A bill to amend the Internal Revenue Code of 1986 to provide special rules for purposes of determining if financial guaranty insurance companies are qualifying insurance corporations under the passive foreign investment company rules.
Bill: S.3217 | Sponsor: Sen. Menendez, Robert (D-NJ)
Policy area: Taxation

Summary:
This bill sets forth special tax rules for determining whether financial guaranty insurance companies are qualifying insurance corporations under the passive foreign investment company rules.

To amend the Internal Revenue Code of 1986 to provide special rules for 
 purposes of determining if financial guaranty insurance companies are 
qualifying insurance corporations under the passive foreign investment 
                             company rules.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. TREATMENT OF FINANCIAL GUARANTY INSURANCE COMPANIES AS 
              QUALIFYING INSURANCE CORPORATIONS UNDER PASSIVE FOREIGN 
              INVESTMENT COMPANY RULES.

    (a) In General.--Section 1297(f)(3) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new subparagraph:
                    ``(C) Special rules for financial guaranty 
                insurance companies.--
                            ``(i) In general.--Notwithstanding 
                        subparagraphs (A)(ii) and (B), the applicable 
                        insurance liabilities of a financial guaranty 
                        insurance company shall include its unearned 
                        premium reserves if--
                                    ``(I) such company is prohibited 
                                under generally accepted accounting 
                                principles from reporting on its 
                                applicable financial statements 
                                reserves for losses and loss adjustment 
                                expenses with respect to a financial 
                                guaranty insurance or reinsurance 
                                contract except to the extent that 
                                losses and loss adjustment expenses are 
                                expected to exceed the unearned premium 
                                reserves on the contract,
                                    ``(II) the applicable financial 
                                statement of such company reports 
                                financial guaranty exposure of at least 
                                15-to-1 or State or local bond exposure 
                                of at least 9-to-1 (8-to-1 in the case 
                                of a taxable year of such company which 
                                ends on or before December 31, 2018), 
                                and
                                    ``(III) such company includes in 
                                its insurance liabilities only its 
                                unearned premium reserves relating to 
                                insurance written or assumed that is 
                                within the single risk limits set forth 
                                in subsection (D) of section 4 of the 
                                Financial Guaranty Insurance Guideline 
                                (modified by using total shareholder's 
                                equity as reported on the applicable 
                                financial statement of the company 
                                rather than aggregate of the surplus to 
                                policyholders and contingency 
                                reserves).
                            ``(ii) Application of alternative facts and 
                        circumstances test.--A financial guaranty 
                        insurance company shall be treated as 
                        satisfying the requirements of paragraph 
                        (2)(B).
                            ``(iii) Financial guaranty insurance 
                        company.--For purposes of this subparagraph, 
                        the term `financial guaranty insurance company' 
                        means any insurance company the sole business 
                        of which is writing or reinsuring financial 
                        guaranty insurance (as defined in subsection 
                        (A) of section 1 of the Financial Guaranty 
                        Insurance Guideline) which is permitted under 
                        subsection (B) of section 4 of such Guideline.
                            ``(iv) Financial guaranty exposure.--For 
                        purposes of this subparagraph, the term 
                        `financial guaranty exposure' means the ratio 
                        of--
                                    ``(I) the net debt service 
                                outstanding insured or reinsured by the 
                                company that is within the single risk 
                                limits set forth in the Financial 
                                Guaranty Insurance Guideline (as 
                                reported on such company's applicable 
                                financial statement), to
                                    ``(II) the company's total assets 
                                (as so reported).
                            ``(v) State or local bond exposure.--For 
                        purposes of this subparagraph, the term `State 
                        or local bond exposure' means the ratio of--
                                    ``(I) the net unpaid principal of 
                                State or local bonds (as defined in 
                                section 103(c)(1)) insured or reinsured 
                                by the company that is within the 
                                single risk limits set forth in the 
                                Financial Guaranty Insurance Guideline 
                                (as reported on such company's 
                                applicable financial statement), to
                                    ``(II) the company's total assets 
                                (as so reported).''
                            ``(vi) Financial guaranty insurance 
                        guideline.--For purposes of this subparagraph--
                                    ``(I) In general.--The term 
                                `Financial Guaranty Insurance 
                                Guideline' means the October 2008 model 
                                regulation that was adopted by the 
                                National Association of Insurance 
                                Commissioners on December 4, 2007.
                                    ``(II) Determinations made by 
                                secretary.--The determination of 
                                whether any provision of the Financial 
                                Guaranty Insurance Guideline has been 
                                satisfied shall be made by the 
                                Secretary.''.
    (b) Reporting of Certain Items.--Section 1297(f)(4) of such Code is 
amended by adding at the end the following new subparagraph:
                    ``(C) Clarification that certain items on 
                applicable financial statement be separately reported 
                with respect to corporation.--An amount described in 
                paragraph (1)(B) or clause (i)(II), (i)(III), (iv)(I), 
                (iv)(II), (v)(I), or (v)(II) of paragraph (3)(C) shall 
                be treated as reported on an applicable financial 
                statement for purposes of this section if--
                            ``(i) such amount is separately reported on 
                        such statement with respect to the corporation 
                        referred to in paragraph (1), or
                            ``(ii) such amount is separately determined 
                        for purposes of calculating an amount which is 
                        reported on such statement.
                    ``(D) Authority of secretary to require 
                reporting.--
                            ``(i) In general.--Each United States 
                        person who owns an interest in a specified non-
                        publicly traded foreign corporation and who 
                        takes the position that such corporation is not 
                        a passive foreign investment company shall 
                        report to the Secretary such information with 
                        respect to such corporation as the Secretary 
                        may require.
                            ``(ii) Specified non-publicly traded 
                        foreign corporation.--For purposes of this 
                        subparagraph, the term `specified non-publicly 
                        traded foreign corporation' means any foreign 
                        corporation--
                                    ``(I) which would be a passive 
                                foreign investment company if 
                                subsection (b)(2)(B) did not apply, and
                                    ``(II) no interest in which is 
                                traded on an established securities 
                                market.''.
    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall take 
        effect as if included in section 14501 of Public Law 115-97.
            (2) Reporting.--The amendment made by subsection (b) shall 
        apply to reports made after the date of the enactment of this 
        Act.
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