316
paragraph (3) and by redesignating paragraphs (4)
through (9) as paragraphs (3) through (8), respectively.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 141(d) is amended
by striking ‘‘subsection (b)(4)’’ and inserting ‘‘sub-
section (b)(3)’’.
(2) Paragraph (2) of section 142(c) is amended
by striking ‘‘section 141(b)(6)’’ and inserting ‘‘sec-
tion 141(b)(5)’’.
(3) Subsections (k)(3) and (m)(1) of section
146 and section 149(f)(4)(B)(i) are each amended
by striking ‘‘section 141(b)(5)’’ and inserting ‘‘sec-
tion 141(b)(4)’’.
SEC. 635. EXPANDED EXCEPTION FROM REBATE FOR ISSU-
ERS ISSUING $10,000,000 OR LESS OF BONDS.
Subparagraph (D) of section 148(f) (relating to ex-
ception for governmental units issuing $5,000,000 or less
of bonds) is amended by striking ‘‘$5,000,000’’ each place
it appears (including the heading) and inserting
‘‘$10,000,000’’.
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SEC. 636. REPEAL OF DEBT SERVICE-BASED LIMITATION
ON INVESTMENT IN CERTAIN NONPURPOSE
INVESTMENTS.
Subsection (d) of section 148 (relating to special
rules for reasonably required reserve or replacement fund)
is amended by striking paragraph (3).
SEC. 637. REPEAL OF EXPIRED PROVISIONS.
(a) Paragraph (2) of section 148(c) is amended by
striking subparagraph (B) and by redesignating subpara-
graphs (C), (D), and (E) as subparagraph (B), (C), and
(D), respectively.
(b) Paragraph (4) of section 148(f) is amended by
striking subparagraph (E).
SEC. 638. CLARIFICATION OF INVESTMENT–TYPE PROP-
ERTY.
Subparagraph (D) of section 148(b)(2) is amended
to read as follows:
‘‘(D) any investment-type property, or’’.
SEC. 639. EFFECTIVE DATES.
(a) IN GENERAL.—Except as otherwise provided in
this section, the amendments made by this subtitle shall
apply to bonds issued after the date of the enactment of
this Act.
(b) SMALL ISSUER EXPANSION.—The amendment
made by section 635 shall apply to bonds issued in cal-
318
endar years beginning after the date of the enactment of
this Act.
(c) INVESTMENT-TYPE PROPERTY.—The amendment
made by section 638 shall take effect as if included in the
amendments made by section 1301 of the Tax Reform Act
of 1986.
Subtitle E—Insurance Provisions
SEC. 641. TREATMENT 
OF 
CERTAIN 
INSURANCE 
CON-
TRACTS ON RETIRED LIVES.
(a) GENERAL RULE.—
(1) Paragraph (2) of section 817(d) (defining
variable contract) is amended by striking ‘‘or’’ at the
end of subparagraph (A), by striking ‘‘and’’ at the
end of subparagraph (B) and inserting ‘‘or’’, and by
inserting after subparagraph (B) the following new
subparagraph:
‘‘(C) provides for funding of insurance on
retired lives as described in section 807(c)(6),
and’’.
(2) Paragraph (3) of section 817(d) is amended
by striking ‘‘or’’ at the end of subparagraph (A), by
striking the period at the end of subparagraph (B)
and inserting ‘‘, or’’, and by inserting after subpara-
graph (B) the following new subparagraph:
319
‘‘(C) in the case of funds held under a con-
tract described in paragraph (2)(C), the
amounts paid in, or the amounts paid out, re-
flect the investment return and the market
value of the segregated asset account.’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
SEC. 642. TREATMENT OF MODIFIED GUARANTEED CON-
TRACTS.
(a) GENERAL RULE.—Subpart E of part I of sub-
chapter L of chapter 1 (relating to definitions and special
rules) is amended by inserting after section 817 the follow-
ing new section:
‘‘SEC. 817A. SPECIAL RULES FOR MODIFIED GUARANTEED
CONTRACTS.
‘‘(a) COMPUTATION OF RESERVES.—In the case of
a modified guaranteed contract, clause (ii) of section
807(e)(1)(A) shall not apply.
‘‘(b) SEGREGATED ASSETS UNDER MODIFIED GUAR-
ANTEED CONTRACTS MARKED TO MARKET.—
‘‘(1) IN GENERAL.—In the case of any life in-
surance company, for purposes of this subtitle—
320
‘‘(A) Any gain or loss with respect to a
segregated asset shall be treated as ordinary in-
come or loss, as the case may be.
‘‘(B) If any segregated asset is held by
such company as of the close of any taxable
year—
‘‘(i) such company shall recognize
gain or loss as if such asset were sold for
its fair market value on the last business
day of such taxable year, and
‘‘(ii) any such gain or loss shall be
taken into account for such taxable year.
Proper adjustment shall be made in the amount
of any gain or loss subsequently realized for
gain or loss taken into account under the pre-
ceding sentence. The Secretary may provide by
regulations for the application of this subpara-
graph at times other than the times provided in
this subparagraph.
‘‘(2) SEGREGATED
ASSET.—For purposes of
paragraph (1), the term ‘segregated asset’ means
any asset held as part of a segregated account re-
ferred to in subsection (d)(1) under a modified guar-
anteed contract.