H.R. 5746

116TH CONGRESS
2D SESSION

H.R. 5746

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 HOUSE OF REPRESENTATIVES

FEBRUARY 3, 2020

Ms. MOORE (for herself and Mr. SMITH of Nebraska) introduced the following bill;
which was referred to the Committee on Ways and Means

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 company rules.

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

SECTION 1. TREATMENT OF FINANCIAL GUARANTY INSURANCE COMPANIES AS QUALIFYING INSURANCE CORPORATIONS UNDER PASSIVE FOREIGN INVESTMENT COMPANY RULES.

(a) IN GENERAL. — Section 1297(f)(3) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

"(C) SPECIAL RULE FOR FINANCIAL GUARANTY INSURANCE COMPANIES. —

"(i) IN GENERAL. — Notwithstanding subparagraphs (A)(ii) and (B), the applicable insurance liabilities of a financial guaranty insurance company shall include its unearned premium reserves if —

"(I) such company is prohibited under generally accepted accounting principles from reporting on its applicable financial statements reserves for losses and loss adjustment expenses with respect to a financial guaranty insurance or reinsurance contract except to the extent that such reserve amounts are expected to exceed the unearned premium reserves on the contract,

"(II) the applicable financial statement of such company reports financial guaranty exposure of at least 15-to-1, and

"(III) such company includes in its insurance liabilities only its unearned premium reserves relating to insurance written or assumed that is within the single risk limits set forth in subsection (D) of section 4 of the Financial Guaranty Insurance Guideline (modified by using total shareholder's equity as reported on the applicable financial statement of the company rather than aggregate of the surplus to policyholders and contingency reserves).

"(ii) FINANCIAL GUARANTY INSURANCE COMPANY. — For purposes of this subparagraph, the term 'financial guaranty insurance company' means any insurance company the sole business of which is writing or reinsuring financial guaranty insurance (as defined in subsection (A) of section 1 of the Financial Guaranty Insurance Guideline) which is permitted under subsection (B) of section 4 of such Guideline.

"(iii) FINANCIAL GUARANTY EXPOSURE. — For purposes of this subparagraph, the term 'financial guaranty exposure' means the ratio of —

"(I) the net debt service outstanding insured or reinsured by the company that is within the single risk limits set forth in the Financial Guaranty Insurance Guideline (as reported on such company's applicable financial statement), to

"(II) the company's total assets (as so reported).

"(iv) FINANCIAL GUARANTY INSURANCE GUIDELINE. — For purposes of this subparagraph, the term 'Financial Guaranty Insurance Guideline' means the October 2008 model regulation that was adopted by the National Association of Insurance Commissioners on December 4, 2007.".

(b) REPORTING OF CERTAIN ITEMS. — Section 1297(f)(4) of such Code is amended by adding at the end the following new subparagraph:

"(C) CLARIFICATION THAT CERTAIN ITEMS ON APPLICABLE FINANCIAL STATEMENT BE SEPARATELY REPORTED WITH RESPECT TO CORPORATION. — An amount described in paragraph (1)(B) or clause (i)(II), (i)(III), (iii)(I), or (iii)(II) of paragraph (3)(C) shall not be treated as reported on an applicable financial statement for purposes of this section unless such amount is separately reported on such statement with respect to the corporation referred to in paragraph (1).

"(D) AUTHORITY OF SECRETARY TO REQUIRE REPORTING. —

"(i) IN GENERAL. — Each United States person who owns an interest in a specified non-publicly traded foreign corporation and who takes the position that such corporation is not a passive foreign investment company shall report to the Secretary such information with respect to such corporation as the Secretary may require.

"(ii) SPECIFIED NON-PUBLICLY TRADED FOREIGN CORPORATION. — For purposes of this subparagraph, the term 'specified non-publicly traded foreign corporation' means any foreign corporation —

"(I) which would be a passive foreign investment company if subsection (b)(2)(B) did not apply, and

"(II) no interest in which is traded on an established securities market.".

(c) EFFECTIVE DATE. —

(1) IN GENERAL. — Except as otherwise provided in this subsection, the amendments made by this section shall take effect as if included in section 14501 of Public Law 115–97.

(2) REPORTING. — The amendment made by subsection (b) shall apply to reports made after the date of the enactment of this Act.