I
119THCONGRESS
1
STSESSION 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
APRIL1, 2025
Ms. M
OOREof Wisconsin (for herself and Mr. SMITHof 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 com-
pany rules.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
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SECTION 1. TREATMENT OF FINANCIAL GUARANTY INSUR-1
ANCE COMPANIES AS QUALIFYING INSUR-2
ANCE CORPORATIONS UNDER PASSIVE FOR-3
EIGN INVESTMENT COMPANY RULES. 4
(a) I
NGENERAL.—Section 1297(f)(3) of the Internal 5
Revenue Code of 1986 is amended by adding at the end 6
the following new subparagraph: 7
‘‘(C) S
PECIAL RULES FOR FINANCIAL 8
GUARANTY INSURANCE COMPANIES .— 9
‘‘(i) I
N GENERAL.—Notwithstanding 10
subparagraphs (A)(ii) and (B), the applica-11
ble insurance liabilities of a financial guar-12
anty insurance company shall include its 13
unearned premium reserves if— 14
‘‘(I) such company is prohibited 15
under generally accepted accounting 16
principles from reporting on its appli-17
cable financial statements reserves for 18
losses and loss adjustment expenses 19
with respect to a financial guaranty 20
insurance or reinsurance contract ex-21
cept to the extent that losses and loss 22
adjustment expenses are expected to 23
exceed the unearned premium reserves 24
on the contract, 25
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‘‘(II) the applicable financial 1
statement of such company reports fi-2
nancial guaranty exposure of at least 3
15-to-1 or State or local bond expo-4
sure of at least 9-to-1, and 5
‘‘(III) such company includes in 6
its insurance liabilities only its un-7
earned premium reserves relating to 8
insurance written or assumed that is 9
within the single risk limits set forth 10
in subsection (D) of section 4 of the 11
Financial Guaranty Insurance Guide-12
line (modified by using total share-13
holder’s equity as reported on the ap-14
plicable financial statement of the 15
company rather than aggregate of the 16
surplus to policyholders and contin-17
gency reserves). 18
‘‘(ii) A
PPLICATION OF ALTERNATIVE 19
FACTS AND CIRCUMSTANCES TEST .—A fi-20
nancial guaranty insurance company shall 21
be treated as satisfying the requirements 22
of paragraph (2)(B). 23
‘‘(iii) F
INANCIAL GUARANTY INSUR -24
ANCE COMPANY .—For purposes of this 25
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subparagraph, the term ‘financial guaranty 1
insurance company’ means any insurance 2
company the sole business of which is writ-3
ing or reinsuring financial guaranty insur-4
ance (as defined in subsection (A) of sec-5
tion 1 of the Financial Guaranty Insurance 6
Guideline) which is permitted under sub-7
section (B) of section 4 of such Guideline. 8
‘‘(iv) F
INANCIAL GUARANTY EXPO -9
SURE.—For purposes of this subpara-10
graph, the term ‘financial guaranty expo-11
sure’ means the ratio of— 12
‘‘(I) the net debt service out-13
standing insured or reinsured by the 14
company that is within the single risk 15
limits set forth in the Financial Guar-16
anty Insurance Guideline (as reported 17
on such company’s applicable financial 18
statement), to 19
‘‘(II) the company’s total assets 20
(as so reported). 21
‘‘(v) S
TATE OR LOCAL BOND EXPO -22
SURE.—For purposes of this subpara-23
graph, the term ‘State or local bond expo-24
sure’ means the ratio of— 25
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‘‘(I) the net unpaid principal of 1
State or local bonds (as defined in 2
section 103(c)(1)) insured or rein-3
sured by the company that is within 4
the single risk limits set forth in the 5
Financial Guaranty Insurance Guide-6
line (as reported on such company’s 7
applicable financial statement), to 8
‘‘(II) the company’s total assets 9
(as so reported). 10
‘‘(vi) F
INANCIAL GUARANTY INSUR -11
ANCE GUIDELINE.—For purposes of this 12
subparagraph— 13
‘‘(I) I
N GENERAL.—The term 14
‘Financial Guaranty Insurance Guide-15
line’ means the October 2008 model 16
regulation that was adopted by the 17
National Association of Insurance 18
Commissioners on December 4, 2007. 19
‘‘(II) D
ETERMINATIONS MADE BY 20
SECRETARY.—The determination of 21
whether any provision of the Financial 22
Guaranty Insurance Guideline has 23
been satisfied shall be made by the 24
Secretary.’’. 25
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(b) REPORTING OF CERTAINITEMS.—Section 1
1297(f)(4) of such Code is amended by adding at the end 2
the following new subparagraph: 3
‘‘(C) C
LARIFICATION THAT CERTAIN ITEMS 4
ON APPLICABLE FINANCIAL STATEMENT BE 5
SEPARATELY REPORTED WITH RESPECT TO 6
CORPORATION.—An amount described in para-7
graph (1)(B) or clause (i)(II), (i)(III), (iv)(I), 8
(iv)(II), (v)(I), or (v)(II) of paragraph (3)(C) 9
shall be treated as reported on an applicable fi-10
nancial statement for purposes of this section 11
if— 12
‘‘(i) such amount is separately re-13
ported on such statement with respect to 14
the corporation referred to in paragraph 15
(1), or 16
‘‘(ii) such amount is separately deter-17
mined for purposes of calculating an 18
amount which is reported on such state-19
ment. 20
‘‘(D) A
UTHORITY OF SECRETARY TO RE -21
QUIRE REPORTING.— 22
‘‘(i) I
N GENERAL .—Each United 23
States person who owns an interest in a 24
specified non-publicly traded foreign cor-25
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poration and who takes the position that 1
such corporation is not a passive foreign 2
investment company shall report to the 3
Secretary such information with respect to 4
such corporation as the Secretary may re-5
quire. 6
‘‘(ii) S
PECIFIED NON-PUBLICLY TRAD-7
ED FOREIGN CORPORATION .—For purposes 8
of this subparagraph, the term ‘specified 9
non-publicly traded foreign corporation’ 10
means any foreign corporation— 11
‘‘(I) which would be a passive 12
foreign investment company if sub-13
section (b)(2)(B) did not apply, and 14
‘‘(II) no interest in which is trad-15
ed on an established securities mar-16
ket.’’. 17
(c) E
FFECTIVEDATE.— 18
(1) I
N GENERAL.—Except as otherwise pro-19
vided in this subsection, the amendments made by 20
this section shall apply to taxable years beginning 21
after December 31, 2024. 22
(2) R
EPORTING.—The amendment made by 23
subsection (b) shall apply to reports made after De-24
cember 31, 2024. 25
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(3) CERTAIN FINANCIAL GUARANTEE INSUR -1
ANCE COMPANIES NOT TREATED AS PASSIVE FOR -2
EIGN INVESTMENT COMPANIES MERELY BY REASON 3
OF STATUS IN CERTAIN PRIOR TAXABLE YEARS .— 4
(A) I
N GENERAL.—In the case of any tax-5
able year of a qualified financial guarantee in-6
surance company beginning after December 31, 7
2024, section 1298(b)(1) of the Internal Rev-8
enue Code of 1986 shall be applied to stock 9
held by any taxpayer in such company by treat-10
ing the specified grace period with respect to 11
such company as not part of such taxpayer’s 12
holding period of such stock. 13
(B) Q
UALIFIED FINANCIAL GUARANTEE 14
INSURANCE COMPANY .—For purposes of this 15
paragraph, the term ‘‘qualified financial guar-16
antee insurance company’’ means any financial 17
guarantee insurance company (as defined in 18
subparagraph (C) of section 1297(f)(3) of the 19
Internal Revenue Code of 1986, as added by 20
this section) which would not be a passive for-21
eign investment company if— 22
(i) such subparagraph applied to the 23
specified grace period, and 24
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(ii) in the case of any taxable year 1
ending before January 1, 2019, clause 2
(i)(II) of such subparagraph were applied 3
by substituting ‘‘8-to-1’’ for ‘‘9-to-1’’. 4
(C) S
PECIFIED GRACE PERIOD .—For pur-5
poses of this paragraph, the term ‘‘specified 6
grace period’’ means, with respect to any finan-7
cial guarantee insurance company, the period 8
beginning with such company’s first taxable 9
year beginning after December 31, 2017, and 10
ending with such company’s last taxable year 11
beginning before January 1, 2025. 12
(D) R
EGULATIONS AND OTHER GUID -13
ANCE.—The Secretary of the Treasury (or the 14
Secretary’s delegate) shall issue such regula-15
tions or other guidance as may be necessary or 16
appropriate to provide for the proper treatment 17
of any financial guarantee insurance company 18
which ceases to be treated as a passive foreign 19
investment company by reason of subparagraph 20
(A), including regulations or other guidance 21
which provide for— 22
(i) an opportunity for the revocation 23
of any election made under section 1295(b) 24
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or 1296(k) of the Internal Revenue Code 1
of 1986, and 2
(ii) the application of section 1293(c) 3
of such Code to periods after such com-4
pany ceases to be treated as a passive for-5
eign investment company. 6
Æ
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