An Act to amend the Internal Revenue Code of 1954 to correct certain inequities with respect to the taxation of life insurance companies and for other purposes
PL 88-571 (H.R.5739), enacted 09/02/1964

78 STAT. ] 
PUBLIC LAW 88-571-SEPT. 2, 1964 
857 
Public Law 88-571 
AN A C T 
September 2, 1964 
To amend the Internal Revenue Code of 1954 to correct certain inequities with 
[H. R. 5739] 
respect to the taxation of life insurance companies, and for other purposes. 
Taxes. 
Life insurance 
companies. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled^ That (a) subsection 
(e) of section 812 of the Internal Revenue Code of 1954 (rules relat-
ing to new companies) is amended to read as follows: 
73 stat. 128 
"(e) NEW COMPANY DEFINED.—For purposes of this part, a life 
^^ 
^^^" 
insurance company is a new company for any taxable year only if 
such taxable year begins not more than 5 years after the first day on 
which it (or any predecessor, if section 381(c) (22) applies or would 
^^ "^^ ^^'• 
have applied if in effect) was authorized to do business as an 
insurance company." 
(b) The amendment made by subsection (a) shall apply to a loss 
from operations for taxable years beginning after December 31, 
1955; except that, in the case of a nonqualified corporation as defined 
in section 812(e) (2) (B) of the Internal Revenue Code of 1954 as 
in effect before such amendment— 
(1) a loss from operations for a taxable year beginning in 1956 
shall not be an operating loss carryover to the years 1962 and 
1963, and there shall be no reduction in the portion of such loss 
from operations which may be carried to 1964 by reason of an 
offset with respect to the year 1962 or 1963, and 
(2) a loss from operations for a taxable year beginning in 1957 
shall not be an operating loss carryover to the year 1963, and 
there shall be no reduction in the portion of such loss from opera-
tions which may be carried to 1964 and 1965 by reason of an offset 
with respect to the year 1963. 
SEC. 2. Section 815(b) (2) (A) (ii) of the Internal Revenue Code of 
1954 (relating to additions to shareholders surplus account) is 26 use sis. 
amended by adding at the end thereof the following: "reduced (in 
the case of a taxable year beginning after December 31, 1961) by the 
amount referred to in clause (i),". 
SEC. 3. (a) Section 815(d) of the Internal Revenue Code of 1954 
(relating to special rules with respect to distributions to shareholders) 
is amended by adding at the end thereof the following new paragraph: 
" ( 5 ) 
REDUCTION OF POLICYHOLDERS SURPLUS ACCOUNT FOR CER-
TAIN UNUSED DEDUCTIONS. 
If— 
" (A) an amount added to the policyholders surplus account 
for any taxable year increased (or created) a loss from opera-
tions for such year, and 
"(B) any portion of the increase (or amount created) in 
the loss from operations referred to in subparagraph (A) did 
not reduce the life insurance company taxable income for any 
taxable year to which such loss was carried, 
the policyholders surplus account for the taxable year referred to 
in subparagraph (A) shall be reduced by the amount described 
in subparagraph (B)." 
(b) Section 6501 of such Code (relating to limitations on assess- 
26 use esoi. 
ment and collection) is amended by redesignating subsection (k) as 
subsection (1), and by inserting after subsection (j) the following 
new subsection: 
"(k) 
REDUCTIONS OF POLICYHOLDERS SURPLUS ACCOUNT OF LIFE 
INSURANCE COMPANIES.—In the case of a deficiency attributable to 
the application to the taxpayer of section 815(d) (5) (relating to re-
ductions of policyholders surplus account of life insurance companies 
858 
PUBLIC L
A
W 88-571-SEPT. 2, 1964 
[78 STAT. 
for certain unused deductions), such deficiency may be assessed at any 
time before the expiration of the period within which a deficiency for 
the last taxable year to which the loss described in section 815(d) (5) 
fa'sta^ iS: 
('^) ^^ carried under section 812(b) (2) may be assessed." 
26 use 812.* 
(c) Section 6511(d) of such Code (relating to special rules ap-
76^sut!*891-^°^' 
plicable to income taxes with regard to limitations on credit or refund) 
Ante^p. 128'. 
J^ amended by adding at the end thereof the following new para-
26 use 6511. 
graph: 
"(6) 
SPECIAL PERIOD or LIMITATION WITH RESPECT TO REDUCTION 
OP 
POLICYHOLDERS 
SURPLUS 
ACCOUNT 
OF 
LIFE 
INSURANCE 
COMPANIES. 
"(A) PERIOD OF LIMITATION.—If the claim for credit or 
refund relates to an overpayment arising by operation of sec-
tion 815(d) (5) (relating to reduction of policyholders sur-
plus account of life insurance companies for certain unused 
deductions), in lieu of the 3-year period of limitation pre-
scribed in subsection (a), the period shall be that period 
which ends with the expiration of the 15th day of the 39th 
month following the end of the last taxable year to which 
the loss described in section 815(d)(5)(A) is carried under 
section 812(b) (2), or the period prescribed in subsection (c), 
in respect of such taxable year, whichever expires later. In 
the case of such a claim, the amount of the credit or refund 
may exceed the portion of the tax paid within the period pro-
vided in subsection (b)(2) or (c), whichever is applicable, 
to the extent of the amount of overpayment arising by opera-
tion of section 815 (d)(5). 
"(B) APPLICABLE RULES.—If the allowance of a credit or 
refund of an overpayment arising by operation of section 
815(d)(5) is otherwise prevented by operation of any law 
26 use 7122. 
Qj. j.y]g Q
j
f lo^y^^ other than section 7122 (relating to compro-
mises), such credit or refund may be allowed or made, if 
claim therefor is filed within the period provided in subpara-
graph (A) of this paragraph. 
In the case of any such claim 
for credit or refund, the determination by any court, includ-
ing the Tax Court, in any proceeding in which the decision 
of the court has become final, shall be conclusive except with 
respect to the effect of the operation of section 815(d) (5), to 
the extent such effect of the operation of section 815(d) (5) 
was not in issue in such proceeding.*' 
26 use 6
6
0
^
1 
(^^ Section 6601(e) of such Code (relating to income tax reduced 
by carryback with regard to interest on underpayment, nonpayment, 
or extensions of time for payment of tax) is amended— 
(1) by striking out the heading and inserting in lieu thereof 
the following: "(e) INCOME TAX REDUCED BY CARRYBACK OR 
ADJUSTMENT FOR CERTAIN UNUSED DEDUCTIONS.—"; and 
(2) by adding at the end thereof the following new paragraph: 
"(3) 
ADJUSTMENT FOR CERTAIN UNUSED DEDUCTIONS OF LIFE IN-
SURANCE COMPANIES.—If the amount of any tax imposed by 
subtitle A is reduced by operation of section 815 (d) (5) (relating 
to reduction of policyholders surplus account of life insurance 
companies for certain unused deductions), such reduction in tax 
shall not affect the computation of interest under this section for 
the period ending with the last day of the last taxable year to 
which the loss described in section 815 (d)(5)(A) is carried under 
section 812(b) (2)." 
26 use 6611. 
^gj Section 6611(f) of such Code (relating to interest on refunds 
of income tax caused by carryback) is amended— 
78 STAT. ] 
PUBLIC LAW 88-571-SEPT. 2, 1964 
859 
(1) by striking out the heading and inserting in lieu thereof 
the following: "(f) EEFUND OF INCOME TAX CAUSED BY CABRY-
BACK O
R ADJUSTMENT FOR CERTAIN UNUSED DEDUCTIONS.—"; and 
(2) by adding at the end thereof the following new paragraph: 
"(3) 
ADJUSTMENT FOR CERTAIN UNUSED DEDUCTIONS OF LIFE 
INSURANCE COMPANIES.—For purposes of subsection (a), if any 
overpayment of tax imposed by subtitle A arises by operation of 
section 815(d)(5) (relating to reduction of policyholders sur- 
^nte.p.ssT. 
plus account of lite insurance companies for certain unused 
deductions), such overpayment shall be deemed not to have been 
made prior to the close of the last taxable year to which the loss 
described in section 815(d)(5)(A) 
is carried under section 
812(b)(2)." 
^ ^ - s ^ - - -
(f) The amendments made by this section shall apply with respect 
to amounts added to policyholders surplus accounts (within the mean-
ing of section 815(c) of the Internal Revenue Code of 1954) for 
26 use sis. 
taxable years beginning after December 31, 1958. 
SEC. 4. (a) Section 815 of the Internal Revenue Code of 1954 
(relating to distributions to shareholders) is amended— 
(1) by striking out the second and third sentences of subsection 
(a), and 
(2) by adding at the end thereof the following new subsection: 
"(f) 
DISTRIBUTION DEFINED.—For purposes of this section, the 
term 'distribution' includes any distribution in redemption of stock 
or in partial or complete liquidation of the corporation, but does not 
include— 
"(1) any distribution made by the corporation in its stock or 
in rights to acquire its stock; 
"(2) except for purposes of subsection (a) (3) and subsection 
(e) (2) (B), any distribution in redemption of stock issued before 
1958 which at all times on and after the date of issuance and on 
and before the date of redemption is limited as to dividends and 
is callable, at the option of the issuer, at a price not in excess of 105 
percent of the sum of the issue price and the amount of any con-
tribution to surplus made by the original purchaser at the time 
of his purchase; or 
(3) any distribution after December 31, 1963, of the stock of 
a controlled corporation to which section 355 applies, if such con- 
esA stat. lu. 
trolled corporation is an insurance company subject to the tax 
^^ ^^^ ^^^" 
imposed by section 831 and if— 
^^^ ^*^*- ^^^" 
"(A) control was acquired prior to January 1,1958, or 
26 use 831. 
"(B) control has been acquired after December 31, 1957— 
"(i) in a transaction qualifying as a reorganization 
under section 368(a)(1)(B), if the distributing cor- 
26 use 368. 
poration has at all times since December 31, 1957, owned 
stock representing not less than 50 percent of the total 
combined voting power of all classes of stock entitled 
to vote, and not less than 50 percent of the value of all 
classes of stock, of the controlled corporation, or 
"(ii) solely in exchange for stock of the distributing 
corporation which stock is immediately exchanged by 
the controlled corporation in a transaction qualifying 
as a reorganization under section 368(a)(1) 
(A) or 
(C), if the controlled corporation has at all times 
since its organization been wholly owned by the distrib-
uting corporation and the distributing corporation has 
at all times since December 31, 1957, owned stock repre-
senting not less than 50 percent of the total combined 
voting power of all classes of stock entitled to vote, and 
73 Stat. 119 
26 use 805. 
75 Stat. 801. 
26 use 403. 
860 
PUBLIC LAW 88-571-SEPT. 2, 1%4 
[78 STAT. 
not less than 50 percent of the value of all classes of 
stock, of the corporation the assets of which have been 
transferred to the controlled corporation in the section 
2ruic'i68^°" 
368(a)(1) (A) or (C) reorganization. 
Paragraph (3) shall not apply to that portion of the distribution of 
stock of the controlled corporation equal to the increase in the aggre-
gate adjusted basis of such stock after December 31, 1957, except to 
the extent such increase results from an acquisition of stock in the 
controlled corporation in a transaction described in subparagraph 
(B) of such paragraph. If any part of the increase in the aggregate 
adjusted basis of stock of the controlled corporation after Decem-
ber 31, 1957, results from the transfer (other than as part of a trans-
action described in paragraph (3) (B)) by the distributing corporation 
to the controlled corporation of property which has a fair market 
value in excess of its adjusted basis at the time of the transfer, para-
graph (3) also shall not apply to that portion of the distribution equal 
to such excess." 
(b) The amendments made by subsection (a) shall apply to taxable 
years beginning after December 31,1963. 
SEC. 5. (a) Section 805(d)(1) of the Internal Revenue Code of 
1954 (relating to pension plan reserves) is amended by inserting 
before the period at the end of subpara^aph (D) the following: ", or 
purchased to provide retirement annuities for employees described in 
section 403(b) (1) (A) (ii) by an employer which is a State, a political 
subdivision of a State, or an agency or instrumentality of any one 
or more of the foregoing". 
(b) The amendment made by subsection (a) shall apply to tax-
able years beginning after December 31,1963. 
26 use 613. 
SEC. 6. (a) Section 613(b) of the Internal Revenue Code of 1954 
(relating to percentage depletion rates) is amended— 
(1) by striking out "beryl," in paragraphs (2) (B) and (6); 
and 
(2) by inserting "beryllium," after "antimony," in paragraph 
(b) The amendments made by subsection (a) shall apply to tax-
able years beginning after December 31,1963. 
SEC. 7. (a) Section 1212(a) of the Internal Revenue Code of 
Ante, p. 99. 
1954 (relating to capital loss carryovers of corporations) is amended 
to read as follows: 
"(a) 
CORPORATIONS.— 
"(1) I N GENERAL.—If for any taxable year a corporation has 
a net capital loss, the amount thereof shall be a short-term 
capital loss— 
" (A) in each of the 5 succeeding taxable years, or 
"(B) to the extent such loss is attributable to a foreign 
expropriation capital loss, in each of the 10 succeeding tax-
able years, 
to the extent such amount exceeds the total of any net capital 
gains (determined without regard to this paragraph) of any 
taxable years intervening between the taxable year in which the 
net capital loss arose and such succeeding taxable year. 
"(2) 
DEFINITIONS AND SPECIAL RULES.— 
"(A) 
FOREIGN EXPROPRIATION CAPITAL LOSS DEFINED.—^For 
purposes of this subsection, the term 'foreign expropriation 
capital loss' means, for any taxable year, the sum of the losses 
taken into account in computing the net capital loss for such 
year which are— 
"(i) losses sustained directly by reason of the expro-
priation, intervention, seizure, or similar taking of prop-
68A Stat. 49. 
26 use 165. 
78 STAT. ] 
PUBLIC LAW 88-572-SEPT. 2, 1964 
861 
erty by the government of any foreign country^, any 
political subdivision thereof, or any agency or instru-
mentality of the foregoing, or 
"(ii) losses (treated under section 165(g) (1) as losses 
from the sale or exchange of capital assets) from securi-
ties which become worthless by reason of the expropria-
tion, intervention, seizure, or similar taking of property 
by the government of any foreign country, any political 
subdivision thereof, or any agency or instrumentality of 
the foregoing. 
"(B) PORTION or LOSS ATTRIBUTABLE TO FOREIGN EXPROPRIA-
TION CAPITAL LOSS.—FoT purposes of paragraph (1), the por-
tion of any net capital loss for any taxable year attributable 
to a foreign expropriation capital loss is the amount of the 
foreign expropriation capital loss for such year (but not in 
excess of the net capital loss for such year). 
"(C) PRIORITY or APPLICATION.—For purposes of para-
graph (1), if a portion of a net capital loss for anj^ taxable 
year is attributable to a foreign expropriation capital loss, 
such portion shall be considered to be a separate net capital 
loss for such year to be applied after the other portion of 
such net capital loss." 
(b) The amendment made by subsection (a) shall apply with respect 
to net capital losses (to the extent attributable to foreign expropria-
tion capital losses, as defined in section 1212(a) (2) (A) of the Internal 
Revenue Code of 1954) sustained in taxable years ending after Decem- 
"*"'*' P- ^^° 
ber31,1958. 
Approved September 2, 1964. 
Public Law 88-572 
AN A C T 
September 2, 1964 
To authorize the Secretary of the Army to acquire the building constructed on 
[H. R. 9803] 
the Fort Jay Military Reservation, New York, by the Young Men's Christian 
Association. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assernJbled^ That the Secretary ^^f 
°^ ^^^ '^^!^" 
of the Army is authorized to acquire on behalf of the United States, N.Y. *'''"^^*'°"' 
out of funds appropriated pursuant to section 2 of this Act, fee simple 
title to the building constructed on the Fort Jay Military Reservation, 
New York, by the Young Men's Christian Association. 
SEC. 2. The purchase price for the property acquired under this Act fofbuUdii!^"°" 
shall be $150,000, provided that no funds may be expended for acqui- "
"
^ "' '"^' 
sition of title to the property in the absence of specific appropriation 
of funds for such acquisition, which appropriation is hereby 
authorized. 
Approved September 2, 1964.