[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2567 Introduced in House (IH)]
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119th CONGRESS
1st Session
H. R. 2567
To amend the Internal Revenue Code of 1986 to provide special rules for
purposes of determining if financial guaranty insurance companies are
qualifying insurance corporations under the passive foreign investment
company rules.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 1, 2025
Ms. Moore of Wisconsin (for herself and Mr. Smith of Nebraska)
introduced the following bill; which was referred to the Committee on
Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide special rules for
purposes of determining if financial guaranty insurance companies are
qualifying insurance corporations under the passive foreign investment
company rules.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. TREATMENT OF FINANCIAL GUARANTY INSURANCE COMPANIES AS
QUALIFYING INSURANCE CORPORATIONS UNDER PASSIVE FOREIGN
INVESTMENT COMPANY RULES.
(a) In General.--Section 1297(f)(3) of the Internal Revenue Code of
1986 is amended by adding at the end the following new subparagraph:
``(C) Special rules for financial guaranty
insurance companies.--
``(i) In general.--Notwithstanding
subparagraphs (A)(ii) and (B), the applicable
insurance liabilities of a financial guaranty
insurance company shall include its unearned
premium reserves if--
``(I) such company is prohibited
under generally accepted accounting
principles from reporting on its
applicable financial statements
reserves for losses and loss adjustment
expenses with respect to a financial
guaranty insurance or reinsurance
contract except to the extent that
losses and loss adjustment expenses are
expected to exceed the unearned premium
reserves on the contract,
``(II) the applicable financial
statement of such company reports
financial guaranty exposure of at least
15-to-1 or State or local bond exposure
of at least 9-to-1, and
``(III) such company includes in
its insurance liabilities only its
unearned premium reserves relating to
insurance written or assumed that is
within the single risk limits set forth
in subsection (D) of section 4 of the
Financial Guaranty Insurance Guideline
(modified by using total shareholder's
equity as reported on the applicable
financial statement of the company
rather than aggregate of the surplus to
policyholders and contingency
reserves).
``(ii) Application of alternative facts and
circumstances test.--A financial guaranty
insurance company shall be treated as
satisfying the requirements of paragraph
(2)(B).
``(iii) Financial guaranty insurance
company.--For purposes of this subparagraph,
the term `financial guaranty insurance company'
means any insurance company the sole business
of which is writing or reinsuring financial
guaranty insurance (as defined in subsection
(A) of section 1 of the Financial Guaranty
Insurance Guideline) which is permitted under
subsection (B) of section 4 of such Guideline.
``(iv) Financial guaranty exposure.--For
purposes of this subparagraph, the term
`financial guaranty exposure' means the ratio
of--
``(I) the net debt service
outstanding insured or reinsured by the
company that is within the single risk
limits set forth in the Financial
Guaranty Insurance Guideline (as
reported on such company's applicable
financial statement), to
``(II) the company's total assets
(as so reported).
``(v) State or local bond exposure.--For
purposes of this subparagraph, the term `State
or local bond exposure' means the ratio of--
``(I) the net unpaid principal of
State or local bonds (as defined in
section 103(c)(1)) insured or reinsured
by the company that is within the
single risk limits set forth in the
Financial Guaranty Insurance Guideline
(as reported on such company's
applicable financial statement), to
``(II) the company's total assets
(as so reported).
``(vi) Financial guaranty insurance
guideline.--For purposes of this subparagraph--
``(I) In general.--The term
`Financial Guaranty Insurance
Guideline' means the October 2008 model
regulation that was adopted by the
National Association of Insurance
Commissioners on December 4, 2007.
``(II) Determinations made by
secretary.--The determination of
whether any provision of the Financial
Guaranty Insurance Guideline has been
satisfied shall be made by the
Secretary.''.
(b) Reporting of Certain Items.--Section 1297(f)(4) of such Code is
amended by adding at the end the following new subparagraph:
``(C) Clarification that certain items on
applicable financial statement be separately reported
with respect to corporation.--An amount described in
paragraph (1)(B) or clause (i)(II), (i)(III), (iv)(I),
(iv)(II), (v)(I), or (v)(II) of paragraph (3)(C) shall
be treated as reported on an applicable financial
statement for purposes of this section if--
``(i) such amount is separately reported on
such statement with respect to the corporation
referred to in paragraph (1), or
``(ii) such amount is separately determined
for purposes of calculating an amount which is
reported on such statement.
``(D) Authority of secretary to require
reporting.--
``(i) In general.--Each United States
person who owns an interest in a specified non-
publicly traded foreign corporation and who
takes the position that such corporation is not
a passive foreign investment company shall
report to the Secretary such information with
respect to such corporation as the Secretary
may require.
``(ii) Specified non-publicly traded
foreign corporation.--For purposes of this
subparagraph, the term `specified non-publicly
traded foreign corporation' means any foreign
corporation--
``(I) which would be a passive
foreign investment company if
subsection (b)(2)(B) did not apply, and
``(II) no interest in which is
traded on an established securities
market.''.
(c) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2024.
(2) Reporting.--The amendment made by subsection (b) shall
apply to reports made after December 31, 2024.
(3) Certain financial guarantee insurance companies not
treated as passive foreign investment companies merely by
reason of status in certain prior taxable years.--
(A) In general.--In the case of any taxable year of
a qualified financial guarantee insurance company
beginning after December 31, 2024, section 1298(b)(1)
of the Internal Revenue Code of 1986 shall be applied
to stock held by any taxpayer in such company by
treating the specified grace period with respect to
such company as not part of such taxpayer's holding
period of such stock.
(B) Qualified financial guarantee insurance
company.--For purposes of this paragraph, the term
``qualified financial guarantee insurance company''
means any financial guarantee insurance company (as
defined in subparagraph (C) of section 1297(f)(3) of
the Internal Revenue Code of 1986, as added by this
section) which would not be a passive foreign
investment company if--
(i) such subparagraph applied to the
specified grace period, and
(ii) in the case of any taxable year ending
before January 1, 2019, clause (i)(II) of such
subparagraph were applied by substituting ``8-
to-1'' for ``9-to-1''.
(C) Specified grace period.--For purposes of this
paragraph, the term ``specified grace period'' means,
with respect to any financial guarantee insurance
company, the period beginning with such company's first
taxable year beginning after December 31, 2017, and
ending with such company's last taxable year beginning
before January 1, 2025.
(D) Regulations and other guidance.--The Secretary
of the Treasury (or the Secretary's delegate) shall
issue such regulations or other guidance as may be
necessary or appropriate to provide for the proper
treatment of any financial guarantee insurance company
which ceases to be treated as a passive foreign
investment company by reason of subparagraph (A),
including regulations or other guidance which provide
for--
(i) an opportunity for the revocation of
any election made under section 1295(b) or
1296(k) of the Internal Revenue Code of 1986,
and
(ii) the application of section 1293(c) of
such Code to periods after such company ceases
to be treated as a passive foreign investment
company.
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