,i #aafth ,,congress #b;d ,session ,h4 ,r4 #fgcb ,,in ,,the ,,house ,,of ,,representatives ,may #e1 #bjbj,mr4 ,wenstrup introduced the following bill2 which was referred to the ,committee on ,ways and ,means ,a ,,bill ,to direct the ,secretary of the ,treasury to modify certain regulations relating to insurance-dedicated exchange-traded funds4 #a4 ,insurance-dedicated exchange-traded funds 7a7 ,in general ,not later than the date which is #a year after the date of the enactment of this ,act1 the ,secretary of the ,treasury 7or the ,secretary's delegate7 shall amend the regulation issued by the ,department of the ,treasury relating to ,income ,tax2 ,diversification ,requirements for ,variable ,annuity1 ,endowment1 and ,life ,insurance ,contracts1 #ed ,fed4 ,reg4 #hgbh 7,march #b1 #aihi71 and make any necessary corresponding amendments to other regulations1 in order to facilitate the use of exchange-traded funds as investment options under variable contracts within the meaning of section #hag7;d7 of the ,internal ,revenue ,code of #aihf1 in accordance with subsections 7b7 and 7c7 of this section4 7b7 ,designate certain authorized participants and market makers as eligible investors ,the ,secretary of the ,treasury 7or the ,secretary's delegate7 shall amend ,treas4 ,reg4 section #a4hag-e7;f77#c7 to provide that satisfaction of the requirements in ,treas4 ,reg4 section #a4hag-e7;f77#b77;i7 with respect to an exchange-traded fund shall not be prevented by reason of beneficial interests in such a fund being held by one or more authorized participants or market makers4 7c7 ,confirm that similarities to other funds are irrelevant ,the ,secretary of the ,treasury 7or the ,secretary's delegate7 shall amend ,treas4 ,reg4 section #a4hag-e7;f7 to confirm that1 for ,federal income tax purposes1 a regulated investment company1 partnership1 or trust 7including an exchange-traded fund7 that satisfies the requirements of ,treas4 ,reg4 section #a4hag-e7;f7 7#b7 and 7#c7 shall not be treated as owned by the holder of a variable contract pursuant to the principles of ,rev4 ,rul4 #ha-bbe1 #aiha-b ,c4,b4 #ab1 merely because another regulated investment company1 partnership1 trust1 or similar investment vehicle follows the same investment strategy1 has the same investment manager1 or holds the same investments4 7d7 ,define relevant terms ,in amending ,treas4 ,reg4 section #a4hag-e7;f77#c7 in accordance with subsections 7b7 and 7c7 of this section1 the ,secretary of the ,treasury 7or the ,secretary's delegate7 shall provide definitions consistent with the following3 7#a7 ,exchange-traded fund ,the term exchange-traded fund means a regulated investment company1 partnership1 or trust-- 7,a7 that is registered with the ,securities and ,exchange ,commission as an open-end investment company or a unit investment trust2 7,b7 the shares of which can be purchased or redeemed directly from the fund only by an authorized participant2 and 7,c7 the shares of which are traded throughout the day on a national stock exchange at market prices that may or may not be the same as the net asset value of the shares4 7#b7 ,authorized participant ,the term authorized participant means a financial institution that is a member or participant of a clearing agency registered under section #ag;,a7b7 of the ,securities ,exchange ,act of #aicd that enters into a contractual relationship with an exchange-traded fund pursuant to which the financial institution is permitted to purchase and redeem shares directly from the fund and to sell such shares to third parties1 but only if the contractual arrangement or applicable law precludes the financial institution from-- 7,a7 purchasing the shares for its own investment purposes rather than for the exclusive purpose of creating and redeeming such shares on behalf of third parties2 and 7,b7 selling the shares to third parties who are not market makers or otherwise described in ,treas4 ,reg4 section #a4hag-e7;f7 7#a7 and 7#c74 7#c7 ,market maker ,the term market maker means a financial institution that is a registered broker or dealer under section #ae7;b7 of the ,securities ,exchange ,act of #aicd that maintains liquidity for an exchange-traded fund on a national stock exchange by being always ready to buy and sell shares of such fund on the market1 but only if the financial institution is contractually or legally precluded from selling or buying such shares to or from persons who are not authorized participants or otherwise described in ,treas4 ,reg4 section #a4hag-e7;f7 7#b7 and 7#c74 7e7 ,effective dates1 enforcement1 and interpretations 7#a7 ,effective dates 7,a7 ,subsection 7b71 and the definitions under subsection 7d71 shall apply to segregated asset account investments made on or after the date of enactment of this ,act4 7,b7 ,subsection 7c7 shall apply to taxable years beginning after ,december #ca1 #aihc4 7#b7 ,enforcement and interpretations ,prior to the date that the ,secretary of the ,treasury 7or the ,secretary's delegate7 issues final regulations pursuant to this section-- 7,a7 the ,secretary 7or delegate7 shall administer and enforce the law in accordance with this section and the effective dates in paragraph 7#a7 of this subsection2 and 7,b7 taxpayers may rely upon their reasonable good faith interpretations of the preceding subsections of this section4