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.

I 116TH CONGRESS 2D SESSION H. R. 5746 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 FEBRUARY 3, 2020 Ms. MOORE (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 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 VerDate Sep 11 2014 22:23 Feb 03, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5746.IH H5746 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 5746 IH 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) IN GENERAL.—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) SPECIAL RULE FOR FINANCIAL GUAR- 8 ANTY INSURANCE COMPANIES.— 9 ‘‘(i) IN 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 such reserve 22 amounts are expected to exceed the 23 unearned premium reserves on the 24 contract, 25 VerDate Sep 11 2014 22:23 Feb 03, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5746.IH H5746 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 5746 IH ‘‘(II) the applicable financial 1 statement of such company reports fi- 2 nancial guaranty exposure of at least 3 15-to-1, and 4 ‘‘(III) such company includes in 5 its insurance liabilities only its un- 6 earned premium reserves relating to 7 insurance written or assumed that is 8 within the single risk limits set forth 9 in subsection (D) of section 4 of the 10 Financial Guaranty Insurance Guide- 11 line (modified by using total share- 12 holder’s equity as reported on the ap- 13 plicable financial statement of the 14 company rather than aggregate of the 15 surplus to policyholders and contin- 16 gency reserves). 17 ‘‘(ii) FINANCIAL GUARANTY INSUR- 18 ANCE COMPANY.—For purposes of this 19 subparagraph, the term ‘financial guaranty 20 insurance company’ means any insurance 21 company the sole business of which is writ- 22 ing or reinsuring financial guaranty insur- 23 ance (as defined in subsection (A) of sec- 24 tion 1 of the Financial Guaranty Insurance 25 VerDate Sep 11 2014 22:23 Feb 03, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5746.IH H5746 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 5746 IH Guideline) which is permitted under sub- 1 section (B) of section 4 of such Guideline. 2 ‘‘(iii) FINANCIAL GUARANTY EXPO- 3 SURE.—For purposes of this subpara- 4 graph, the term ‘financial guaranty expo- 5 sure’ means the ratio of— 6 ‘‘(I) the net debt service out- 7 standing insured or reinsured by the 8 company that is within the single risk 9 limits set forth in the Financial Guar- 10 anty Insurance Guideline (as reported 11 on such company’s applicable financial 12 statement), to 13 ‘‘(II) the company’s total assets 14 (as so reported). 15 ‘‘(iv) FINANCIAL GUARANTY INSUR- 16 ANCE GUIDELINE.—For purposes of this 17 subparagraph, the term ‘Financial Guar- 18 anty Insurance Guideline’ means the Octo- 19 ber 2008 model regulation that was adopt- 20 ed by the National Association of Insur- 21 ance Commissioners on December 4, 22 2007.’’. 23 VerDate Sep 11 2014 22:23 Feb 03, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5746.IH H5746 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 5746 IH (b) REPORTING OF CERTAIN ITEMS.—Section 1 1297(f)(4) of such Code is amended by adding at the end 2 the following new subparagraph: 3 ‘‘(C) CLARIFICATION 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), (iii)(I), 8 or (iii)(II) of paragraph (3)(C) shall not be 9 treated as reported on an applicable financial 10 statement for purposes of this section unless 11 such amount is separately reported on such 12 statement with respect to the corporation re- 13 ferred to in paragraph (1). 14 ‘‘(D) AUTHORITY OF SECRETARY TO RE- 15 QUIRE REPORTING.— 16 ‘‘(i) IN GENERAL.—Each United 17 States person who owns an interest in a 18 specified non-publicly traded foreign cor- 19 poration and who takes the position that 20 such corporation is not a passive foreign 21 investment company shall report to the 22 Secretary such information with respect to 23 such corporation as the Secretary may re- 24 quire. 25 VerDate Sep 11 2014 22:23 Feb 03, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5746.IH H5746 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 5746 IH ‘‘(ii) SPECIFIED NON-PUBLICLY TRAD- 1 ED FOREIGN CORPORATION.—For purposes 2 of this subparagraph, the term ‘specified 3 non-publicly traded foreign corporation’ 4 means any foreign corporation— 5 ‘‘(I) which would be a passive 6 foreign investment company if sub- 7 section (b)(2)(B) did not apply, and 8 ‘‘(II) no interest in which is trad- 9 ed on an established securities mar- 10 ket.’’. 11 (c) EFFECTIVE DATE.— 12 (1) IN GENERAL.—Except as otherwise pro- 13 vided in this subsection, the amendments made by 14 this section shall take effect as if included in section 15 14501 of Public Law 115–97. 16 (2) REPORTING.—The amendment made by 17 subsection (b) shall apply to reports made after the 18 date of the enactment of this Act. 19 Æ VerDate Sep 11 2014 22:23 Feb 03, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6301 E:\BILLS\H5746.IH H5746 pamtmann on DSKBC07HB2PROD with BILLS