[Congressional Record Volume 151, Number 60 (Tuesday, May 10, 2005)]
[Senate]
[Page S4877]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Baucus):
  S. 993. A bill to amend the Internal Revenue Code of 1986 to impose 
an excise tax on amounts received under certain insurance policies in 
which certain exempt organizations hold an interest; to the Committee 
on Finance.
  Mr. GRASSLEY. Mr. President, the bill imposes an excise tax, equal to 
100 percent of the acquisition costs, on the taxable acquisition of any 
interest in an applicable insurance contract. An applicable insurance 
contract is any life insurance, annuity or endowment contract in which 
both an applicable exempt organization and any person that is not an 
applicable exempt organization have, directly or indirectly, held an 
interest in the contract (whether or not the interests are held at the 
same time).
  An applicable exempt organization generally includes an organization 
that is exempt from Federal income tax by reason of being described in 
section 501(c)(3) (including one organized outside the United States), 
a government or political subdivision of a government, and an Indian 
tribal government.
  The bill provides that an interest in an applicable insurance 
contract includes any right with respect to the contract, whether as an 
owner, beneficiary, or otherwise. An indirect interest in a contract 
includes an interest in an entity that, directly or indirectly, holds 
an interest in the contract.
  Exceptions apply under the bill. An exception is provided if each 
person (other than the exempt organization) with an interest in the 
contract has an insurable interest in the insured person independent of 
any interest of the exempt organization. Another exception is provided 
if each person, other than an exempt organization, has an interest 
solely as a named beneficiary. An exception is also provided for a 
person, other than the exempt organization, with an interest as a trust 
beneficiary, if the beneficiary designation is purely gratuitous, or 
with an interest as a trustee who holds in a fiduciary capacity for an 
applicable exempt organization or another permitted beneficiary.
  The bill provides reporting rules requiring an applicable exempt 
organization or other person that makes a taxable acquisition of an 
applicable insurance contract to file a return showing required 
information. A statement is required to be furnished to each person 
whose taxpayer identification information is required to be reported on 
the return. Penalties apply for failure to file the return or furnish 
the statement, including, in the case of intentional disregard of the 
return filing requirement, a penalty equal to the amount of the excise 
tax that has not been paid with respect to the items required to be 
included on the return.
  The bill is effective for contracts issued after May 3, 2005. The 
bill requires reporting of existing life insurance, endowment and 
annuity contracts issued on or before that date, in which an applicable 
exempt organization holds an interest and which would be treated as an 
applicable insurance contract under the bill. This reporting is 
required within one year after the date of enactment.
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