1.Excise tax on certain
acquisitions of interests in insurance contracts in which certain exempt
organizations hold an interest
(a)
(1)Chapter 42 of the Internal Revenue Code of 1986 (relating
to excise taxes involving private foundations and certain other tax-exempt
organizations) is amended by adding at the end the following new
subchapter:
FInsurance
contracts in which certain exempt organizations hold interests
Sec. 4965. Excise tax on acquisition of
interests in insurance contracts in which certain exempt organizations hold an
interest.
4965.Excise tax on
acquisition of interests in insurance contracts in which certain exempt
organizations hold an interest
(a)If there is a taxable acquisition of any interest in an
applicable insurance contract, there is hereby imposed on the person acquiring
the interest a tax equal to 100 percent of the acquisition costs of the
interest.
(b)For purposes of this section—
(1)The term taxable acquisition means the
acquisition of any direct or indirect interest in an applicable insurance
contract by—
(A)an applicable
exempt organization, or
(B)a person other
than an applicable exempt organization if such interest in the hands of such
person is not an interest described in clause (i), (ii), or (iii) of paragraph
(2)(B).
(2)Applicable
insurance contract
(A)The term applicable insurance contract means
any life insurance, annuity, or endowment contract with respect to which both
an applicable exempt organization and a person other than an applicable exempt
organization have directly or indirectly held an interest in the contract
(whether or not at the same time).
(B)Such
term shall not include a life insurance, annuity, or endowment contract
if—
(i)all persons
directly or indirectly holding any interest in the contract (other than
applicable exempt organizations) have an insurable interest in the insured
under the contract independent of any interest of an applicable exempt
organization in the contract,
(ii)the sole
interest in the contract of each person other than an applicable exempt
organization is as a named beneficiary, or
(iii)the sole
interest in the contract of each person other than an applicable exempt
organization is—
(I)as a beneficiary
of a trust holding an interest in the contract, but only if the person's
designation as such beneficiary was made without consideration and solely on a
purely gratuitous basis, or
(II)as a trustee who
holds an interest in the contract in a fiduciary capacity solely for the
benefit of applicable exempt organizations or persons otherwise described in
clauses (i) and (ii) or subclause (I) of this clause.
(3)Definition and
rule relating to acquisition costs
(A)Acquisition
costs definedThe term acquisition costs means the
direct or indirect costs of acquiring an interest in an applicable insurance
contract. Such term shall include any fees, commissions, charges, or other
amounts paid in connection with the acquisition, whether or not paid to the
issuer of the contract.
(B)Except as provided in regulations, if acquisition costs
of any acquisition are paid or incurred in more than 1 calendar year, the tax
imposed by subsection (a) with respect to the acquisition shall be imposed each
time the costs are so paid or incurred.
(4)Rules relating
to interests
(A)An interest in the contract includes any right with
respect to the contract, whether as an owner, beneficiary, or otherwise.
(B)An indirect interest in a contract includes an interest
in an entity which directly or indirectly holds an interest in the
contract.
(C)In the case of an exchange of an applicable insurance
contract on which no gain or loss is recognized under section 1035, any
interest in any of the contracts involved in the exchange shall be treated as
an interest in all such contracts.
(5)If a person increases an interest in an applicable
insurance contract, the increase shall be treated as a separate acquisition for
purposes of this section.
(6)Except as provided in regulations, if a person
acquires an interest in a contract before the contract is treated as an
applicable insurance contract, the acquisition shall be treated as a taxable
acquisition of an interest in an applicable insurance contract as of the date
the contract becomes an applicable insurance contract.
(c)Applicable
exempt organizationFor purposes of this section, the term
applicable exempt organization means—
(1)an organization
described in section 170(c),
(2)an organization
described in section 168(h)(2)(A)(iv), or
(3)an organization
not described in paragraph (1) or (2) which is described in section 2055(a) or
section 2522(a).
(d)Tax not treated
as investment in the contractFor purposes of section 72, the tax
imposed by this section shall not be included in investment in the
contract.
(e)The
Secretary shall prescribe such regulations as may be necessary to carry out the
provisions of this section. Such regulations may include regulations
which—
(1)exempt certain
contracts from treatment as applicable insurance contracts based on specific
factors, including whether the transaction is at arms length, the relative
economic benefits to applicable exempt organizations as compared to other
persons, and the likelihood of abuse,
(2)provide, for
purposes of subsection (b)(6), appropriate rules for the application of this
section in any case where an interest is acquired before a contract becomes an
applicable insurance contract,
(3)prevent, in cases
the Secretary determines appropriate, the imposition of more than one tax under
this section if the same interest is acquired more than once, and
(4)are designed to
prevent avoidance of the purposes of this section, including through the use of
intermediaries.
.
(2)The table of subchapters for chapter 42 of such Code is
amended by adding at the end the following new item:
Subchapter F. Insurance contracts in which
certain exempt organizations hold
interests.
.
(b)
(1)Subpart B of part III of subchapter A of chapter 61 of
the Internal Revenue Code of 1986 (relating to information concerning
transactions with other persons) is amended by adding at the end the following
new section:
6050U.Returns
relating to applicable insurance contracts in which certain exempt
organizations hold interests
(a)Requirements of
reporting
(1)Each—
(A)applicable exempt
organization which acquires (within the meaning of section 4965) an interest in
any applicable insurance contract, and
(B)other person
which so acquires such an interest which, in the hands of such person, is
taxable under section 4965,
shall make
the return described in subsection (c).(2)If
a person (including an applicable exempt organization) acquires an interest in
an applicable insurance contract in an acquisition which is taxable under
section 4965 and then transfers such interest to 1 or more other persons, each
person acquiring all or a portion of such interest shall make the return
described in subsection (c).
(b)Any organization or person required to make a return under
subsection (a) shall file such return at such time as may be established by the
Secretary with respect to—
(1)in the case of an
organization described in subsection (a)(1), the calendar year in which the
acquisition occurs, any calendar year in which acquisition costs are paid or
incurred, and any other calendar years specified by the Secretary, and
(2)in the case of a
person described in subsection (a)(2), the calendar year in which the transfer
occurs.
(c)Form and manner
of returnsA return is described in this subsection if such
return—
(1)is in such form
as the Secretary prescribes,
(2)in the case
of—
(A)a return required
under subsection (a)(1)(A), contains the name, address, and taxpayer
identification number of the applicable exempt organization, the issuer of the
applicable insurance contract, and any person acquiring an interest in the
contract which may be taxable under section 4965,
(B)a return required
under subsection (a)(1)(B), contains the name, address, and taxpayer
identification number of the person acquiring an interest in the applicable
insurance contract which is taxable under section 4965, any applicable exempt
organization holding an interest in the contract, and the issuer of the
contract, and
(C)a return required
under subsection (a)(2), contains the name, address, and taxpayer
identification number of the transferor and transferee, and
(3)contains such
other information as the Secretary may prescribe.
(d)Statements To
be furnished to persons with respect to whom information is
requiredEvery person required to make a return under subsection
(a) shall furnish to each person whose taxpayer identification information is
required to be included in such return under subsection (c) a written statement
showing—
(1)the name and
address of the person required to make such return and the telephone number of
the information contact for such person, and
(2)the taxpayer
identity and other information required to be shown on the return with respect
to such person.
The
written statement required under the preceding sentence shall be furnished on
or before the date specified by the Secretary.(e)For
purposes of this section, any term used in this section which is also used in
section 4965 shall have the meaning given such term by section
4965.
.
(2)
(A)Section 6724(d) of such Code is amended—
(i)in
paragraph (1)(B), by redesignating clauses (xiii) through (xviii) as clauses
(xiv) through (xix) and by inserting after clause (xii) the following new
clause:
(xiii)section 6050U
(relating to returns relating to applicable insurance contracts in which
certain exempt organizations hold
interests),
,
and
(ii)in
paragraph (3), by striking and
at the end of subparagraph (C),
by striking the period at the end of subparagraph (D) and inserting ,
and
, and by adding at the end the following new subparagraph:
(E)the statement
required by subsection (d) of section 6050U (relating to returns relating to
applicable insurance contracts in which certain exempt organizations hold
interests).
.
(B)Section 6721(e)(2) of such Code is amended by striking
or
at the end of subparagraph (B), by striking
and
at the end of subparagraph (C) and inserting
or
, and by adding at the end the following new
subparagraph:
(D)in the case of a
return required to be filed under section 6050U, the amount of tax imposed
under section 4965 which has not been paid with respect to items required to be
included on the return,
and
.
(3)The table of sections for subpart B of part III of
subchapter A of chapter 61 of such Code is amended by adding at the end the
following new item:
Sec. 6050U. Returns relating to applicable
insurance contracts in which certain exempt organizations hold
interests.
.
(c)
(1)The amendments made by this section shall apply to
contracts issued after May 3, 2005.
(2)Reporting of
existing contractsIn the case of any life insurance, annuity, or
endowment contract—
(A)which was issued
on or before May 3, 2005,
(B)with respect to
which an applicable exempt organization (as defined in section 4965 of the
Internal Revenue Code of 1986, as added by this section) holds an interest on
May 3, 2005, and
(C)which would be
treated as an applicable insurance contract (as so defined) if issued after May
3, 2005,
such organization shall, not later
than the date which is 1 year after the date of the enactment of this Act,
report to the Secretary of the Treasury with respect to such contract. Such
report shall be in such form and manner, and contain such information, as the
Secretary may prescribe. The Secretary shall submit such reports, along with
any recommendations for legislation as the Secretary considers appropriate, to
the Committee on Ways and Means of the House of Representatives and to the
Committee on Finance of the Senate within 6 months of the date such reports are
required to be filed.