,,ii #aacth ,,congress #ast ,session ,s4 #iia ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,may #bj1 #bjac ,mr4 ,menendez introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to prevent the avoidance of tax by insurance companies through reinsurance with non-taxed affiliates4 #a4 ,prevention of avoidance of tax through reinsurance with non-taxed affiliates 7a7 ,in general ,part ,,iii of subchapter ,l of chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #hdi4 ,special rules for reinsurance of non-life contracts with non-taxed affiliates 7a7 ,in general ,the taxable income under section #hca7;a7 or the life insurance company taxable income under section #hja7;b7 7as the case may be7 of an insurance company shall be determined by not taking into account-- 7#a7 any non-taxed reinsurance premium1 7#b7 any additional amount paid by such insurance company with respect to the reinsurance for which such non-taxed reinsurance premium is paid1 to the extent such additional amount is properly allocable to such non-taxed reinsurance premium1 and 7#c7 any return premium1 ceding commission1 reinsurance recovered1 or other amount received by such insurance company with respect to the reinsurance for which such non-taxed reinsurance premium is paid1 to the extent such return premium1 ceding commission1 reinsurance recovered1 or other amount is properly allocable to such non-taxed reinsurance premium4 7b7 ,non-,taxed reinsurance premiums ,for purposes of this section-- 7#a7 ,in general ,the term non-taxed reinsurance premium means any reinsurance premium paid directly or indirectly to an affiliated corporation with respect to reinsurance of risks 7other than excepted risks71 to the extent that the income attributable to the premium is not subject to tax under this subtitle 7either as the income of the affiliated corporation or as amounts included in gross income by a ,united ,states shareholder under section #iea74 7#b7 ,excepted risks ,the term excepted risks means any risk with respect to which reserves described in section #haf7;b77#a7 are established4 7c7 ,affiliated corporations ,for purposes of this section1 a corporation shall be treated as affiliated with an insurance company if both corporations would be members of the same controlled group of corporations 7as defined in section #aefc7;a77 if section #aefc were applied-- 7#a7 by substituting at least #ej percent for at least #hj percent each place it appears in subsection 7a77#a71 and 7#b7 without regard to subsections 7a77#d71 7b77#b77;,c71 7b77#b77;,d71 and 7e77#c77;,c74 7d7 ,election ,to treat reinsurance income as effectively connected 7#a7 ,in general ,a specified affiliated corporation may elect for any taxable year to treat specified reinsurance income as-- 7,a7 income effectively connected with the conduct of a trade or business in the ,united ,states1 and 7,b7 for purposes of any treaty between the ,united ,states and any foreign country1 income attributable to a permanent establishment in the ,united ,states4 7#b7 ,effect of election ,in the case of any specified reinsurance income with respect to which the election under this subsection applies-- 7,a7 ,deduction allowed for reinsurance premiums ,for exemption from subsection 7a71 see definition of non-taxed reinsurance premiums in subsection 7b74 7,b7 ,exception from excise tax ,the tax imposed by section #dcga shall not apply with respect to any income treated as effectively connected with the conduct of a trade or business in the ,united ,states under paragraph 7#a74 7,c7 ,taxation under this subchapter ,such income shall be subject to tax under this subchapter to the same extent and in the same manner as if such income were the income of a domestic insurance company4 7,d7 ,coordination with foreign tax credit provisions ,for purposes of subpart ,a of part ,,iii of subchapter ,n and sections #gh and #ifj-- 7i7 such specified reinsurance income shall be treated as derived from sources without the ,united ,states1 and 7ii7 subsections 7a71 7b71 and 7c7 of section #ijd and sections #ijb1 #ijg1 and #ifj shall be applied separately with respect to each item of such income4 ,the ,secretary may issue regulations or other guidance which provide that related items of specified reinsurance income may be aggregated for purposes of applying clause 7ii74 7#c7 ,specified affiliated corporation ,for purposes of this subsection1 the term specified affiliated corporation means any affiliated corporation which is a foreign corporation and which meets such requirements as the ,secretary shall prescribe to ensure that tax on the specified reinsurance income of such corporation is properly determined and paid4 7#d7 ,specified reinsurance income ,for purposes of this paragraph1 the term specified reinsurance income means all income of a specified affiliated corporation which is attributable to reinsurance with respect to which subsection 7a7 would 7but for the election under this subsection7 apply4 7#e7 ,rules related to election ,any election under paragraph 7#a7 shall-- 7,a7 be made at such time and in such form and manner as the ,secretary may provide1 and 7,b7 apply for the taxable year for which made and all subsequent taxable years unless revoked with the consent of the ,secretary4 7e7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be appropriate to carry out1 or to prevent the avoidance of the purposes of1 this section1 including regulations or other guidance which provide for the application of this section to alternative reinsurance transactions1 fronting transactions1 conduit and reciprocal transactions1 and any economically equivalent transactions4 4 7b7 ,clerical amendment ,the table of sections for part ,,iii of subchapter ,l of chapter #a of such ,code is amended by adding at the end the following new item3 ,sec4 #hdi4 ,special rules for reinsurance of non-life contracts with non-taxed affiliates4 4 7c7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4