[Congressional Record Volume 147, Number 77 (Wednesday, June 6, 2001)]
[Senate]
[Page S5903]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. NICKLES (for himself, Mr. Conrad, Mr. Frist, and Mr. 
        Torricelli):
  S. 992. A bill to amend the Internal Revenue Code of 1986 to repeal 
the provision taxing policy holder dividends of mutual life insurance 
companies and to repeal the policyholders surplus account provisions; 
to the Committee on Finance.
  Mr. NICKLES. Mr. President, today I introduce legislation to simplify 
the taxation of life insurance companies, along with Senator Conrad and 
several of our colleagues.
  Our legislation repeals section 809 and section 815 of the Internal 
Revenue Code. Due to significant changes in the life insurance industry 
and their taxation over the years, these provisions are no longer 
relevant and their repeal will simplify the tax code.
  Section 809 was enacted in 1984 as part of an overhaul of the 
taxation of life insurance companies. At the time, mutual life 
insurance companies were thought to be the dominant segment of the 
industry, and Congress sought to ensure that stock life insurance 
companies were not competitively disadvantaged. However, today, mutual 
life insurance companies comprise only about ten percent of the 
industry. Section 809 raises little revenue, but is very complex and 
burdensome. Since the reason for its enactment no longer exists, our 
bill repeals it.
  Section 815 has an even longer history, dating back to 1959. Tax 
changes in 1959 created an accounting mechanism called a 
``policyholders surplus account'' for stock life insurance companies. 
These companies were allowed to defer tax on one-half of their 
underwriting income so long as it was not distributed to shareholders. 
This income was accounted for through the policyholder surplus account. 
In 1984, Congress eliminated the deferral of income, but they did not 
address the issue of the policyholder surplus accounts. The amounts in 
those accounts remain subject to tax if certain triggering events 
occur. Since no company is willing to ``trigger'' the account, this 
provision also raises little or no revenue, but it directly inhibits 
business decisions of these companies. Our bill would also repeal this 
provision.
  Congress has worked hard over the last few years to modernize laws 
governing the financial services industry to encourage its growth and 
enhance its competitiveness. Elimination of these old, complicated tax 
provisions will complement this effort and provide greater certainty to 
the taxation of these companies.
  I encourage my colleagues to join me in this initiative.
                                 ______