.— 
The term ‘excess balance drawdown amount’ means 
the excess (if any) of— 
‘‘(A) the amount of the fund balance as of 
the end of the taxable year, over 
‘‘(B) the total amount of exposure of the 
fund to qualified losses at the end of the tax-
able year under contracts issued by the quali-
fied insurance company, as determined actuari-
ally on a multi-year basis. 
‘‘(7) UNITED STATES RISK.—The term ‘United 
States risk’ means any hazard, risk, loss, or liability 
attributable to property situated, or an activity con-
ducted, in the United States, or its territories or 
possessions. 
‘‘(8) EXCLUSION OF PREMIUMS AND LOSSES ON 
CERTAIN
PUERTO
RICAN
RISKS.—Notwithstanding 
any other provision of this subsection, premiums and 
losses with respect to risks covered by a catastrophe 
reserve established under the laws or regulations of 
the Commonwealth of Puerto Rico shall not be taken 
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into account under this subsection in determining 
the amount of the qualified contributions allowed or 
the amount of qualified losses. 
‘‘(9) CONTRIBUTIONS IN KIND.—A transfer of 
property other than money to a fund shall be treated 
as a sale or exchange of such property for an 
amount equal to its fair market value as of the date 
of transfer, and appropriate adjustment shall be 
made to the basis of such property. Section 267 
shall apply to any loss realized upon such a transfer. 
‘‘(10) DISTRIBUTIONS IN KIND.—A distribution 
of property other than money from a fund to a 
qualified insurance company shall be treated as a 
sale or exchange of such property, and any gain or 
loss realized on such sale or exchange shall be ex-
cluded from the gross income of the qualified insur-
ance company. 
‘‘(11) REGULATIONS.—The Secretary shall pre-
scribe regulations as may be necessary or appro-
priate to carry out the purposes of this subsection.’’ 
(e) ADDITIONAL TAX ON CERTAIN DISTRIBUTIONS 
FROM A NATURAL DISASTER PROTECTION FUND.—Sub-
section (d) of section 831 of such Code (relating to the 
tax on insurance companies other than life insurance com-
panies) is amended by redesignating subsection (d) as sub-
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section (e) and inserting after subsection (c) the following 
new subsection: 
‘‘(d) TAX ON NONQUALIFIED DISTRIBUTIONS.— 
‘‘(1) IN GENERAL.—In the case of a qualified 
insurance company, the tax imposed by this section 
for the current year shall be increased by an amount 
equal to 20 percent of the aggregate amount of non-
qualified distributions made by such company during 
such year from a natural disaster protection fund. 
‘‘(2) DEFINITIONS.— 
‘‘(A) NONQUALIFIED
DISTRIBUTIONS.— 
The term ‘nonqualified distributions’ means any 
distribution from a natural disaster protection 
fund other than a qualified distribution (as de-
fined in section 832(h)(4)). 
‘‘(B) OTHER
DEFINITIONS.—The terms 
‘qualified insurance company’ and ‘natural dis-
aster protection fund’ shall have the meanings 
ascribed to such terms in section 832(h).’’ 
(f) EFFECTIVE DATE.—The amendments made by 
this bill shall apply to taxable years beginning after De-
cember 31, 2011. 
Æ 
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