,i #aadth ,,congress #b;d ,session ,h4 ,r4 #eigc ,,in ,,the ,,house ,,of ,,representatives ,september #h1 #bjaf,mr4 ,tiberi 7for himself and ,mr4 ,kind7 introduced the following bill2 which was referred to the ,committee on ,ways and ,means ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to clarify the tax treatment of certain life insurance contract transactions1 and for other purposes4 #a4 ,tax reporting for life settlement transactions 7a7 ,in general ,subpart ,b of part ,,iii of subchapter ,a of chapter #fa of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #fjej,x4 ,returns relating to certain life insurance contract transactions 7a7 ,requirement of reporting of certain payments 7#a7 ,in general ,every person who acquires a life insurance contract or any interest in a life insurance contract in a reportable policy sale during any taxable year shall make a return for such taxable year 7at such time and in such manner as the ,secretary shall prescribe7 setting forth-- 7,a7 the name1 address1 and ,,tin of such person1 7,b7 the name1 address1 and ,,tin of each recipient of payment in the reportable policy sale1 7,c7 the date of such sale1 7,d7 the name of the issuer of the life insurance contract sold and the policy number of such contract1 and 7,e7 the amount of each payment4 7#b7 ,statement to be furnished to persons with respect to whom information is required ,every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing-- 7,a7 the name1 address1 and phone number of the information contact of the person required to make such return1 and 7,b7 the information required to be shown on such return with respect to such person1 except that in the case of an issuer of a life insurance contract1 such statement is not required to include the information specified in paragraph 7#a77;,e74 7b7 ,requirement of reporting of seller's basis in life insurance contracts 7#a7 ,in general ,upon receipt of the statement required under subsection 7a77#b7 or upon notice of a transfer of a life insurance contract to a foreign person1 each issuer of a life insurance contract shall make a return 7at such time and in such manner as the ,secretary shall prescribe7 setting forth-- 7,a7 the name1 address1 and ,,tin of the seller who transfers any interest in such contract in such sale1 7,b7 the investment in the contract 7as defined in section #gb7;e77#f77 with respect to such seller1 and 7,c7 the policy number of such contract4 7#b7 ,statement to be furnished to persons with respect to whom information is required ,every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing-- 7,a7 the name1 address1 and phone number of the information contact of the person required to make such return1 and 7,b7 the information required to be shown on such return with respect to each seller whose name is required to be set forth in such return4 7c7 ,requirement of reporting with respect to reportable death benefits 7#a7 ,in general ,every person who makes a payment of reportable death benefits during any taxable year shall make a return for such taxable year 7at such time and in such manner as the ,secretary shall prescribe7 setting forth-- 7,a7 the name1 address1 and ,,tin of the person making such payment1 7,b7 the name1 address1 and ,,tin of each recipient of such payment1 7,c7 the date of each such payment1 and 7,d7 the amount of each such payment4 7#b7 ,statement to be furnished to persons with respect to whom information is required ,every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing-- 7,a7 the name1 address1 and phone number of the information contact of the person required to make such return1 and 7,b7 the information required to be shown on such return with respect to each recipient of payment whose name is required to be set forth in such return4 7d7 ,definitions ,for purposes of this section3 7#a7 ,payment ,the term payment means the amount of cash and the fair market value of any consideration transferred in a reportable policy sale4 7#b7 ,reportable policy sale ,the term reportable policy sale has the meaning given such term in section #aja7;a77#c77;,b74 7#c7 ,issuer ,the term issuer means any life insurance company that bears the risk with respect to a life insurance contract on the date any return or statement is required to be made under this section4 7#d7 ,reportable death benefits ,the term reportable death benefits means amounts paid by reason of the death of the insured under a life insurance contract that has been transferred in a reportable policy sale with respect to which1 a statement is required to be furnished under subsection 7a77#b71 or a notice of a transfer of a life insurance contract to a foreign person has been received4 4 7b7 ,clerical amendment ,the table of sections for subpart ,b of part ,,iii of subchapter ,a of chapter #fa of the ,internal ,revenue ,code of #aihf is amended by inserting after the item relating to section #fjej,w the following new item3 ,sec4 #fjej,x4 ,returns relating to certain life insurance contract transactions4 4 7c7 ,conforming amendments 7#a7 ,section #fgbd7;d77#a77;,b7 of the ,internal ,revenue ,code of #aihf is amended by striking or at the end of clause 7xxiv71 by adding or at the end of clause 7xxv71 and by inserting after clause 7xxv7 the following new clause3 7xxvi7 section #fjej,x 7relating to returns relating to certain life insurance contract transactions71 4 7#b7 ,section #fgbd7;d77#b7 of such ,code is amended by striking or at the end of subparagraph 7,,hh71 by striking the period at the end of subparagraph 7,,ii7 and inserting 1 or1 and by inserting after subparagraph 7,,ii7 the following new subparagraph3 7,,jj7 subsection 7a77#b71 7b77#b71 or 7c77#b7 of section #fjej,x 7relating to returns relating to certain life insurance contract transactions74 4 7#c7 ,section #fjdg of such ,code is amended-- 7,a7 by redesignating subsection 7g7 as subsection 7h71 7,b7 by inserting after subsection 7f7 the following new subsection3 7g7 ,information relating to life insurance contract transactions ,this section shall not apply to any information which is required to be reported under section #fjej,x4 1 and 7,c7 by adding at the end of subsection 7h71 as so redesignated1 the following new paragraph3 7#d7 ,for provisions requiring reporting of information relating to certain life insurance contract transactions1 see section #fjej,x4 4 7d7 ,effective date ,the amendments made by this section shall apply to-- 7#a7 reportable policy sales after ,december #ca1 #bjaf1 and 7#b7 reportable death benefits paid after ,december #ca1 #bjaf4 #b4 ,clarification of tax basis of life insurance contracts 7a7 ,in general ,paragraph 7#a7 of section #ajaf7;a7 of the ,internal ,revenue ,code of #aihf is amended by striking subparagraph 7,a7 and all that follows and inserting the following3 7,a7 for-- 7i7 taxes or other carrying charges described in section #bff1 or 7ii7 expenditures described in section #agc 7relating to circulation expenditures71 for which deductions have been taken by the taxpayer in determining taxable income for the taxable year or prior taxable years1 or 7,b7 for mortality1 expense1 or other reasonable charges incurred under an annuity or life insurance contract4 4 7b7 ,effective date ,the amendment made by this section shall apply to transactions entered into after ,august #be1 #bjji4 #c4 ,exception to transfer for valuable consideration rules 7a7 ,in general ,subsection 7a7 of section #aja of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#c7 ,exception to valuable consideration rules for commercial transfers 7,a7 ,in general ,the second sentence of paragraph 7#b7 shall not apply in the case of a transfer of a life insurance contract1 or any interest therein1 which is a reportable policy sale4 7,b7 ,reportable policy sale 7i7 ,in general ,for purposes of this paragraph1 the term reportable policy sale means the acquisition of an interest in a life insurance contract1 directly or indirectly1 if the acquirer has no substantial family1 business1 or financial relationship with the insured apart from the acquirer's interest in such life insurance contract4 7ii7 ,indirect acquisitions ,for purposes of clause 7i71 the term indirectly applies to the acquisition of an interest in a partnership1 trust1 or other entity that holds an interest in the life insurance contract unless-- 7,i7 the insured of the life insurance contract is an existing or former employee1 officer1 director1 #e-percent owner1 or independent contractor of the acquired entity or its subsidiaries or predecessors1 and 7,,ii7 no more than #ej percent of the gross value of the assets of the acquired entity consists of life insurance contracts or the parties demonstrate to the satisfaction of the ,secretary that the acquisition of the life insurance is not the principal purpose of the acquired entity4 7iii7 ,determination of gross value of assets ,for purposes of clause 7ii71 the term gross value of assets means1 with respect to any acquired entity1 the sum of-- 7,i7 in the case of assets of the acquired entity which are life insurance policies or annuity or endowment contracts1 the unborrowed policy cash values of such policies and contracts1 and 7,,ii7 in the case of assets of the acquired entity not described in subclause 7,i71 the adjusted bases 7within the meaning of section #ajaf7 of such assets4 4 7b7 ,conforming amendment ,paragraph 7#a7 of section #aja7;a7 of the ,internal ,revenue ,code of #aihf is amended by striking paragraph 7#b7 and inserting paragraphs 7#b7 and 7#c74 7c7 ,effective date ,the amendments made by this section shall apply to transfers after ,december #ca1 #bjaf4