[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1755 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 1755

   To amend the Internal Revenue Code of 1986 to prevent the use of 
 reinsurance with foreign persons to enable domestic nonlife insurance 
           companies to evade United States income taxation.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 8, 2001

Mrs. Johnson of Connecticut (for herself and Mr. Neal of Massachusetts) 
 introduced the following bill; which was referred to the Committee on 
                             Ways and Means

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to prevent the use of 
 reinsurance with foreign persons to enable domestic nonlife insurance 
           companies to evade United States income taxation.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Reinsurance Tax Equity Act of 
2001''.

SEC. 2. PREVENTION OF EVASION OF UNITED STATES INCOME TAX ON NONLIFE 
              INSURANCE COMPANIES THROUGH USE OF REINSURANCE WITH 
              FOREIGN PERSONS.

    (a) In General.--Subparagraph (A) of section 832(b)(4) of the 
Internal Revenue Code of 1986 (relating to insurance company taxable 
income) is amended to read as follows:
                    ``(A) From the amount of gross premiums written on 
                insurance contracts during the taxable year, deduct 
                return premiums and premiums paid for reinsurance 
                (except as provided in paragraph (9)).''
    (b) Treatment of Reinsurance With Related Reinsurers.--Subsection 
(b) of section 832 of such Code is amended by adding at the end the 
following new paragraph:
            ``(9) Denial of deduction under paragraph (4) for 
        reinsurance of u.s. risks with certain related persons.--
                    ``(A) In general.--No deduction shall be allowed 
                under paragraph (4) for premiums paid for the direct or 
                indirect reinsurance of United States risks with a 
                related reinsurer.
                    ``(B) Exceptions.--This paragraph shall not apply 
                to any premium to the extent that--
                            ``(i) the income attributable to the 
                        reinsurance to which such premium relates is 
                        includible in the gross income of--
                                    ``(I) such reinsurer, or
                                    ``(II) 1 or more domestic 
                                corporations or citizens or residents 
                                of the United States, or
                            ``(ii) the related insurer establishes to 
                        the satisfaction of the Secretary that the 
                        taxable income (determined in accordance with 
                        this section 832) attributable to such 
                        reinsurance is subject to an effective rate of 
                        income tax imposed by a foreign country at a 
                        rate greater than 20 percent of the maximum 
                        rate of tax specified in section 11.
                    ``(C) Election by reinsurer to be taxed on 
                income.--Income of a related reinsurer attributable to 
                the reinsurance of United States risks which is not 
                otherwise includible in gross income shall be treated 
                as gross income which is effectively connected with the 
                conduct of a trade or business in the United States if 
                such reinsurer--
                            ``(i) elects to so treat such income, and
                            ``(ii) meets such requirements as the 
                        Secretary shall prescribe to ensure that the 
                        taxes imposed by this chapter on such income 
                        are paid.
                    ``(D) Definitions.--For purposes of this 
                paragraph--
                            ``(i) United states risk.--The term `United 
                        States risk' means any risk related to property 
                        in the United States, or liability arising out 
                        of activity in, or in connection with the lives 
                        or health of residents of, the United States.
                            ``(ii) Related insurer.--The term `related 
                        insurer' means any reinsurer owned or 
                        controlled directly or indirectly by the same 
                        interests (within the meaning of section 482) 
                        as the person making the premium payment.''
    (c) Technical Amendment.--Subparagraph (A) of section 832(b)(5) of 
such Code is amended by inserting after clause (iii) the following new 
clause:
                            ``(iv) To the results so obtained, add 
                        reinsurance recovered from a related reinsurer 
                        to the extent a deduction for the premium paid 
                        for the reinsurance was disallowed under 
                        paragraph (9).''
    (d) Effective Date.--The amendments made by this section shall 
apply to premiums paid after the date that the Committee on Ways and 
Means of the House of Representatives votes to report this bill.
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