I 
114TH CONGRESS 
2D SESSION 
H. R. 5973 
To amend the Internal Revenue Code of 1986 to clarify the tax treatment 
of certain life insurance contract transactions, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 8, 2016 
Mr. TIBERI (for himself and Mr. KIND) 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 tax treatment of certain life insurance contract trans-
actions, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. TAX REPORTING FOR LIFE SETTLEMENT 
TRANSACTIONS. 
(a) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
section: 
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‘‘SEC. 6050X. RETURNS RELATING TO CERTAIN LIFE INSUR-
ANCE CONTRACT TRANSACTIONS. 
‘‘(a) REQUIREMENT
OF REPORTING
OF CERTAIN 
PAYMENTS.— 
‘‘(1) IN GENERAL.—Every person who acquires 
a life insurance contract or any interest in a life in-
surance contract in a reportable policy sale during 
any taxable year shall make a return for such tax-
able year (at such time and in such manner as the 
Secretary shall prescribe) setting forth— 
‘‘(A) the name, address, and TIN of such 
person, 
‘‘(B) the name, address, and TIN of each 
recipient of payment in the reportable policy 
sale, 
‘‘(C) the date of such sale, 
‘‘(D) the name of the issuer of the life in-
surance contract sold and the policy number of 
such contract, and 
‘‘(E) the amount of each payment. 
‘‘(2) STATEMENT TO BE FURNISHED TO PER-
SONS WITH RESPECT TO WHOM INFORMATION IS RE-
QUIRED.—Every person required to make a return 
under this subsection shall furnish to each person 
whose name is required to be set forth in such re-
turn a written statement showing— 
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‘‘(A) the name, address, and phone num-
ber of the information contact of the person re-
quired to make such return, and 
‘‘(B) the information required to be shown 
on such return with respect to such person, ex-
cept that in the case of an issuer of a life insur-
ance contract, such statement is not required to 
include the information specified in paragraph 
(1)(E). 
‘‘(b) REQUIREMENT OF REPORTING OF SELLER’S 
BASIS IN LIFE INSURANCE CONTRACTS.— 
‘‘(1) IN GENERAL.—Upon receipt of the state-
ment required under subsection (a)(2) or upon no-
tice of a transfer of a life insurance contract to a 
foreign person, each issuer of a life insurance con-
tract shall make a return (at such time and in such 
manner as the Secretary shall prescribe) setting 
forth— 
‘‘(A) the name, address, and TIN of the 
seller who transfers any interest in such con-
tract in such sale, 
‘‘(B) the investment in the contract (as de-
fined in section 72(e)(6)) with respect to such 
seller, and 
‘‘(C) the policy number of such contract. 
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‘‘(2) STATEMENT TO BE FURNISHED TO PER-
SONS WITH RESPECT TO WHOM INFORMATION IS RE-
QUIRED.—Every person required to make a return 
under this subsection shall furnish to each person 
whose name is required to be set forth in such re-
turn a written statement showing— 
‘‘(A) the name, address, and phone num-
ber of the information contact of the person re-
quired to make such return, and 
‘‘(B) the information required to be shown 
on such return with respect to each seller whose 
name is required to be set forth in such return. 
‘‘(c) REQUIREMENT OF REPORTING WITH RESPECT 
TO REPORTABLE DEATH BENEFITS.— 
‘‘(1) IN GENERAL.—Every person who makes a 
payment of reportable death benefits during any tax-
able year shall make a return for such taxable year 
(at such time and in such manner as the Secretary 
shall prescribe) setting forth— 
‘‘(A) the name, address, and TIN of the 
person making such payment, 
‘‘(B) the name, address, and TIN of each 
recipient of such payment, 
‘‘(C) the date of each such payment, and 
‘‘(D) the amount of each such payment. 
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‘‘(2) STATEMENT TO BE FURNISHED TO PER-
SONS WITH RESPECT TO WHOM INFORMATION IS RE-
QUIRED.—Every person required to make a return 
under this subsection shall furnish to each person 
whose name is required to be set forth in such re-
turn a written statement showing— 
‘‘(A) the name, address, and phone num-
ber of the information contact of the person re-
quired to make such return, and 
‘‘(B) the information required to be shown 
on such return with respect to each recipient of 
payment whose name is required to be set forth 
in such return. 
‘‘(d) DEFINITIONS.—For purposes of this section: 
‘‘(1) PAYMENT.—The term ‘payment’ means 
the amount of cash and the fair market value of any 
consideration transferred in a reportable policy sale. 
‘‘(2) REPORTABLE
POLICY
SALE.—The term 
‘reportable policy sale’ has the meaning given such 
term in section 101(a)(3)(B). 
‘‘(3) ISSUER.—The term ‘issuer’ means any life 
insurance company that bears the risk with respect 
to a life insurance contract on the date any return 
or statement is required to be made under this sec-
tion. 
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‘‘(4) REPORTABLE
DEATH
BENEFITS.—The 
term ‘reportable death benefits’ means amounts paid 
by reason of the death of the insured under a life 
insurance contract that has been transferred in a re-
portable policy sale with respect to which, a state-
ment is required to be furnished under subsection 
(a)(2), or a notice of a transfer of a life insurance 
contract to a foreign person has been received.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for subpart B of part III of subchapter A of chapter 61 
of the Internal Revenue Code of 1986 is amended by in-
serting after the item relating to section 6050W the fol-
lowing new item: 
‘‘Sec. 6050X. Returns relating to certain life insurance contract transactions.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 6724(d)(1)(B) of the Internal Rev-
enue Code of 1986 is amended by striking ‘‘or’’ at 
the end of clause (xxiv), by adding ‘‘or’’ at the end 
of clause (xxv), and by inserting after clause (xxv) 
the following new clause: 
‘‘(xxvi) section 6050X (relating to re-
turns relating to certain life insurance con-
tract transactions),’’. 
(2) Section 6724(d)(2) of such Code is amend-
ed by striking ‘‘or’’ at the end of subparagraph 
(HH), by striking the period at the end of subpara-
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graph (II) and inserting ‘‘, or’’, and by inserting 
after subparagraph (II) the following new subpara-
graph: 
‘‘(JJ) subsection (a)(2), (b)(2), or (c)(2) of 
section 6050X (relating to returns relating to 
certain life insurance contract transactions).’’. 
(3) Section 6047 of such Code is amended— 
(A) by redesignating subsection (g) as sub-
section (h), 
(B) by inserting after subsection (f) the 
following new subsection: 
‘‘(g) INFORMATION RELATING TO LIFE INSURANCE 
CONTRACT TRANSACTIONS.—This section shall not apply 
to any information which is required to be reported under 
section 6050X.’’, and 
(C) by adding at the end of subsection (h), 
as so redesignated, the following new para-
graph: 
‘‘(4) For provisions requiring reporting of infor-
mation relating to certain life insurance contract 
transactions, see section 6050X.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to— 
(1) reportable policy sales after December 31, 
2016, and 
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(2) reportable death benefits paid after Decem-
ber 31, 2016. 
SEC. 2. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE 
CONTRACTS. 
(a) IN GENERAL.—Paragraph (1) of section 1016(a) 
of the Internal Revenue Code of 1986 is amended by strik-
ing subparagraph (A) and all that follows and inserting 
the following: 
‘‘(A) for— 
‘‘(i) taxes or other carrying charges 
described in section 266, or 
‘‘(ii) expenditures described in section 
173 (relating to circulation expenditures), 
for which deductions have been taken by the 
taxpayer in determining taxable income for the 
taxable year or prior taxable years, or 
‘‘(B) for mortality, expense, or other rea-
sonable charges incurred under an annuity or 
life insurance contract.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to transactions entered into after 
August 25, 2009. 
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SEC. 3. EXCEPTION TO TRANSFER FOR VALUABLE CONSID-
ERATION RULES. 
(a) IN GENERAL.—Subsection (a) of section 101 of 
the Internal Revenue Code of 1986 is amended by adding 
at the end the following new paragraph: 
‘‘(3) EXCEPTION TO VALUABLE CONSIDERATION 
RULES FOR COMMERCIAL TRANSFERS.— 
‘‘(A) IN GENERAL.—The second sentence 
of paragraph (2) shall not apply in the case of 
a transfer of a life insurance contract, or any 
interest therein, which is a reportable policy 
sale. 
‘‘(B) REPORTABLE POLICY SALE.— 
‘‘(i) IN
GENERAL.—For purposes of 
this paragraph, the term ‘reportable policy 
sale’ means the acquisition of an interest 
in a life insurance contract, directly or in-
directly, if the acquirer has no substantial 
family, business, or financial relationship 
with the insured apart from the acquirer’s 
interest in such life insurance contract. 
‘‘(ii) INDIRECT
ACQUISITIONS.—For 
purposes of clause (i), the term ‘indirectly’ 
applies to the acquisition of an interest in 
a partnership, trust, or other entity that 
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holds an interest in the life insurance con-
tract unless— 
‘‘(I) the insured of the life insur-
ance contract is an existing or former 
employee, officer, director, 5-percent 
owner, or independent contractor of 
the acquired entity or its subsidiaries 
or predecessors, and 
‘‘(II) no more than 50 percent of 
the gross value of the assets of the ac-
quired entity consists of life insurance 
contracts or the parties demonstrate 
to the satisfaction of the Secretary 
that the acquisition of the life insur-
ance is not the principal purpose of 
the acquired entity. 
‘‘(iii) 
DETERMINATION
OF
GROSS 
VALUE
OF
ASSETS.—For purposes of 
clause (ii), the term ‘gross value of assets’ 
means, with respect to any acquired entity, 
the sum of— 
‘‘(I) in the case of assets of the 
acquired entity which are life insur-
ance policies or annuity or endowment 
contracts, the unborrowed policy cash 
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values of such policies and contracts, 
and 
‘‘(II) in the case of assets of the 
acquired entity not described in sub-
clause (I), the adjusted bases (within 
the meaning of section 1016) of such 
assets.’’. 
(b) CONFORMING AMENDMENT.—Paragraph (1) of 
section 101(a) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘paragraph (2)’’ and inserting ‘‘para-
graphs (2) and (3)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transfers after December 31, 
2016. 
Æ 
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