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: 117-s-3217
Sponsor: full_name: Sen. Menendez, Robert [D-NJ]
Introduced: 2021-11-17
Policy area: Taxation
Subjects: Accounting and auditing

Capital gains tax

Financial services and investments

Foreign and international corporations

Securities

Tax administration and collection, taxpayers

Taxation of foreign income
Latest action: action_date: 2021-11-17
text: Read twice and referred to the Committee on Finance.

Summaries:
action_date: 2021-11-17
action_desc: Introduced in Senate
text: <p>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.</p>

tv_txt: II 117th CONGRESS 1st Session S. 3217 IN THE SENATE OF THE UNITED STATES November 17, 2021 Mr. Menendez introduced the following bill; which was read twice and referred to the Committee on Finance 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.

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.