I
107TH CONGRESS
1ST SESSION
H. R. 3320
To amend the Internal Revenue Code of 1986 to encourage guaranteed
lifetime income payments from annuities and similar payments of life
insurance proceeds at dates later than death by taxing the income portion
of such payments at capital gains rates.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 16, 2001
Mr. ENGLISH (for himself, Mrs. THURMAN, and Mrs. JOHNSON of Con-
necticut) introduced the following bill; which was referred to the Com-
mittee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to encourage
guaranteed lifetime income payments from annuities and
similar payments of life insurance proceeds at dates later
than death by taxing the income portion of such pay-
ments at capital gains rates.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. LIFETIME ANNUITY PAYOUTS AND SIMILAR
PAYMENTS OF LIFE INSURANCE PROCEEDS
AT DATES LATER THAN DEATH TAXED AT
CAPITAL GAINS RATES.
(a) IN GENERAL.—Subsection (h) of section 1 of the
Internal Revenue Code of 1986 (relating to maximum cap-
ital gains rate) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(13) NET CAPITAL GAIN INCREASED BY CER-
TAIN ANNUITY AND LIFE INSURANCE PAYMENTS.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the amount (if any) of net capital
gain, determined without regard to this para-
graph, for any taxable year shall be increased
by—
‘‘(i) the amount received as an annu-
ity under an annuity contract which is in-
cludible in income under section 72, and
‘‘(ii) the amount received as a pay-
ment of life insurance proceeds at a date
later than death which is includible in in-
come under section 101(d).
‘‘(B) AMOUNT RECEIVED AS AN ANNUITY
UNDER ANNUITY CONTRACT.—For purposes of
subparagraph (A)(i), an amount is received as
an annuity under an annuity contract if such
amount is received as an annuity under any
portion of an annuity contract and is part of a
series of payments made over—
‘‘(i) the life of the annuitant,
‘‘(ii) the joint lives of 2 or more annu-
itants,
‘‘(iii) the life of the annuitant with a
minimum period of payments certain or
with a minimum amount which must be
paid in any event, or
‘‘(iv) the joint lives of 2 or more an-
nuitants with a minimum period of pay-
ments certain or with a minimum amount
which must be paid in any event.
‘‘(C) AMOUNT RECEIVED AS PAYMENT OF
LIFE INSURANCE PROCEEDS AT A DATE LATER
THAN DEATH.—For purposes of subparagraph
(A)(ii), an amount is received as a payment of
life insurance proceeds at a date later than
death if such amount is part of a series of pay-
ments made over—
‘‘(i) the life of the beneficiary of the
life insurance contract,
‘‘(ii) the joint lives of 2 or more bene-
ficiaries of the life insurance contract,
‘‘(iii) the life of the beneficiary of the
life insurance contract with a minimum pe-
riod of payments certain or with a min-
imum amount which must be paid in any
event, or
‘‘(iv) the joint lives of 2 or more bene-
ficiaries of the life insurance contract with
a minimum period of payments certain or
with a minimum amount which must be
paid in any event.
‘‘(D) EXCEPTION
FOR
DEFERRED
COM-
PENSATION PLANS AND RETIREMENT PLANS.—
Subparagraphs (A), (B), and (C) shall not
apply to amounts received under an eligible de-
ferred compensation plan (as defined in section
457(b)) or under a qualified retirement plan (as
defined in section 4974(c)).’’.
(b) ALTERNATIVE MINIMUM TAX.—The last sentence
of paragraph (3) of section 55(b) of such Code is amended
by inserting ‘‘(including the modification made by para-
graph (13) thereof)’’ after ‘‘section 1(h)’’ the first place
it appears.
(c) CONFORMING AMENDMENTS.—
(1) Section 72(a) of such Code is amended—
(A) by striking ‘‘ANNUITIES.—Except’’
and inserting ‘‘ANNUITIES.—
‘‘(1) INCLUSION IN GROSS INCOME.—Except’’,
and
(B) by adding at the end the following:
‘‘(2) CROSS REFERENCE.—
‘‘For taxation at capital gains rates of certain
amounts includible in income under this section,
see section 1(h)(13).’’.
(2) Section 101(d) of such Code is amended by
adding at the end the following new paragraph:
‘‘(4) CROSS REFERENCE.—
‘‘For taxation at capital gains rates of certain
amounts includible in income under this subsection,
see section 1(h)(13).’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received in calendar
years beginning after the date of enactment of this Act.
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