Sec. 3504. Computation of life insurance tax reserves
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/bill/113/hr/1/ih/section-3504·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Subparagraph
(B)of section 807(d)(2) is amended to read as follows: an interest rate equal to the sum of— the applicable Federal interest rate, plus 3.5 percentage points, and . Paragraph
(4)of section 807(d) is amended to read as follows: Except as provided in subparagraph (B), the term applicable Federal interest rate means the annual rate determined by the Secretary under subparagraph
(C)for the calendar year in which the contract was issued. For purposes of this subsection— In computing the amount of the reserve with respect to any contract to which an election under this subparagraph applies for periods during any recomputation period, the applicable Federal interest rate shall be the annual rate determined by the Secretary under subparagraph
(C)for the 1st year of such period. No change in the applicable Federal interest rate shall be made under the preceding sentence unless such change would equal or exceed 1/2 of 1 percentage point. For purposes of clause (i), the term recomputation period means, with respect to any contract, the 5 calendar year period beginning with the 5th calendar year beginning after the calendar year in which the contract was issued (and each subsequent 5 calendar year period). An election under this subparagraph shall apply to all contracts issued during the calendar year for which the election was made or during any subsequent calendar year unless such election is revoked with the consent of the Secretary. Subsection
(f)shall not apply to any adjustment required under this paragraph. For purposes of this paragraph, the rate of interest determined under this subparagraph shall be the annual rate determined by the Secretary under clause (ii). The annual rate determined by the Secretary under this clause for any calendar year shall be a rate equal to the average of the applicable Federal mid-term rates (as defined in section 1274(d) but based on annual compounding) effective as of the beginning of each of the calendar months in the test period. For purposes of subclause (I), the test period is the most recent 60-calendar-month period ending before the beginning of the calendar year for which the determination is made. . The first sentence following paragraph
(6)in section 807(c) is amended by striking the applicable Federal interest rate under subsection (d)(2)(B)(i), the prevailing State assumed interest rate under subsection (d)(2)(B)(ii), and inserting the interest rate determined under subsection (d)(2)(B) . Section 808 is amended by adding at the end the following new subsection: For purposes of this subchapter— The term prevailing State assumed interest rate means, with respect to any contract, the highest assumed interest rate permitted to be used in computing life insurance reserves for insurance contracts or annuity contracts (as the case may be) under the insurance laws of at least 26 States. For purposes of the preceding sentence, the effect of nonforfeiture laws of a State on interest rates for reserves shall not be taken into account. The prevailing State assumed interest rate with respect to any contract shall be determined as of the beginning of the calendar year in which the contract was issued. . Paragraph
(1)of section 811(d) is amended by striking the greater of the prevailing State assumed interest rate or applicable Federal interest rate in effect under section 807 and inserting the interest rate in effect under section 807(d)(2)(B) . Subparagraph
(A)of section 846(f)(6) is amended by striking except that and all that follows and inserting except that the limitation of subsection (a)(3) shall apply in lieu of the limitation of the last sentence of section 807(d)(1), and . Subparagraph
(B)of section 954(i)(5) is amended by striking shall be substituted for the prevailing State assumed interest rate and inserting shall, if higher, be substituted for the interest rate in effect under section 807(d)(2)(B) . The amendments made by this section shall apply to taxable years beginning after December 31, 2014. For the first taxable year beginning after December 31, 2014, the reserve with respect to any contract (as determined under section 807(d)(2) of the Internal Revenue Code of 1986) at the end of the preceding taxable year shall be determined as if the amendments made by this section had applied to such reserve in such preceding taxable year and by using the interest rate applicable to such reserves under section 807(d)(2) of the Internal Revenue Code of 1986 for calendar year 2015. For subsequent taxable years, such amendments shall be applied with respect to such reserve by using the interest rate applicable under such section for calendar year 2015. If— the reserve determined under section 807(d)(2) of the Internal Revenue Code of 1986 with respect to any contract as of the close of the year preceding the first taxable year beginning after December 31, 2014, differs from the reserve which would have been determined with respect to such contract as of the close of such taxable year under such section determined without regard to paragraph (2), then the difference between the amount of the reserve described in clause
(i)and the amount of the reserve described in clause
(ii)shall be taken into account under the method provided in subparagraph (B). The method provided in this subparagraph is as follows: if the amount determined under subparagraph (A)(i) exceeds the amount determined under subparagraph (A)(ii), 1/8 of such excess shall be taken into account, for each of the 8 succeeding taxable years, as a deduction under section 805(a)(2) of such Code, or if the amount determined under subparagraph (A)(ii) exceeds the amount determined under subparagraph (A)(i), 1/8 of such excess shall be included in gross income, for each of the 8 succeeding taxable years, under section 803(a)(2) of such Code.