| 1 | 1 | | I |
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| 2 | 2 | | 119THCONGRESS |
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| 3 | 3 | | 1 |
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| 4 | 4 | | STSESSION H. R. 2567 |
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| 5 | 5 | | To amend the Internal Revenue Code of 1986 to provide special rules for |
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| 6 | 6 | | purposes of determining if financial guaranty insurance companies are |
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| 7 | 7 | | qualifying insurance corporations under the passive foreign investment |
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| 8 | 8 | | company rules. |
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| 9 | 9 | | IN THE HOUSE OF REPRESENTATIVES |
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| 10 | 10 | | APRIL1, 2025 |
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| 11 | 11 | | Ms. M |
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| 12 | 12 | | OOREof Wisconsin (for herself and Mr. SMITHof Nebraska) introduced |
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| 13 | 13 | | the following bill; which was referred to the Committee on Ways and Means |
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| 14 | 14 | | A BILL |
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| 15 | 15 | | To amend the Internal Revenue Code of 1986 to provide |
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| 16 | 16 | | special rules for purposes of determining if financial |
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| 17 | 17 | | guaranty insurance companies are qualifying insurance |
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| 18 | 18 | | corporations under the passive foreign investment com- |
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| 19 | 19 | | pany rules. |
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| 20 | 20 | | Be it enacted by the Senate and House of Representa-1 |
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| 21 | 21 | | tives of the United States of America in Congress assembled, 2 |
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| 23 | 23 | | ssavage on LAPJG3WLY3PROD with BILLS 2 |
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| 24 | 24 | | •HR 2567 IH |
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| 25 | 25 | | SECTION 1. TREATMENT OF FINANCIAL GUARANTY INSUR-1 |
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| 26 | 26 | | ANCE COMPANIES AS QUALIFYING INSUR-2 |
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| 27 | 27 | | ANCE CORPORATIONS UNDER PASSIVE FOR-3 |
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| 28 | 28 | | EIGN INVESTMENT COMPANY RULES. 4 |
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| 29 | 29 | | (a) I |
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| 30 | 30 | | NGENERAL.—Section 1297(f)(3) of the Internal 5 |
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| 31 | 31 | | Revenue Code of 1986 is amended by adding at the end 6 |
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| 32 | 32 | | the following new subparagraph: 7 |
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| 33 | 33 | | ‘‘(C) S |
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| 34 | 34 | | PECIAL RULES FOR FINANCIAL 8 |
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| 35 | 35 | | GUARANTY INSURANCE COMPANIES .— 9 |
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| 36 | 36 | | ‘‘(i) I |
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| 37 | 37 | | N GENERAL.—Notwithstanding 10 |
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| 38 | 38 | | subparagraphs (A)(ii) and (B), the applica-11 |
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| 39 | 39 | | ble insurance liabilities of a financial guar-12 |
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| 40 | 40 | | anty insurance company shall include its 13 |
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| 41 | 41 | | unearned premium reserves if— 14 |
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| 42 | 42 | | ‘‘(I) such company is prohibited 15 |
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| 43 | 43 | | under generally accepted accounting 16 |
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| 44 | 44 | | principles from reporting on its appli-17 |
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| 45 | 45 | | cable financial statements reserves for 18 |
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| 46 | 46 | | losses and loss adjustment expenses 19 |
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| 47 | 47 | | with respect to a financial guaranty 20 |
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| 48 | 48 | | insurance or reinsurance contract ex-21 |
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| 49 | 49 | | cept to the extent that losses and loss 22 |
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| 50 | 50 | | adjustment expenses are expected to 23 |
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| 51 | 51 | | exceed the unearned premium reserves 24 |
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| 52 | 52 | | on the contract, 25 |
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| 54 | 54 | | ssavage on LAPJG3WLY3PROD with BILLS 3 |
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| 55 | 55 | | •HR 2567 IH |
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| 56 | 56 | | ‘‘(II) the applicable financial 1 |
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| 57 | 57 | | statement of such company reports fi-2 |
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| 58 | 58 | | nancial guaranty exposure of at least 3 |
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| 59 | 59 | | 15-to-1 or State or local bond expo-4 |
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| 60 | 60 | | sure of at least 9-to-1, and 5 |
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| 61 | 61 | | ‘‘(III) such company includes in 6 |
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| 62 | 62 | | its insurance liabilities only its un-7 |
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| 63 | 63 | | earned premium reserves relating to 8 |
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| 64 | 64 | | insurance written or assumed that is 9 |
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| 65 | 65 | | within the single risk limits set forth 10 |
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| 66 | 66 | | in subsection (D) of section 4 of the 11 |
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| 67 | 67 | | Financial Guaranty Insurance Guide-12 |
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| 68 | 68 | | line (modified by using total share-13 |
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| 69 | 69 | | holder’s equity as reported on the ap-14 |
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| 70 | 70 | | plicable financial statement of the 15 |
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| 71 | 71 | | company rather than aggregate of the 16 |
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| 72 | 72 | | surplus to policyholders and contin-17 |
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| 73 | 73 | | gency reserves). 18 |
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| 74 | 74 | | ‘‘(ii) A |
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| 75 | 75 | | PPLICATION OF ALTERNATIVE 19 |
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| 76 | 76 | | FACTS AND CIRCUMSTANCES TEST .—A fi-20 |
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| 77 | 77 | | nancial guaranty insurance company shall 21 |
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| 78 | 78 | | be treated as satisfying the requirements 22 |
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| 79 | 79 | | of paragraph (2)(B). 23 |
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| 80 | 80 | | ‘‘(iii) F |
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| 81 | 81 | | INANCIAL GUARANTY INSUR -24 |
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| 82 | 82 | | ANCE COMPANY .—For purposes of this 25 |
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| 84 | 84 | | ssavage on LAPJG3WLY3PROD with BILLS 4 |
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| 85 | 85 | | •HR 2567 IH |
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| 86 | 86 | | subparagraph, the term ‘financial guaranty 1 |
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| 87 | 87 | | insurance company’ means any insurance 2 |
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| 88 | 88 | | company the sole business of which is writ-3 |
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| 89 | 89 | | ing or reinsuring financial guaranty insur-4 |
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| 90 | 90 | | ance (as defined in subsection (A) of sec-5 |
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| 91 | 91 | | tion 1 of the Financial Guaranty Insurance 6 |
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| 92 | 92 | | Guideline) which is permitted under sub-7 |
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| 93 | 93 | | section (B) of section 4 of such Guideline. 8 |
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| 94 | 94 | | ‘‘(iv) F |
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| 95 | 95 | | INANCIAL GUARANTY EXPO -9 |
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| 96 | 96 | | SURE.—For purposes of this subpara-10 |
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| 97 | 97 | | graph, the term ‘financial guaranty expo-11 |
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| 98 | 98 | | sure’ means the ratio of— 12 |
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| 99 | 99 | | ‘‘(I) the net debt service out-13 |
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| 100 | 100 | | standing insured or reinsured by the 14 |
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| 101 | 101 | | company that is within the single risk 15 |
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| 102 | 102 | | limits set forth in the Financial Guar-16 |
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| 103 | 103 | | anty Insurance Guideline (as reported 17 |
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| 104 | 104 | | on such company’s applicable financial 18 |
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| 105 | 105 | | statement), to 19 |
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| 106 | 106 | | ‘‘(II) the company’s total assets 20 |
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| 107 | 107 | | (as so reported). 21 |
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| 108 | 108 | | ‘‘(v) S |
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| 109 | 109 | | TATE OR LOCAL BOND EXPO -22 |
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| 110 | 110 | | SURE.—For purposes of this subpara-23 |
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| 111 | 111 | | graph, the term ‘State or local bond expo-24 |
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| 112 | 112 | | sure’ means the ratio of— 25 |
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| 114 | 114 | | ssavage on LAPJG3WLY3PROD with BILLS 5 |
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| 115 | 115 | | •HR 2567 IH |
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| 116 | 116 | | ‘‘(I) the net unpaid principal of 1 |
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| 117 | 117 | | State or local bonds (as defined in 2 |
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| 118 | 118 | | section 103(c)(1)) insured or rein-3 |
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| 119 | 119 | | sured by the company that is within 4 |
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| 120 | 120 | | the single risk limits set forth in the 5 |
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| 121 | 121 | | Financial Guaranty Insurance Guide-6 |
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| 122 | 122 | | line (as reported on such company’s 7 |
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| 123 | 123 | | applicable financial statement), to 8 |
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| 124 | 124 | | ‘‘(II) the company’s total assets 9 |
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| 125 | 125 | | (as so reported). 10 |
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| 126 | 126 | | ‘‘(vi) F |
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| 127 | 127 | | INANCIAL GUARANTY INSUR -11 |
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| 128 | 128 | | ANCE GUIDELINE.—For purposes of this 12 |
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| 129 | 129 | | subparagraph— 13 |
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| 130 | 130 | | ‘‘(I) I |
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| 131 | 131 | | N GENERAL.—The term 14 |
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| 132 | 132 | | ‘Financial Guaranty Insurance Guide-15 |
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| 133 | 133 | | line’ means the October 2008 model 16 |
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| 134 | 134 | | regulation that was adopted by the 17 |
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| 135 | 135 | | National Association of Insurance 18 |
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| 136 | 136 | | Commissioners on December 4, 2007. 19 |
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| 137 | 137 | | ‘‘(II) D |
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| 138 | 138 | | ETERMINATIONS MADE BY 20 |
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| 139 | 139 | | SECRETARY.—The determination of 21 |
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| 140 | 140 | | whether any provision of the Financial 22 |
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| 141 | 141 | | Guaranty Insurance Guideline has 23 |
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| 142 | 142 | | been satisfied shall be made by the 24 |
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| 143 | 143 | | Secretary.’’. 25 |
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| 145 | 145 | | ssavage on LAPJG3WLY3PROD with BILLS 6 |
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| 146 | 146 | | •HR 2567 IH |
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| 147 | 147 | | (b) REPORTING OF CERTAINITEMS.—Section 1 |
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| 148 | 148 | | 1297(f)(4) of such Code is amended by adding at the end 2 |
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| 149 | 149 | | the following new subparagraph: 3 |
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| 150 | 150 | | ‘‘(C) C |
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| 151 | 151 | | LARIFICATION THAT CERTAIN ITEMS 4 |
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| 152 | 152 | | ON APPLICABLE FINANCIAL STATEMENT BE 5 |
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| 153 | 153 | | SEPARATELY REPORTED WITH RESPECT TO 6 |
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| 154 | 154 | | CORPORATION.—An amount described in para-7 |
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| 155 | 155 | | graph (1)(B) or clause (i)(II), (i)(III), (iv)(I), 8 |
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| 156 | 156 | | (iv)(II), (v)(I), or (v)(II) of paragraph (3)(C) 9 |
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| 157 | 157 | | shall be treated as reported on an applicable fi-10 |
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| 158 | 158 | | nancial statement for purposes of this section 11 |
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| 159 | 159 | | if— 12 |
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| 160 | 160 | | ‘‘(i) such amount is separately re-13 |
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| 161 | 161 | | ported on such statement with respect to 14 |
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| 162 | 162 | | the corporation referred to in paragraph 15 |
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| 163 | 163 | | (1), or 16 |
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| 164 | 164 | | ‘‘(ii) such amount is separately deter-17 |
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| 165 | 165 | | mined for purposes of calculating an 18 |
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| 166 | 166 | | amount which is reported on such state-19 |
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| 167 | 167 | | ment. 20 |
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| 168 | 168 | | ‘‘(D) A |
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| 169 | 169 | | UTHORITY OF SECRETARY TO RE -21 |
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| 170 | 170 | | QUIRE REPORTING.— 22 |
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| 171 | 171 | | ‘‘(i) I |
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| 172 | 172 | | N GENERAL .—Each United 23 |
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| 173 | 173 | | States person who owns an interest in a 24 |
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| 174 | 174 | | specified non-publicly traded foreign cor-25 |
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| 176 | 176 | | ssavage on LAPJG3WLY3PROD with BILLS 7 |
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| 177 | 177 | | •HR 2567 IH |
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| 178 | 178 | | poration and who takes the position that 1 |
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| 179 | 179 | | such corporation is not a passive foreign 2 |
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| 180 | 180 | | investment company shall report to the 3 |
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| 181 | 181 | | Secretary such information with respect to 4 |
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| 182 | 182 | | such corporation as the Secretary may re-5 |
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| 183 | 183 | | quire. 6 |
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| 184 | 184 | | ‘‘(ii) S |
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| 185 | 185 | | PECIFIED NON-PUBLICLY TRAD-7 |
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| 186 | 186 | | ED FOREIGN CORPORATION .—For purposes 8 |
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| 187 | 187 | | of this subparagraph, the term ‘specified 9 |
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| 188 | 188 | | non-publicly traded foreign corporation’ 10 |
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| 189 | 189 | | means any foreign corporation— 11 |
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| 190 | 190 | | ‘‘(I) which would be a passive 12 |
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| 191 | 191 | | foreign investment company if sub-13 |
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| 192 | 192 | | section (b)(2)(B) did not apply, and 14 |
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| 193 | 193 | | ‘‘(II) no interest in which is trad-15 |
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| 194 | 194 | | ed on an established securities mar-16 |
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| 195 | 195 | | ket.’’. 17 |
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| 196 | 196 | | (c) E |
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| 197 | 197 | | FFECTIVEDATE.— 18 |
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| 198 | 198 | | (1) I |
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| 199 | 199 | | N GENERAL.—Except as otherwise pro-19 |
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| 200 | 200 | | vided in this subsection, the amendments made by 20 |
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| 201 | 201 | | this section shall apply to taxable years beginning 21 |
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| 202 | 202 | | after December 31, 2024. 22 |
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| 203 | 203 | | (2) R |
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| 204 | 204 | | EPORTING.—The amendment made by 23 |
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| 205 | 205 | | subsection (b) shall apply to reports made after De-24 |
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| 206 | 206 | | cember 31, 2024. 25 |
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| 208 | 208 | | ssavage on LAPJG3WLY3PROD with BILLS 8 |
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| 209 | 209 | | •HR 2567 IH |
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| 210 | 210 | | (3) CERTAIN FINANCIAL GUARANTEE INSUR -1 |
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| 211 | 211 | | ANCE COMPANIES NOT TREATED AS PASSIVE FOR -2 |
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| 212 | 212 | | EIGN INVESTMENT COMPANIES MERELY BY REASON 3 |
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| 213 | 213 | | OF STATUS IN CERTAIN PRIOR TAXABLE YEARS .— 4 |
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| 214 | 214 | | (A) I |
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| 215 | 215 | | N GENERAL.—In the case of any tax-5 |
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| 216 | 216 | | able year of a qualified financial guarantee in-6 |
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| 217 | 217 | | surance company beginning after December 31, 7 |
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| 218 | 218 | | 2024, section 1298(b)(1) of the Internal Rev-8 |
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| 219 | 219 | | enue Code of 1986 shall be applied to stock 9 |
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| 220 | 220 | | held by any taxpayer in such company by treat-10 |
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| 221 | 221 | | ing the specified grace period with respect to 11 |
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| 222 | 222 | | such company as not part of such taxpayer’s 12 |
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| 223 | 223 | | holding period of such stock. 13 |
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| 224 | 224 | | (B) Q |
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| 225 | 225 | | UALIFIED FINANCIAL GUARANTEE 14 |
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| 226 | 226 | | INSURANCE COMPANY .—For purposes of this 15 |
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| 227 | 227 | | paragraph, the term ‘‘qualified financial guar-16 |
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| 228 | 228 | | antee insurance company’’ means any financial 17 |
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| 229 | 229 | | guarantee insurance company (as defined in 18 |
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| 230 | 230 | | subparagraph (C) of section 1297(f)(3) of the 19 |
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| 231 | 231 | | Internal Revenue Code of 1986, as added by 20 |
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| 232 | 232 | | this section) which would not be a passive for-21 |
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| 233 | 233 | | eign investment company if— 22 |
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| 234 | 234 | | (i) such subparagraph applied to the 23 |
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| 235 | 235 | | specified grace period, and 24 |
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| 237 | 237 | | ssavage on LAPJG3WLY3PROD with BILLS 9 |
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| 238 | 238 | | •HR 2567 IH |
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| 239 | 239 | | (ii) in the case of any taxable year 1 |
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| 240 | 240 | | ending before January 1, 2019, clause 2 |
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| 241 | 241 | | (i)(II) of such subparagraph were applied 3 |
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| 242 | 242 | | by substituting ‘‘8-to-1’’ for ‘‘9-to-1’’. 4 |
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| 243 | 243 | | (C) S |
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| 244 | 244 | | PECIFIED GRACE PERIOD .—For pur-5 |
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| 245 | 245 | | poses of this paragraph, the term ‘‘specified 6 |
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| 246 | 246 | | grace period’’ means, with respect to any finan-7 |
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| 247 | 247 | | cial guarantee insurance company, the period 8 |
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| 248 | 248 | | beginning with such company’s first taxable 9 |
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| 249 | 249 | | year beginning after December 31, 2017, and 10 |
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| 250 | 250 | | ending with such company’s last taxable year 11 |
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| 251 | 251 | | beginning before January 1, 2025. 12 |
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| 252 | 252 | | (D) R |
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| 253 | 253 | | EGULATIONS AND OTHER GUID -13 |
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| 254 | 254 | | ANCE.—The Secretary of the Treasury (or the 14 |
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| 255 | 255 | | Secretary’s delegate) shall issue such regula-15 |
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| 256 | 256 | | tions or other guidance as may be necessary or 16 |
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| 257 | 257 | | appropriate to provide for the proper treatment 17 |
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| 258 | 258 | | of any financial guarantee insurance company 18 |
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| 259 | 259 | | which ceases to be treated as a passive foreign 19 |
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| 260 | 260 | | investment company by reason of subparagraph 20 |
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| 261 | 261 | | (A), including regulations or other guidance 21 |
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| 262 | 262 | | which provide for— 22 |
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| 263 | 263 | | (i) an opportunity for the revocation 23 |
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| 264 | 264 | | of any election made under section 1295(b) 24 |
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| 266 | 266 | | ssavage on LAPJG3WLY3PROD with BILLS 10 |
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| 267 | 267 | | •HR 2567 IH |
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| 268 | 268 | | or 1296(k) of the Internal Revenue Code 1 |
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| 269 | 269 | | of 1986, and 2 |
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| 270 | 270 | | (ii) the application of section 1293(c) 3 |
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| 271 | 271 | | of such Code to periods after such com-4 |
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| 272 | 272 | | pany ceases to be treated as a passive for-5 |
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| 273 | 273 | | eign investment company. 6 |
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| 274 | 274 | | Æ |
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