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Code · BILL · 116th Congress · H.R. 8696 (Introduced in House) — To increase retirement savings, simplify and clarify retirement plan rules, and for other purposes. · Sec. 203

Sec. 203. Insurance-dedicated exchange-traded funds

767 words·~3 min read·/bill/116/hr/8696/ih/section-203·

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Not later than the date which is 1 year after the date of the enactment of this Act, the Secretary of the Treasury (or the Secretary’s delegate) shall amend the regulation issued by the Department of the Treasury relating to Income Tax; Diversification Requirements for Variable Annuity, Endowment, and Life Insurance Contracts , 54 Fed. Reg. 8728 (March 2, 1989), and make any necessary corresponding amendments to other regulations, in order to facilitate the use of exchange-traded funds as investment options under variable contracts within the meaning of section 817(d) of the Internal Revenue Code of 1986, in accordance with subsections
(b)and
(c)of this section. The Secretary of the Treasury (or the Secretary’s delegate) shall amend Treas. Reg. section 1.817–5(f)(3) to provide that satisfaction of the requirements in Treas. Reg. section 1.817–5(f)(2)(i) with respect to an exchange-traded fund shall not be prevented by reason of beneficial interests in such a fund being held by 1 or more authorized participants or market makers. The Secretary of the Treasury (or the Secretary’s delegate) shall amend Treas. Reg. section 1.817–5(f) to confirm that, for Federal income tax purposes, a regulated investment company, partnership, or trust (including an exchange-traded fund) that satisfies the requirements of Treas. Reg. section 1.817–5(f)
(2)and
(3)shall not be treated as owned by the holder of a variable contract pursuant to the principles of Rev. Rul. 81–225, 1981–2 C.B. 12, merely because another regulated investment company, partnership, trust, or similar investment vehicle follows the same investment strategy, has the same investment manager, or holds the same investments. In amending Treas. Reg. section 1.817–5(f)(3) in accordance with subsections
(b)and
(c)of this section, the Secretary of the Treasury (or the Secretary’s delegate) shall provide definitions consistent with the following: The term exchange-traded fund means a regulated investment company, partnership, or trust— that is registered with the Securities and Exchange Commission as an open-end investment company or a unit investment trust; the shares of which can be purchased or redeemed directly from the fund only by an authorized participant; and the shares of which are traded throughout the day on a national stock exchange at market prices that may or may not be the same as the net asset value of the shares. The term authorized participant means a financial institution that is a member or participant of a clearing agency registered under section 17A(b) of the Securities Exchange Act of 1934 that enters into a contractual relationship with an exchange-traded fund pursuant to which the financial institution is permitted to purchase and redeem shares directly from the fund and to sell such shares to third parties, but only if the contractual arrangement or applicable law precludes the financial institution from— purchasing the shares for its own investment purposes rather than for the exclusive purpose of creating and redeeming such shares on behalf of third parties; and selling the shares to third parties who are not market makers or otherwise described in Treas. Reg. section 1.817–5(f)
(1)and (3). The term market maker means a financial institution that is a registered broker or dealer under section 15(b) of the Securities Exchange Act of 1934 that maintains liquidity for an exchange-traded fund on a national stock exchange by being always ready to buy and sell shares of such fund on the market, but only if the financial institution is contractually or legally precluded from selling or buying such shares to or from persons who are not authorized participants or otherwise described in Treas. Reg. section 1.817–5(f)
(2)and (3).
(b)Subsection (b), and the definitions under subsection (d), shall apply to segregated asset account investments made on or after the earlier of— the date that is 18 months after the date of the of enactment of this Act, or the date on which the amendments to regulations under subsection
(b)are made.
(c)Subsection
(c)shall apply to taxable years beginning after the date of the enactment of this Act. Prior to the date that the Secretary of the Treasury (or the Secretary’s delegate) issues final regulations pursuant to this section— the Secretary (or delegate) shall administer and enforce the law in accordance with this section and the effective dates under paragraph (1), and taxpayers may rely upon their reasonable good faith interpretations of the preceding subsections of this section. Nothing contained in the amendments to regulations pursuant to subsection (c), or the administration and enforcement of such subsection under paragraph (2), shall be construed to create any inference as to a change in law or guidance in effect prior to enactment of this section.
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2 references not yet in our index
  • 54 FR 8728
  • Rev. Rul. 81-225
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cites case law
Sec. 203
Insurance-dedicated exchange-traded funds
Fed. Reg.54 FR 8728
Rev. Rul.Rev. Rul. 81-225
Cites 2Cited by 0 across 0 sources
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