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119-s-1987119th CongressWALLET

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.

Sponsored By: Senator Cassidy, Bill [R-LA]

Introduced

Summary

This bill would change how financial guaranty insurance companies are judged under the passive foreign investment company rules by allowing certain unearned premium reserves to count as insurance liabilities. It would also add specific financial-statement reporting rules and set a transition schedule for companies affected by the change.

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  • Financial guaranty insurers would be able to qualify as insurance corporations for PFIC tests if they meet three conditions. One condition lets applicable insurance liabilities include unearned premium reserves when GAAP limits reserve reporting. Another requires high exposure ratios of at least 15-to-1 for financial guaranty exposure or 9-to-1 for State or local bond exposure. The third limits which unearned premium reserves count based on single risk limits and reported shareholder equity.
  • Reporting requirements would require certain items on applicable financial statements to be separately reported or separately determined so they count for the PFIC calculation.
  • Timing and transition rules would apply to tax years beginning after December 31, 2024 and to reports after that date. The bill would create a grace period and a phased shift from a 9-to-1 to an 8-to-1 threshold for certain earlier years. The Treasury would issue regulations and guidance to handle companies that cease to qualify, including revoking elections under 1295(b) or 1296(k) and applying 1293(c).

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Bill Overview

Analyzed Economic Effects

4 provisions identified: 1 benefits, 1 costs, 2 mixed.

PFIC grace period for guaranty insurers

This bill would say a special grace period does not count toward a shareholder's PFIC holding period for certain financial guaranty insurers. The rule would apply for taxable years beginning after December 31, 2024. The "specified grace period" runs from the company's first taxable year after December 31, 2017 through its last taxable year beginning before January 1, 2025. The Treasury would issue guidance to handle companies that stop being PFICs, including revoking certain elections and applying section 1293(c). For years ending before 2019, a substituted 8-to-1 threshold is used instead of 9-to-1 for the grace-period test.

Reporting for U.S. owners of foreign firms

This bill would let the Treasury require any U.S. person who owns an interest in a specified non-publicly traded foreign corporation and who says the company is not a PFIC to report information the Treasury requires about that company. A "specified non-publicly traded foreign corporation" is a foreign firm that would be a PFIC if the special guaranty-insurer rule did not apply and whose interests are not traded on an established securities market. The reporting authority would apply to reports made after December 31, 2024.

Clarify PFIC financial statement items

This bill would clarify that certain amounts count as "reported" on a company's applicable financial statement for PFIC rules if either they are separately shown on the statement or they were separately calculated to make a reported number. The change would apply to reports made after December 31, 2024. This is mainly a paperwork and reporting clarification, but it can affect PFIC calculations.

New PFIC tests for guaranty insurers

This bill would change how to decide if a financial guaranty insurance company is a PFIC. It would define which firms count as financial guaranty insurers using the October 2008 NAIC model Guideline and give the Treasury authority to decide if the Guideline is met. The bill would set two exposure ratios to check each year: a financial guaranty exposure compared to total assets (tested against 15-to-1) and a State or local bond exposure compared to total assets (tested against 9-to-1). The bill would also require including certain unearned premium reserves in insurance liabilities when specific GAAP and exposure conditions are met. These rules would apply for taxable years beginning after December 31, 2024.

Sponsors & CoSponsors

Sponsor

Cassidy, Bill [R-LA]

LA • R

Cosponsors

  • Sen. Marshall, Roger [R-KS]

    KS • R

    Sponsored 6/9/2025

Roll Call Votes

No roll call votes available for this bill.

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