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II
118TH CONGRESS
1ST SESSION
S. 1787
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 SENATE OF THE UNITED STATES
JUNE 1, 2023
Mr. MENENDEZ (for himself and Mr. CASSIDY) introduced the following bill;
which was read twice and referred to the Committee on Finance
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,
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•S 1787 IS
SECTION 1. TREATMENT OF FINANCIAL GUARANTY INSUR-
1
ANCE COMPANIES AS QUALIFYING INSUR-
2
ANCE CORPORATIONS UNDER PASSIVE FOR-
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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
RULES
FOR
FINANCIAL
8
GUARANTY 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
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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,
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•S 1787 IS
‘‘(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 (8-to-1 in the
5
case of a taxable year of such com-
6
pany which ends on or before Decem-
7
ber 31, 2018), and
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‘‘(III) such company includes in
9
its insurance liabilities only its un-
10
earned premium reserves relating to
11
insurance written or assumed that is
12
within the single risk limits set forth
13
in subsection (D) of section 4 of the
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Financial Guaranty Insurance Guide-
15
line (modified by using total share-
16
holder’s equity as reported on the ap-
17
plicable financial statement of the
18
company rather than aggregate of the
19
surplus to policyholders and contin-
20
gency reserves).
21
‘‘(ii) APPLICATION
OF
ALTERNATIVE
22
FACTS AND CIRCUMSTANCES TEST.—A fi-
23
nancial guaranty insurance company shall
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•S 1787 IS
be treated as satisfying the requirements
1
of paragraph (2)(B).
2
‘‘(iii) FINANCIAL
GUARANTY
INSUR-
3
ANCE
COMPANY.—For purposes of this
4
subparagraph, the term ‘financial guaranty
5
insurance company’ means any insurance
6
company the sole business of which is writ-
7
ing or reinsuring financial guaranty insur-
8
ance (as defined in subsection (A) of sec-
9
tion 1 of the Financial Guaranty Insurance
10
Guideline) which is permitted under sub-
11
section (B) of section 4 of such Guideline.
12
‘‘(iv) FINANCIAL
GUARANTY
EXPO-
13
SURE.—For purposes of this subpara-
14
graph, the term ‘financial guaranty expo-
15
sure’ means the ratio of—
16
‘‘(I) the net debt service out-
17
standing insured or reinsured by the
18
company that is within the single risk
19
limits set forth in the Financial Guar-
20
anty Insurance Guideline (as reported
21
on such company’s applicable financial
22
statement), to
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‘‘(II) the company’s total assets
24
(as so reported).
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•S 1787 IS
‘‘(v) STATE OR LOCAL BOND EXPO-
1
SURE.—For purposes of this subpara-
2
graph, the term ‘State or local bond expo-
3
sure’ means the ratio of—
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‘‘(I) the net unpaid principal of
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State or local bonds (as defined in
6
section 103(c)(1)) insured or rein-
7
sured by the company that is within
8
the single risk limits set forth in the
9
Financial Guaranty Insurance Guide-
10
line (as reported on such company’s
11
applicable financial statement), to
12
‘‘(II) the company’s total assets
13
(as so reported).
14
‘‘(vi) FINANCIAL
GUARANTY
INSUR-
15
ANCE
GUIDELINE.—For purposes of this
16
subparagraph—
17
‘‘(I) IN
GENERAL.—The term
18
‘Financial Guaranty Insurance Guide-
19
line’ means the October 2008 model
20
regulation that was adopted by the
21
National Association of Insurance
22
Commissioners on December 4, 2007.
23
‘‘(II) DETERMINATIONS MADE BY
24
SECRETARY.—The determination of
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•S 1787 IS
whether any provision of the Financial
1
Guaranty Insurance Guideline has
2
been satisfied shall be made by the
3
Secretary.’’.
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(b)
REPORTING
OF
CERTAIN
ITEMS.—Section
5
1297(f)(4) of such Code is amended by adding at the end
6
the following new subparagraph:
7
‘‘(C) CLARIFICATION THAT CERTAIN ITEMS
8
ON
APPLICABLE
FINANCIAL
STATEMENT
BE
9
SEPARATELY
REPORTED
WITH
RESPECT
TO
10
CORPORATION.—An amount described in para-
11
graph (1)(B) or clause (i)(II), (i)(III), (iv)(I),
12
(iv)(II), (v)(I), or (v)(II) of paragraph (3)(C)
13
shall be treated as reported on an applicable fi-
14
nancial statement for purposes of this section
15
if—
16
‘‘(i) such amount is separately re-
17
ported on such statement with respect to
18
the corporation referred to in paragraph
19
(1), or
20
‘‘(ii) such amount is separately deter-
21
mined for purposes of calculating an
22
amount which is reported on such state-
23
ment.
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•S 1787 IS
‘‘(D) AUTHORITY OF SECRETARY TO RE-
1
QUIRE REPORTING.—
2
‘‘(i)
IN
GENERAL.—Each
United
3
States person who owns an interest in a
4
specified non-publicly traded foreign cor-
5
poration and who takes the position that
6
such corporation is not a passive foreign
7
investment company shall report to the
8
Secretary such information with respect to
9
such corporation as the Secretary may re-
10
quire.
11
‘‘(ii) SPECIFIED NON-PUBLICLY TRAD-
12
ED FOREIGN CORPORATION.—For purposes
13
of this subparagraph, the term ‘specified
14
non-publicly traded foreign corporation’
15
means any foreign corporation—
16
‘‘(I) which would be a passive
17
foreign investment company if sub-
18
section (b)(2)(B) did not apply, and
19
‘‘(II) no interest in which is trad-
20
ed on an established securities mar-
21
ket.’’.
22
(c) EFFECTIVE DATE.—
23
(1) IN
GENERAL.—Except as otherwise pro-
24
vided in this subsection, the amendments made by
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•S 1787 IS
this section shall take effect as if included in section
1
14501 of Public Law 115–97.
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(2) REPORTING.—The amendment made by
3
subsection (b) shall apply to reports made after the
4
date of the enactment of this Act.
5
Æ
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