I
103D CONGRESS
2D SESSION
H. R. 4510
To amend the Internal Revenue Code of 1986 to revise the limitation applica-
ble to mutual life insurance companies on the deduction for policyholder
dividends and to exempt small life insurance companies from the required
capitalization of certain policy acquisition expenses.
IN THE HOUSE OF REPRESENTATIVES
MAY 26, 1994
Mr. FILNER (for himself, Mr. BECERRA, Mr. BERMAN, Mr. BROWN of Califor-
nia, Ms. FURSE, Mr. HASTINGS, Ms. MCKINNEY, Mrs. MINK of Hawaii,
Ms. NORTON, Mrs. UNSOELD, Ms. VELA´ZQUEZ, Ms. WATERS, and Mr.
WATT) 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 revise
the limitation applicable to mutual life insurance compa-
nies on the deduction for policyholder dividends and to
exempt small life insurance companies from the required
capitalization of certain policy acquisition expenses.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Insurance Tax Fair-
ness Act of 1994’’.
SEC. 2. REVISION OF LIMITATION ON DEDUCTION OF POL-
ICYHOLDER DIVIDENDS BY MUTUAL LIFE IN-
SURANCE COMPANIES.
(a) IN GENERAL.—Paragraph (2) of section 808(c)
of the Internal Revenue Code of 1986 (relating to reduc-
tion in case of mutual companies) is amended to read as
follows:
‘‘(2) LIMITATION IN CASE OF MUTUAL COMPA-
NIES.—
‘‘(A) IN GENERAL.—In the case of a mu-
tual life insurance company, the amount al-
lowed as a deduction under paragraph (1) for
any taxable year shall not exceed the lesser of—
‘‘(i) 90 percent of the policyholder
dividends paid or accrued by such company
during such taxable year, or
‘‘(ii) 30 percent of the life insurance
company taxable income of such company
for such taxable year (determined without
regard to any deduction for policyholder
dividends).
In no event shall the limitation under this sub-
paragraph for any taxable year be less than
$35,000,000.
‘‘(B) TREATMENT OF STOCK COMPANIES
OWNED BY MUTUAL LIFE INSURANCE COMPA-
NIES.—Solely for purposes of this paragraph, a
stock life insurance company shall be treated as
a mutual life insurance company if stock pos-
sessing—
‘‘(i) at least 80 percent of the total
combined voting power of all classes of
stock of such stock life insurance company
entitled to vote, or
‘‘(ii) at least 80 percent of the total
value of shares of all classes of stock of
such stock life insurance company,
is owned at any time during the calendar year
directly (or through the application of section
318) by one or more mutual life insurance com-
panies).’’
(b) REPEAL OF SECTION 809.—
(1) Section 809 of such Code is hereby re-
pealed.
(2) Subparagraph (B) of section 807(a)(2) of
such Code is amended to read as follows:
‘‘(B) the amount of the policyholders’
share of tax-exempt interest,’’.
(3) Subparagraph (B) of section 807(b)(1) of
such Code is amended to read as follows:
‘‘(B) the amount of the policyholders’
share of tax-exempt interest,’’.
(4) Subparagraph (A) of section 812(b)(3) of
such Code is amended by striking ‘‘sections 808 and
809’’ and inserting ‘‘section 808’’.
(5) Subsection (c) of section 817 of such Code
is amended by striking ‘‘(other than section 809)’’.
(6) Subsection (c) of section 842 of such Code
is amended by striking paragraph (3) and by redes-
ignating paragraph (4) as paragraph (3).
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years beginning after Decem-
ber 31, 1993.
(2) RECOMPUTATION
UNDER
SECTION
809(f)
NOT
AFFECTED.—The amendments made by this
section shall not affect the application of section
809(f) of the Internal Revenue Code of 1986 (as in
effect before its repeal by subsection (b)) in respect
of any taxable year beginning before January 1,
1994.
(3) LIMITATION ON LOSS CARRYBACKS.—In the
case of a life insurance company subject to the limi-
tation under section 808(b)(2) of such Code, no cap-
ital loss arising in a taxable year beginning after De-
cember 31, 1993, may be carried to a taxable year
beginning before January 1, 1994.
SEC. 3. SMALL LIFE INSURANCE COMPANIES EXEMPT
FROM REQUIRED CAPITALIZATION OF CER-
TAIN POLICY ACQUISITION EXPENSES.
Section 848 of the Internal Revenue Code of 1986
(relating to capitalization of certain policy acquisition ex-
penses) is amended by adding at the end the following new
subsection:
‘‘(k) EXEMPTION FOR SMALL LIFE INSURANCE COM-
PANIES.—This section shall not require any small life in-
surance company (as defined in section 806) to capitalize
any specified policy acquisition expenses for any taxable
year beginning after December 31, 1993.’’
SEC. 4. SENSE OF CONGRESS RELATING TO USE OF IN-
CREASED REVENUES.
It is the sense of the Congress that any increase in
revenues to the Treasury resulting from the amendments
made by this Act shall be dedicated to the funding of pro-
grams benefiting the nutrition, early education, housing,
and family support of the Nation’s children.
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