[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1136 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                S. 1136

     To amend the Internal Revenue Code of 1986 to provide that an 
  organization shall be exempt from income tax if it is created by a 
State to provide property and casualty insurance coverage for property 
           for which such coverage is otherwise unavailable.


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                   IN THE SENATE OF THE UNITED STATES

                              May 26, 1999

 Mr. Mack (for himself and Mr. Graham) 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 that an 
  organization shall be exempt from income tax if it is created by a 
State to provide property and casualty insurance coverage for property 
           for which such coverage is otherwise unavailable.

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

SECTION 1. EXEMPTION FROM INCOME TAX FOR STATE-CREATED ORGANIZATIONS 
              PROVIDING PROPERTY AND CASUALTY INSURANCE FOR PROPERTY 
              FOR WHICH SUCH COVERAGE IS OTHERWISE UNAVAILABLE.

    (a) In General.--Subsection (c) of section 501 of the Internal 
Revenue Code of 1986 (relating to exemption from tax on corporations, 
certain trusts, etc.) is amended by adding at the end the following new 
paragraph:
            ``(28)(A) Any association created before January 1, 1999, 
        by State law and organized and operated exclusively to provide 
        property and casualty insurance coverage for property located 
        within the State for which the State has determined that 
        coverage in the authorized insurance market is limited or 
        unavailable at reasonable rates, if--
                    ``(i) no part of the net earnings of which inures 
                to the benefit of any private shareholder or 
                individual,
                    ``(ii) except as provided in clause (v), no part of 
                the assets of which may be used for, or diverted to, 
                any purpose other than--
                            ``(I) to satisfy, in whole or in part, the 
                        liability of the association for, or with 
                        respect to, claims made on policies written by 
                        the association,
                            ``(II) to invest in investments authorized 
                        by applicable law, or
                            ``(III) to pay reasonable and necessary 
                        administration expenses in connection with the 
                        establishment and operation of the association 
                        and the processing of claims against the 
                        association,
                    ``(iii) the State law governing the association 
                permits the association to levy assessments on property 
                and casualty insurance policyholders with insurable 
                interests in property located in the State to fund 
                deficits of the association, including the creation of 
                reserves,
                    ``(iv) the plan of operation of the association is 
                subject to approval by the chief executive officer or 
                other executive branch official of the State, by the 
                State legislature, or both, and
                    ``(v) the assets of the association revert upon 
                dissolution to the State, the State's designee, or an 
                entity designated by the State law governing the 
                association, or State law does not permit the 
                dissolution of the association.
            ``(B) Subparagraph (A) shall not apply to an association 
        for any taxable year if the association's surplus income for 
        such year exceeds 5 percent of the total insured value of 
        properties insured by the association as of the close of the 
        taxable year unless the association pays a tax equal to 35 
        percent of such excess for such year. Such tax shall be treated 
        as imposed by chapter 42 for purposes of this title.''
    (b) Transitional Rule.--No income or gain shall be recognized by an 
association as a result of a change in status to that of an association 
described by section 501(c)(28) of the Internal Revenue Code of 1986, 
as amended by subsection (a).
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1998.
                                 <all>