To amend the Internal Revenue Code of 1986 to repeal the provision taxing policyholder dividends of mutual life insurance companies and to repeal the policyholders surplus account provisions.

February 13, 2003

Mr. HOUGHTON (for himself, Mr. NEAL of Massachusetts, Mr. KLECZKA, Mr. CRANE, Mr. BECERRA, Mr. HERGER, Mr. RANGEL, Mr. MCINNIS, Mr. TANNER, Mr. BRADY of Texas, Mrs. JOHNSON of Connecticut, Mr. POMEROY, Mr. RAMSTAD, and Mr. RYAN of Wisconsin) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to repeal the provision taxing policyholder dividends of mutual life insurance companies and to repeal the policyholders surplus account provisions.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Life Insurance Tax Simplification Act of 2003'.

SEC. 2. REPEAL OF REDUCTION OF DEDUCTIONS FOR MUTUAL LIFE INSURANCE COMPANIES.

(a) IN GENERAL- Section 809 of the Internal Revenue Code of 1986 (relating to reductions in certain deduction of mutual life insurance companies) is hereby repealed.

(b) CONFORMING AMENDMENTS-

(1) Subsections (a)(2)(B) and (b)(1)(B) of section 807 of such Code are each amended by striking `the sum of (i)' and by striking `plus (ii) any excess described in section 809(a)(2) for the taxable year,'.

(2)(A) The last sentence of section 807(d)(1) of such Code is amended by striking `section 809(b)(4)(B)' and inserting `paragraph (6)'.

(B) Subsection (d) of section 807 of such Code is amended by adding at the end the following new paragraph:

`(6) STATUTORY RESERVES- The term `statutory reserves' means the aggregate amount set forth in the annual statement with respect to items described in section 807(c). Such term shall not include any reserve attributable to a deferred and uncollected premium if the establishment of such reserve is not permitted under section 811(c).'

(3) Subsection (c) of section 808 of such Code is amended to read as follows:

`(c) AMOUNT OF DEDUCTION- The deduction for policyholder dividends for any taxable year shall be an amount equal to the policyholder dividends paid or accrued during the taxable year.'

(4) Subparagraph (A) of section 812(b)(3) of such Code is amended by striking `sections 808 and 809' and inserting `section 808'.

(5) Subsection (c) of section 817 of such Code is amended by striking `(other than section 809)'.

(6) Subsection (c) of section 842 of such Code is amended by striking paragraph (3) and by redesignating paragraph (4) as paragraph (3).

(7) The table of sections for subpart C of part I of subchapter L of chapter 1 of such Code is amended by striking the item relating to section 809.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.

SEC. 3. REPEAL OF POLICYHOLDERS SURPLUS ACCOUNT PROVISIONS.

(a) IN GENERAL- Section 815 of the Internal Revenue Code of 1986 (relating to distributions to shareholders from pre-1984 policyholders surplus account) is hereby repealed.

(b) CONFORMING AMENDMENTS-

(1) Section 801 of such Code is amended by striking subsection (c).

(2) The table of sections for subpart D of part I of subchapter L of chapter 1 of such Code is amended by striking the item relating to section 815.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2002.

END