[Congressional Record Volume 142, Number 141 (Thursday, October 3, 1996)]
[Senate]
[Page S12332]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  SAVINGS BANK LIFE INSURANCE INDUSTRY

 Mr. KERRY. Mr. President, although I do not serve on the 
Finance Committee, I was pleased to work closely with that committee 
during this Congress on a number of issues which have a special impact 
on the people of Massachusetts. For example, in the Small Business Job 
Protection Act, we were able to provide tax relief for fishing families 
in New Bedford, MA, as well as extend the research and development tax 
credit and employer-provided education tax deduction. In addition, in 
that legislation, we raised the minimum wage by 90 cents an hour--the 
first installment of that raise just went into effect this week, and 
the benefit is being felt by families all across Massachusetts.
  Mr. President, while we can take pride in this work, there were 
several miscellaneous tax provisions that the committee, without making 
any judgment about their merit, found unable to give proper review or 
consideration. One of these technical amendments would clarify the tax 
treatment of the State-mandated consolidation of savings banks life 
insurance departments. Specifically, the amendment would address the 
potential unfair consequences for the savings bank life insurance 
[SBLI] industry which is unique to New York, Connecticut, and 
Massachusetts.
  While the Finance Committee did not act on this issue in the current 
Congress, it is my hope and expectation that the Senate will be able to 
make the necessary technical clarifications in the law early next year.
  I should point out that all six Senators from affected States wrote 
to the chairman of the Finance Committee, the Senator from Delaware, 
requesting committee consideration of the measure. That letter, which I 
ask to be printed in the Record immediately following my remarks, was 
signed by Senators Kennedy, Moynihan, D'Amato, Dodd, Lieberman and me. 
Mr. President, in addition to the clear, bipartisan support for this 
technical amendment, the Treasury Department has indicated the Clinton 
administration has no objection to this proposal.
  I look forward to working with my colleagues on this issue in the 
105th Congress. I yield the floor.
  The letter follows:

                                                  U.S. Senate,

                                Washington, DC, December 12, 1995.
     Hon. William V. Roth, Jr.,
     Chairman, Senate Finance Committee,
     Washington, DC.
       Dear Mr. Chairman: During upcoming negotiations on the 
     Balanced Budget Act of 1995, we would ask that you support a 
     technical amendment to address potential unfair tax 
     consequences for the savings bank life insurance (SBLI) 
     organizations in New York, Connecticut and Massachussets. 
     SBLI is an industry unique to our three States. The provision 
     would clarify the tax treatment of the state-mandated 
     consolidation of mutual savings bank's life insurance 
     departments.
       More specifically, the provision would clarify how the 
     Internal Revenue Code of 1986 should treat certain additional 
     policyholders dividends mandated by the Massachusetts State 
     Legislature in 1990. As explained further in the attached 
     paper, the legislation consolidated the state's savings 
     banks' life insurance departments into a new non-public stock 
     company, while still providing for the sale of its products 
     through these state banking institutions. Because of the IRS' 
     expansive interpretation of current law, it is essential that 
     Congress clarify that the 12-year dividend payout associated 
     with this consolidation should be treated as a deductible 
     policyholder dividend rather than a nondeductible redemption 
     of equiy. The IRS has indicated that if the tax clarification 
     of this issue is not made this year, SBLI and its 
     policyholders will be subjected to this tax inequity which 
     will be regrettably and unfairly passed on to the consumer.
       Only the Savings Bank Life Insurance Company of 
     Massachusetts is immediately affected by the IRS' 
     interpretation of the Code. However, the sister industries in 
     both New York and Connecticut may be adversely affected if 
     the Tax Code is not properly clarified because they may 
     follow the consolidation approach taken by Massachusetts. 
     Revenue estimates by the Joint Committee on Taxation project 
     that the cost of this clarification to the Tax Code would not 
     exceed $25 million over the next five years, and the 
     Administration has testified that it does not oppose 
     providing legislative relief to SBLI.
       Mr. Chairman, for the aforementioned reasons, we would 
     appreciate your cooperation in clarifying the Tax Code as it 
     relates to this timely issue.
           Sincerely,
     Alfonse M. D'Amato,
       U.S. Senator.
     Edward M. Kennedy,
     Christopher J. Dodd,
     Daniel Patrick Moynihan,
       U.S. Senator.
     John F. Kerry,
     Joseph I. Lieberman.
     
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