1.This Act may be cited as the
District of Columbia National Disaster
Insurance Protection Act
.
2.District of
Columbia natural disaster protection funds
(a)Contributions to
natural disaster protection fundsSubsection (c) of section 832
of the Internal Revenue Code of 1986 (relating to the taxable income of
insurance companies other than life insurance companies) is amended by striking
and
at the end of paragraph (12), by striking the period at the
end of paragraph (13) and inserting ; and
, and by adding at the
end the following new paragraph:
(14)the qualified
contributions during the taxable year to a natural disaster protection
fund.
(b)Natural disaster
protection fund gross incomeSubsection (b) of section 832 of
such Code is amended by adding at the end the following new paragraph:
(9)Special rule for
assets held in natural disaster protection fundFor purposes of
determining gross income under this subsection, any items of income, gain,
loss, or deduction derived from or attributable to any assets held in a natural
disaster protection fund shall not be taken into
account.
(c)Distributions
from natural disaster protection fundsParagraph (1) of section
832(b) of such Code is amended by striking and
at the end of
subparagraph (D), by striking the period at the end of subparagraph (E) and
inserting , and
, and by adding at the end the following new
subparagraph:
(F)the aggregate
amount of all distributions during the taxable year from a natural disaster
protection fund, except that a distribution made to return to the qualified
insurance company any contribution that is not a qualified contribution for a
taxable year shall not be included in gross income if such distribution is made
prior to the filing by the qualified insurance company of its tax return for
such taxable year.
(d)Definitions and
other rules relating to natural disaster protection fundsSection
832 of such Code is amended by adding at the end the following new
subsection:
(h)Definitions and
other rules relating to natural disaster protection fundsFor
purposes of this section—
(1)Natural disaster
protection fundThe term natural disaster protection
fund (hereafter in this subsection referred to as the fund)
means any money, securities, or other property held by a qualified insurance
company that is identified and maintained in a segregated account—
(A)which is
designated as a natural disaster protection fund and held in a
bank or bank branch located in the District of Columbia that is licensed and
regulated by the Comptroller of the Currency or the District of Columbia
Commissioner of Insurance, Securities, and Banking,
(B)under the terms of
which—
(i)the assets in the
fund are required to be invested in a manner consistent with the investment
requirements applicable to all insurance companies under the laws of the
District of Columbia,
(ii)an excess balance
drawdown amount is required to be distributed to the qualified insurance
company no later than the close of the taxable year following the taxable year
with respect to which such amount is determined, and
(iii)no portion of
the assets of the fund may be paid or distributed from the fund except for a
qualified distribution.
(2)Qualified
Insurance CompanyThe term qualified insurance
company means an insurer or reinsurer that—
(A)is incorporated
and domiciled in the District of Columbia,
(B)is subject to
supervision by the District of Columbia Commissioner of Insurance, Securities,
and Banking,
(C)maintains an
office in the District of Columbia that employs no fewer than 10 full-time
equivalent employees, of whom no fewer than 5 are residents of the District of
Columbia,
(D)is subject to any
premium taxes and any other taxes and fees imposed by the District of Columbia
on all domestic insurance companies, and
(E)is subject to such
additional tax as may be imposed by the District of Columbia—
(i)on
premiums charged for natural catastrophic risk coverage written through the
fund, and
(ii)at such
rate—
(I)as may be
established by the District of Columbia, and
(II)as does not
exceed the rate of Federal excise tax imposed by section 4371(3) on a premium
paid on a contract of reinsurance issued by any foreign insurer or
reinsurer.
(3)The term qualified contribution means a
contribution to a fund established by a qualified insurance company of not more
than the total of net premiums or other payments received during a taxable year
for coverage of qualified losses, but only to the extent such contribution,
when added to all previous contributions to the fund (including net investment
earnings of the fund) and after subtracting all qualified distributions from
the fund, does not exceed the amount reasonably at risk for the payment of
qualified losses insured through the fund, less reinsurance on those risks, as
determined actuarially on a multi-year basis.
(4)The term qualified distribution means
any amount paid or distributed for—
(A)any payment of a
qualified loss pursuant to an insurance contract or contract of reinsurance
issued by the qualified insurance company,
(B)any payment made
to reinsure or otherwise spread the risk of catastrophe loss written by the
qualified insurance company,
(C)any excess balance
drawdown amount,
(D)any administrative
expenses directly related to the maintenance and investment of the fund,
and
(E)any claims
investigation and adjustments relating to a qualified loss.
(5)The term qualified loss means an insured loss
on a United States risk that satisfies subparagraphs (A) and (B).
(A)An
insured loss satisfies this subparagraph if the loss is attributable to one or
more of the following events:
(i)Wind (including
hurricanes and tornados).
(ii)Earthquake
(including any fire following).
(iii)Flood.
(iv)Tsunami or tidal
wave.
(v)Volcanic
eruption.
(vi)Fire.
(vii)Hail.
(viii)Snow, ice,
freezing, or other winter catastrophes.
(ix)Pandemic or other
public health catastrophe.
(B)Catastrophe
designation or minimum aggregate insured lossAn insured loss,
with respect to an event described in subparagraph (A), satisfies this
subparagraph if at least one of the following occurs:
(i)Total insured
losses from the event, or from more than one event happening simultaneously or
immediately following, exceeds $1,000,000,000 on an industry-wide basis.
(ii)The President of
the United States declares a disaster or state of emergency because of the
event.
(iii)The Governor or
chief executive of a State, possession or territory of the United States, or of
the District of Columbia, declares a disaster or state of emergency because of
such event.
(iv)The Property
Claims Services unit of Insurance Services Office, Inc., declares a
catastrophic industry-wide loss because of one or more events.
(6)Excess Balance
Drawdown AmountThe term excess balance drawdown
amount means the excess (if any) of—
(A)the amount of the
fund balance as of the end of the taxable year, over
(B)the total amount
of exposure of the fund to qualified losses at the end of the taxable year
under contracts issued by the qualified insurance company, as determined
actuarially on a multi-year basis.
(7)The term United States risk means any hazard,
risk, loss, or liability attributable to property situated, or an activity
conducted, in the United States, or its territories or possessions.
(8)Exclusion of
premiums and losses on certain Puerto Rican risksNotwithstanding
any other provision of this subsection, premiums and losses with respect to
risks covered by a catastrophe reserve established under the laws or
regulations of the Commonwealth of Puerto Rico shall not be taken into account
under this subsection in determining the amount of the qualified contributions
allowed or the amount of qualified losses.
(9)A transfer of property other than money to a fund shall be
treated as a sale or exchange of such property for an amount equal to its fair
market value as of the date of transfer, and appropriate adjustment shall be
made to the basis of such property. Section 267 shall apply to any loss
realized upon such a transfer.
(10)A distribution of property other than money from a fund
to a qualified insurance company shall be treated as a sale or exchange of such
property, and any gain or loss realized on such sale or exchange shall be
excluded from the gross income of the qualified insurance company.
(11)The
Secretary shall prescribe regulations as may be necessary or appropriate to
carry out the purposes of this
subsection.
(e)Additional tax
on certain distributions from a natural disaster protection
fundSubsection (d) of section 831 of such Code (relating to the
tax on insurance companies other than life insurance companies) is amended by
redesignating subsection (d) as subsection (e) and inserting after subsection
(c) the following new subsection:
(d)Tax on
nonqualified distributions
(1)In the case of a qualified insurance company, the tax
imposed by this section for the current year shall be increased by an amount
equal to 20 percent of the aggregate amount of nonqualified distributions made
by such company during such year from a natural disaster protection
fund.
(2)
(A)Nonqualified
distributionsThe term nonqualified distributions
means any distribution from a natural disaster protection fund other than a
qualified distribution (as defined in section 832(h)(4)).
(B)The terms qualified insurance company
and natural disaster protection fund shall have the meanings
ascribed to such terms in section
832(h).
(f)The amendments made by this bill shall apply to taxable
years beginning after December 31, 2011.