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SECTION 1. CONSOLIDATION OF LIFE INSURANCE COMPANIES WITH OTHER
COMPANIES PERMITTED.

(a) In General.--Section 1504(b) of the Internal Revenue Code of
1986 (defining includible corporation) is amended by striking paragraph
(2) and by redesignating paragraphs (3) through (8) as paragraphs (2)
through (7), respectively.
(b) Conforming Amendments.--
(1) Section 1503 of such Code is amended by striking
subsection (c) (relating to special rule for application of
certain losses against income of insurance companies taxed
under section 801) and by redesignating subsections (d), (e),
and (f) as subsections (b), (c), and (d), respectively.
(2) Section 1504 of such Code is amended by striking
subsection (c) and by redesignating subsections (d), (e), and
(f) as subsections (c), (d), and (e), respectively.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
(d) Phase-In of Application of Certain Losses Against Income of
Insurance Companies.--For taxable years beginning after December 31,
2000, and before January 1, 2007--
(1) In general.--If--
(A) an affiliated group includes 1 or more domestic
insurance companies each of which is subject to tax
under section 801 of the Internal Revenue Code of 1986,
(B) the common parent of such group has elected to
treat all such companies as includible corporations,
and
(C) the consolidated taxable income of the members
of the group not taxed under such section 801 results
in a consolidated net operating loss for such taxable
year,
then, under regulations prescribed by the Secretary of the
Treasury or his delegate, the amount of such loss which cannot
be absorbed in the applicable carryback periods against the
taxable income of such members not taxed under such section 801
shall be taken into account in determining the consolidated
taxable income of the affiliated group for such taxable year to
the extent of the applicable percentage of such loss or the
applicable percentage of the taxable income of the members
taxed under such section 801, whichever is less. The unused
portion of such loss shall be available as a carryover, subject
to the same limitations (applicable to the sum of the loss for
the carryover year and the loss (or losses) carried over to
such year), in applicable carryover years.
(2) Applicable percentage.--For purposes of paragraph (1),
the applicable percentage shall be determined in accordance
with the following table:

For taxable years beginning in: The applicable percentage is:
2001................................................... 40
2002................................................... 50
2003................................................... 60
2004................................................... 70
2005................................................... 80
2006................................................... 90.
(e) Election for Pre-2007 Years of Groups With Insurance
Companies.--For taxable years beginning after December 31, 2000, and
before January 1, 2007, the common parent of an affiliated group which
includes 1 or more domestic insurance companies subject to tax under
section 801 of such Code may elect to treat all such insurance
companies as corporations which are not includible corporations within
the meaning of subsection (b) of section 1504 of such Code, if, as of
the date of the enactment of this section--
(1) such affiliated group included 1 or more insurance
companies subject to tax under section 801 of such Code, and
(2) no additional election was in effect under section
1504(c)(2) of such Code (as in effect on the day before the
date of the enactment of this Act).
(f) No Carryback Before January 1, 2001.--To the extent that a
consolidated net operating loss is allowed or increased by reason of
the amendments made by this section, such loss may not be carried back
to a taxable year beginning before January 1, 2001.
(g) Nontermination of Group.--No affiliated group shall terminate
solely as a result of the amendments made by this section.
(h) Subsidiary Stock Basis Adjustments.--A parent corporation's
basis in the stock of a subsidiary corporation shall be adjusted to
reflect the preconsolidation income, gain, deduction and loss incurred
during a period when such corporations were members of an affiliated
group (determined without regard to section 1504(b)(2) of such Code as
in effect on the day before the date of enactment of this Act) but were
not included in a consolidated return of such group by operation of
section 1504(c)(2)(A) of such Code (as in effect on the day before the
date of the enactment of this Act).
(i) Waiver of 5-Year Waiting Period.--Under regulations prescribed
by the Secretary of the Treasury or his delegate, an automatic waiver
from the 5-year waiting period for reconsolidation provided in section
1504(a)(3) of such Code shall be granted to any corporation which was
previously an includible corporation but was subsequently deemed a
nonincludible corporation as a result of becoming a subsidiary of a
corporation which was not an includible corporation solely by operation
of section 1504(c)(2) of such Code (as in effect on the day before the
date of the enactment of this Act).
Amends the Internal Revenue Code to include life insurance companies as an "includible corporation" for purposes of filing consolidated tax returns.Permits an affiliated group which includes at least one domestic insurance company that elects to file a consolidated return rather than pay tax under certain life insurance provisions to use a phased-in percentage of insurance company net operating loss in determining its own taxable income. (Permits unused loss carryover.)Provides for: (1) subsidiary stock basis adjustment; and (2) waiver of the five-year reconsolidation waiting period for certain formerly includible corporations which became nonincludible as a result of becoming a subsidiary of a nonincludible life insurance company.