Exception From Passive Income for Certain Foreign Insurance Companies, 22954-22956 [2015-09630]
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22954
Federal Register / Vol. 80, No. 79 / Friday, April 24, 2015 / Proposed Rules
request comments on its proposal to
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Dated: April 17, 2015.
Leslie Kux,
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[FR Doc. 2015–09523 Filed 4–23–15; 8:45 am]
BILLING CODE 4164–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
tkelley on DSK3SPTVN1PROD with PROPOSALS
[REG–108214–15]
RIN 1545–BM69
Exception From Passive Income for
Certain Foreign Insurance Companies
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking.
AGENCY:
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Jkt 235001
This document contains
proposed regulations that provide
guidance regarding when a foreign
insurance company’s income is
excluded from the definition of passive
income under section 1297(b)(2)(B). The
proposed regulations affect the U.S.
shareholders of foreign corporations.
This document also invites comments
from the public on all aspects of the
proposed rules and provides the
opportunity for the public to request a
public hearing.
DATES: Written or electronic comments
and requests for a public hearing must
be received by July 23, 2015.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–108214–15), Room
5203, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions
may be hand-delivered Monday through
Friday between the hours of 8 a.m. and
4 p.m. to CC:PA:LPD:PR (REG–108214–
15), Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue NW.,
Washington, DC, or sent electronically
via the Federal eRulemaking Portal at
https://www.regulations.gov (IRS REG–
108214–15).
FOR FURTHER INFORMATION CONTACT:
Concerning the proposed regulations,
Josephine Firehock, (202) 317–4932;
concerning submissions of comments or
requests for a public hearing,
Oluwafunmilayo (Funmi) Taylor at
(202) 317–6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background and Explanation of
Provisions
The Department of Treasury
(Treasury) and the IRS are aware of
situations in which a hedge fund
establishes a purported foreign
reinsurance company in order to defer
and reduce the tax that otherwise would
be due with respect to investment
income. Such foreign corporations may
be Passive Foreign Investment
Companies (PFICs). For a description of
the recent trends and legislative
proposals to address the issue, see
‘‘Background and Data with Respect to
Hedge Fund Reinsurance
Arrangements,’’ JCT (July 31, 2014)
(2014 JCT Report); see also Notice 2003–
34, 2003–23 IRB 990 (May 9, 2003).
Under section 1297 of the Internal
Revenue Code (Code), a foreign
corporation is a PFIC if either 75 percent
or more of its gross income for the
taxable year is passive income (‘‘passive
income test’’), or on average 50 percent
or more of its assets produce passive
income or are held for the production of
passive income (‘‘passive asset test’’).
Section 1297(b)(1) generally defines the
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term ‘‘passive income’’ to mean any
income of a kind that would be ‘‘foreign
personal holding company income’’ as
defined in section 954(c). In general, an
asset is characterized as passive if it
generates (or is reasonably expected to
generate in the reasonably foreseeable
future) passive income as defined in
section 1297(b). Assets that generate
both passive and non-passive income in
a taxable year are treated as partly
passive and partly non-passive assets in
proportion to the relative amounts of
income generated by those assets in that
year. See Notice 88–22, 1988–1 CB 489
(February 26, 1988).
For purposes of applying the passive
income test, section 1297(b)(2)(B)
provides that, except as provided in
regulations, the term ‘‘passive income’’
does not include any income that is
derived in the active conduct of an
insurance business by a corporation
which is predominantly engaged in an
insurance business and which would be
subject to tax under subchapter L as an
insurance company if the corporation
were a domestic corporation. As the
terms ‘‘active conduct’’ and ‘‘insurance
business’’ are not defined in section
1297, Treasury and the IRS are
proposing regulations to clarify the
circumstances under which investment
income earned by a foreign insurance
company is derived in the active
conduct of an insurance business for
purposes of determining whether the
income is passive income, and thus the
extent to which the company’s assets
are treated as passive assets for purposes
of determining whether the company is
a PFIC.
The proposed regulations provide that
the term ‘‘active conduct’’ has the same
meaning as in § 1.367(a)–2T(b)(3),
except that officers and employees are
not considered to include the officers
and employees of related entities. The
proposed regulations define the term
‘‘insurance business’’ to mean the
business activity of issuing insurance
and annuity contracts and the
reinsuring of risks underwritten by
insurance companies, together with
investment activities and administrative
services that are required to support or
are substantially related to insurance
contracts issued or reinsured by the
foreign insurance company.1 The
regulations also provide that an
1 Cf. Committee on Ways and Means U.S. House
of Representatives, Supplemental Report, The
Deficit Reduction Act of 1984, 98th Cong. 2d Sess.,
H.R. Rept. 98–432, part 2, at 531 (Mar. 5, 1984);
Committee on Finance United States Senate, The
Deficit Reduction Act of 1984, S. Rept. 98–169, vol.
1, at 1407–08 (April 2, 1984); H.R. Rept. 98–861,
98th Cong. 2d Sess. at 1045 (June 23, 1984)
(Conference Report).
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tkelley on DSK3SPTVN1PROD with PROPOSALS
investment activity is any activity
engaged in to produce income of a kind
that would be foreign personal holding
company income as defined in section
954(c). The proposed regulations further
provide that investment activities will
be treated as required to support or as
substantially related to insurance or
annuity contracts issued or reinsured by
the foreign corporation to the extent that
income from the activities is earned
from assets held by the foreign
corporation to meet obligations under
the contracts.
The proposed regulations do not set
forth a method to determine the portion
of assets held to meet obligations under
insurance and annuity contracts.
Comments are requested on appropriate
methodologies for determining the
extent to which assets are held to meet
obligations under insurance and annuity
contracts.
The proposed regulations also do not
define what it means to be
‘‘predominantly engaged’’ in an
insurance business. Prior to 1984, the
Code did not define an insurance
company. Section 1.801–3(a) of the
regulations, however, provides in
relevant part that an insurance company
is a company whose primary and
predominant business activity during
the taxable year is the issuing of
insurance or annuity contracts or the
reinsuring of risks underwritten by
insurance companies.
In 1984, Congress enacted a definition
of an ‘‘insurance company’’ that applied
only to life insurance companies, and in
2004, a conforming amendment was
made to apply the same definition to
non-life insurance companies. See
sections 816(a) and 831(c). Under this
definition, in order for a corporation to
be subject to tax as an insurance
company under subchapter L, more than
half of its business during the taxable
year is required to be the issuing of
insurance or annuity contracts or the
reinsuring of risks underwritten by
insurance companies. By requiring that
more than half of the company’s
business activity, rather than its
predominant business activity, be
insurance activity, the current
subchapter L statutory rules adopt a
stricter and more precise standard than
the ‘‘primary and predominant’’
regulatory standard under prior law.2
2 Committee on Ways and Means U.S. House of
Representatives, Supplemental Report, The Deficit
Reduction Act of 1984, 98th Cong. 2d Sess., H.R.
Rept. 98–432, part 2, at 1402–3 (March 5, 1984);
Committee on Finance United States Senate, The
Deficit Reduction Act of 1984, 98th Cong. 2d Sess.,
S. Rpt. 98–169, vol. 1, at 525–6 (April 2, 1984);
Committee on Ways and Means U.S. House of
Representatives, Supplemental Report, The Deficit
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Thus, any company taxable under
subchapter L as an insurance company
is necessarily predominantly engaged in
an insurance business for purposes of
section 1297(a)(2)(B).
Proposed Effective/Applicability Date
These regulations are proposed to
apply on the date of publication of the
Treasury decision adopting these rules
as final regulations in the Federal
Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a
significant regulatory action as defined
in Executive Order 12866, as
supplemented by Executive Order
13563. Therefore, a regulatory
assessment is not required. It also has
been determined that section 553(b) of
the Administrative Procedure Act (5
U.S.C. Chapter 5) does not apply to
these regulations, and because the
regulations do not impose a collection
of information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) of the Code, this notice
of proposed rulemaking has been
submitted to the Chief Counsel of
Advocacy of the Small Business
Administration for comment on its
impact on small business.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations,
consideration will be given to any
comments that are submitted timely to
the IRS as prescribed in this preamble
under ‘‘Addresses.’’ Treasury and the
IRS request comments on all aspects of
the proposed rules. Comments
specifically are requested with regard to
how to determine the portion of a
foreign insurance company’s assets that
are held to meet obligations under
insurance contracts issued or reinsured
by the company. For example, assets
could be considered as held to meet
obligations under insurance or annuity
contracts issued or reinsured by the
corporation to the extent the
corporation’s assets in the calendar year
do not exceed a specified percentage of
the corporation’s total insurance
liabilities for the year (for example, the
sum of the corporation’s ‘‘total reserves’’
(as defined in section 816(c)) plus (to
the extent not included in total reserves)
the items referred to in paragraphs (3),
Reduction Act of 1984, 98th Cong. 2d Sess., H.R.
Rept. 98–432, part 2, at 1042–2 (March 5, 1984)
(Conference Report); H.R. Rept. 108–457, Pension
Funding Equity Act of 2004, 108th Cong. 2d Sess.
at 52–53 (April 1, 2004).
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22955
(4), (5), and (6) of section 807(c)).
Comments are requested with regard to
what percentage would be appropriate.
Also, comments are requested with
regard to whether other methods would
be more appropriate to determine the
portion of assets that are held to meet
obligations under insurance and annuity
contracts.
All comments will be available at
www.regulations.gov or upon request. A
public hearing will be scheduled if
requested in writing by any person that
timely submits comments. If a public
hearing is scheduled, notice of the date,
time, and place for the public hearing
will be published in the Federal
Register.
Drafting Information
The principal author of these
proposed regulations is Josephine
Firehock of the Office of Associate Chief
Counsel (International). However, other
personnel from the IRS and the Treasury
Department participated in their
development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
proposed to be amended as follows:
PART 1—INCOME TAXES
Par. 1. The authority citation for part
1 is amended by adding an entry in
numerical order to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
Section 1.1297–4 is also issued under 26
U.S.C. 1297(b)(2)(B) and 1298(g).
Par. 2. Section 1.1297–4 is added to
read as follows:
■
§ 1.1297–4 Exception from the definition of
passive income for certain foreign
insurance company income.
(a) Income derived in the active
conduct of an insurance business. For
purposes of section 1297, the term
passive income does not include income
earned by a foreign corporation that
would be subject to tax under
subchapter L if it were a domestic
corporation, but only to the extent the
income is derived in the active conduct
of an insurance business.
(b) Definitions. The following
definitions apply for purposes of
paragraph (a) of this section—
(1) Active conduct. The term active
conduct has the same meaning as in
§ 1.367(a)–2T(b)(3), except that officers
and employees are not considered to
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22956
Federal Register / Vol. 80, No. 79 / Friday, April 24, 2015 / Proposed Rules
include the officers and employees of
related entities as provided in
§ 1.367(a)–2T(b)(3).
(2) Insurance business. The term
insurance business means the business
of issuing insurance and annuity
contracts and the reinsuring of risks
underwritten by insurance companies,
together with those investment activities
and administrative services that are
required to support or are substantially
related to insurance and annuity
contracts issued or reinsured by the
foreign corporation. For purposes of the
preceding sentence—
(i) An investment activity is any
activity engaged in by the foreign
corporation to produce income of a kind
that would be foreign personal holding
company income as defined in section
954(c); and
(ii) Investment activities are required
to support or are substantially related to
insurance and annuity contracts issued
or reinsured by the foreign corporation
to the extent that income from the
activities is earned from assets held by
the foreign corporation to meet
obligations under the contracts.
(c) Effective/applicability date. These
regulations apply beginning
[EFFECTIVE DATE OF FINAL RULE].
John M. Dalrymple,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2015–09630 Filed 4–23–15; 8:45 am]
BILLING CODE 4830–01–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 52
[EPA–R01–OAR–2014–0796; EPA–R01–
OAR–2014–0862; FRL–9926–73–Region 1]
Approval and Promulgation of Air
Quality Implementation Plans; New
Hampshire; Nonattainment New
Source Review and Prevention of
Significant Deterioration Program
Environmental Protection
Agency (EPA).
ACTION: Proposed rule.
AGENCY:
The Environmental Protection
Agency (EPA) is proposing to
conditionally approve the New
Hampshire November 15, 2012 State
Implementation Plan (SIP) revisions that
are intended to ensure that the State’s
Prevention of Significant Deterioration
(PSD) and Nonattainment New Source
Review (NNSR) programs are consistent
with the federal PSD and NNSR
program requirements. In a letter dated
March 20, 2015, the New Hampshire
tkelley on DSK3SPTVN1PROD with PROPOSALS
SUMMARY:
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17:05 Apr 23, 2015
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Department of Environmental Services
(NH DES) committed to revising its
regulations no later than one year from
the date when EPA publishes a notice
of final conditional approval, and to
submitting the revised regulations to
EPA for approval into the SIP. EPA is
also proposing to fully approve a July 1,
2003 SIP revision that clarifies two
definitions related to New Hampshire’s
permitting programs. These actions are
being taken in accordance with the
Clean Air Act (CAA).
DATES: Written comments must be
received on or before May 26, 2015.
ADDRESSES: Submit your comments,
identified by Docket ID Number EPA–
R01–OAR–2014–0796 by one of the
following methods:
1. www.regulations.gov: Follow the
on-line instructions for submitting
comments.
2. Email: mcdonnell.ida@epa.gov
3. Fax: (617) 918–0653
4. Mail: ‘‘Docket Identification
Number EPA–R01–OAR–2014–0796’’,
Ida McDonnell, U.S. Environmental
Protection Agency, EPA New England
Regional Office, Office of Ecosystem
Protection, Air Permits, Toxics, and
Indoor Programs Unit, 5 Post Office
Square—Suite 100, (Mail code OEP05–
2), Boston, MA 02109–3912.
5. Hand Delivery or Courier. Deliver
your comments to: Ida McDonnell,
Manager, Air Permits, Toxics, and
Indoor Programs Unit, U.S.
Environmental Protection Agency, EPA
New England Regional Office, Office of
Ecosystem Protection, 5 Post Office
Square—Suite 100, (mail code OEP05–
2), Boston, MA 02109–3912. Such
deliveries are only accepted during the
Regional Office’s normal hours of
operation. The Regional Office’s official
hours of business are Monday through
Friday, 8:30 a.m. to 4:30 p.m., excluding
legal holidays.
Instructions: Direct your comments to
Docket ID No. EPA–R01–OAR–2014–
0796. EPA’s policy is that all comments
received will be included in the public
docket without change and may be
made available online at
www.regulations.gov, including any
personal information provided, unless
the comment includes information
claimed to be Confidential Business
Information (CBI) or other information
whose disclosure is restricted by statute.
Do not submit through
www.regulations.gov, or email,
information that you consider to be CBI
or otherwise protected. The
www.regulations.gov Web site is an
‘‘anonymous access’’ system, which
means EPA will not know your identity
or contact information unless you
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provide it in the body of your comment.
If you send an email comment directly
to EPA without going through
www.regulations.gov your email address
will be automatically captured and
included as part of the comment that is
placed in the public docket and made
available on the Internet. If you submit
an electronic comment, EPA
recommends that you include your
name and other contact information in
the body of your comment and with any
disk or CD–ROM you submit. If EPA
cannot read your comment due to
technical difficulties and cannot contact
you for clarification, EPA may not be
able to consider your comment.
Electronic files should avoid the use of
special characters, any form of
encryption, and be free of any defects or
viruses.
Docket: All documents in the
electronic docket are listed in the
www.regulations.gov index. Although
listed in the index, some information is
not publicly available, i.e., CBI or other
information whose disclosure is
restricted by statute. Certain other
material, such as copyrighted material,
is not placed on the Internet and will be
publicly available only in hard copy
form. Publicly available docket
materials are available either
electronically in www.regulations.gov or
in hard copy at Office of Ecosystem
Protection, U.S. Environmental
Protection Agency, EPA New England
Regional Office, Air Permits, Toxics and
Indoor Programs Unit, 5 Post Office
Square—Suite 100, Boston, MA. EPA
requests that if at all possible, you
contact the contact listed in the FOR
FURTHER INFORMATION CONTACT section to
schedule your inspection. The Regional
Office’s official hours of business are
Monday through Friday, 8:30 a.m. to
4:30 p.m., excluding legal holidays.
In addition, copies of the state
submittal and EPA’s proposed approval
and technical support document are
also available for public inspection
during normal business hours, by
appointment at the Air Resources
Division, New Hampshire Department
of Environmental Services, 6 Hazen
Drive, P.O. Box 95, Concord, NH 03302–
0095.
FOR FURTHER INFORMATION CONTACT:
Brendan McCahill, U.S. Environmental
Protection Agency, EPA New England
Regional Office, Office of Ecosystem
Protection, Air Permits, Toxics, and
Indoor Programs Unit, 5 Post Office
Square—Suite 100, (mail code OEP05–
2), Boston, MA 02109–3912, telephone
number (617) 918–1652, Fax number
(617) 918–0652, email
mccahill.brendan@EPA.GOV.
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]]>Agencies
[Federal Register Volume 80, Number 79 (Friday, April 24, 2015)]
[Proposed Rules]
[Pages 22954-22956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09630]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-108214-15]
RIN 1545-BM69
Exception From Passive Income for Certain Foreign Insurance
Companies
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed regulations that provide
guidance regarding when a foreign insurance company's income is
excluded from the definition of passive income under section
1297(b)(2)(B). The proposed regulations affect the U.S. shareholders of
foreign corporations. This document also invites comments from the
public on all aspects of the proposed rules and provides the
opportunity for the public to request a public hearing.
DATES: Written or electronic comments and requests for a public hearing
must be received by July 23, 2015.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-108214-15), Room
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
108214-15), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue NW., Washington, DC, or sent electronically via the Federal
eRulemaking Portal at https://www.regulations.gov (IRS REG-108214-15).
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Josephine Firehock, (202) 317-4932; concerning submissions of comments
or requests for a public hearing, Oluwafunmilayo (Funmi) Taylor at
(202) 317-6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
The Department of Treasury (Treasury) and the IRS are aware of
situations in which a hedge fund establishes a purported foreign
reinsurance company in order to defer and reduce the tax that otherwise
would be due with respect to investment income. Such foreign
corporations may be Passive Foreign Investment Companies (PFICs). For a
description of the recent trends and legislative proposals to address
the issue, see ``Background and Data with Respect to Hedge Fund
Reinsurance Arrangements,'' JCT (July 31, 2014) (2014 JCT Report); see
also Notice 2003-34, 2003-23 IRB 990 (May 9, 2003).
Under section 1297 of the Internal Revenue Code (Code), a foreign
corporation is a PFIC if either 75 percent or more of its gross income
for the taxable year is passive income (``passive income test''), or on
average 50 percent or more of its assets produce passive income or are
held for the production of passive income (``passive asset test'').
Section 1297(b)(1) generally defines the term ``passive income'' to
mean any income of a kind that would be ``foreign personal holding
company income'' as defined in section 954(c). In general, an asset is
characterized as passive if it generates (or is reasonably expected to
generate in the reasonably foreseeable future) passive income as
defined in section 1297(b). Assets that generate both passive and non-
passive income in a taxable year are treated as partly passive and
partly non-passive assets in proportion to the relative amounts of
income generated by those assets in that year. See Notice 88-22, 1988-1
CB 489 (February 26, 1988).
For purposes of applying the passive income test, section
1297(b)(2)(B) provides that, except as provided in regulations, the
term ``passive income'' does not include any income that is derived in
the active conduct of an insurance business by a corporation which is
predominantly engaged in an insurance business and which would be
subject to tax under subchapter L as an insurance company if the
corporation were a domestic corporation. As the terms ``active
conduct'' and ``insurance business'' are not defined in section 1297,
Treasury and the IRS are proposing regulations to clarify the
circumstances under which investment income earned by a foreign
insurance company is derived in the active conduct of an insurance
business for purposes of determining whether the income is passive
income, and thus the extent to which the company's assets are treated
as passive assets for purposes of determining whether the company is a
PFIC.
The proposed regulations provide that the term ``active conduct''
has the same meaning as in Sec. 1.367(a)-2T(b)(3), except that
officers and employees are not considered to include the officers and
employees of related entities. The proposed regulations define the term
``insurance business'' to mean the business activity of issuing
insurance and annuity contracts and the reinsuring of risks
underwritten by insurance companies, together with investment
activities and administrative services that are required to support or
are substantially related to insurance contracts issued or reinsured by
the foreign insurance company.\1\ The regulations also provide that an
[[Page 22955]]
investment activity is any activity engaged in to produce income of a
kind that would be foreign personal holding company income as defined
in section 954(c). The proposed regulations further provide that
investment activities will be treated as required to support or as
substantially related to insurance or annuity contracts issued or
reinsured by the foreign corporation to the extent that income from the
activities is earned from assets held by the foreign corporation to
meet obligations under the contracts.
---------------------------------------------------------------------------
\1\ Cf. Committee on Ways and Means U.S. House of
Representatives, Supplemental Report, The Deficit Reduction Act of
1984, 98th Cong. 2d Sess., H.R. Rept. 98-432, part 2, at 531 (Mar.
5, 1984); Committee on Finance United States Senate, The Deficit
Reduction Act of 1984, S. Rept. 98-169, vol. 1, at 1407-08 (April 2,
1984); H.R. Rept. 98-861, 98th Cong. 2d Sess. at 1045 (June 23,
1984) (Conference Report).
---------------------------------------------------------------------------
The proposed regulations do not set forth a method to determine the
portion of assets held to meet obligations under insurance and annuity
contracts. Comments are requested on appropriate methodologies for
determining the extent to which assets are held to meet obligations
under insurance and annuity contracts.
The proposed regulations also do not define what it means to be
``predominantly engaged'' in an insurance business. Prior to 1984, the
Code did not define an insurance company. Section 1.801-3(a) of the
regulations, however, provides in relevant part that an insurance
company is a company whose primary and predominant business activity
during the taxable year is the issuing of insurance or annuity
contracts or the reinsuring of risks underwritten by insurance
companies.
In 1984, Congress enacted a definition of an ``insurance company''
that applied only to life insurance companies, and in 2004, a
conforming amendment was made to apply the same definition to non-life
insurance companies. See sections 816(a) and 831(c). Under this
definition, in order for a corporation to be subject to tax as an
insurance company under subchapter L, more than half of its business
during the taxable year is required to be the issuing of insurance or
annuity contracts or the reinsuring of risks underwritten by insurance
companies. By requiring that more than half of the company's business
activity, rather than its predominant business activity, be insurance
activity, the current subchapter L statutory rules adopt a stricter and
more precise standard than the ``primary and predominant'' regulatory
standard under prior law.\2\ Thus, any company taxable under subchapter
L as an insurance company is necessarily predominantly engaged in an
insurance business for purposes of section 1297(a)(2)(B).
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\2\ Committee on Ways and Means U.S. House of Representatives,
Supplemental Report, The Deficit Reduction Act of 1984, 98th Cong.
2d Sess., H.R. Rept. 98-432, part 2, at 1402-3 (March 5, 1984);
Committee on Finance United States Senate, The Deficit Reduction Act
of 1984, 98th Cong. 2d Sess., S. Rpt. 98-169, vol. 1, at 525-6
(April 2, 1984); Committee on Ways and Means U.S. House of
Representatives, Supplemental Report, The Deficit Reduction Act of
1984, 98th Cong. 2d Sess., H.R. Rept. 98-432, part 2, at 1042-2
(March 5, 1984) (Conference Report); H.R. Rept. 108-457, Pension
Funding Equity Act of 2004, 108th Cong. 2d Sess. at 52-53 (April 1,
2004).
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Proposed Effective/Applicability Date
These regulations are proposed to apply on the date of publication
of the Treasury decision adopting these rules as final regulations in
the Federal Register.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in Executive Order
12866, as supplemented by Executive Order 13563. Therefore, a
regulatory assessment is not required. It also has been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. Chapter 5)
does not apply to these regulations, and because the regulations do not
impose a collection of information on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to
section 7805(f) of the Code, this notice of proposed rulemaking has
been submitted to the Chief Counsel of Advocacy of the Small Business
Administration for comment on its impact on small business.
Comments and Requests for Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any comments that are submitted timely
to the IRS as prescribed in this preamble under ``Addresses.'' Treasury
and the IRS request comments on all aspects of the proposed rules.
Comments specifically are requested with regard to how to determine the
portion of a foreign insurance company's assets that are held to meet
obligations under insurance contracts issued or reinsured by the
company. For example, assets could be considered as held to meet
obligations under insurance or annuity contracts issued or reinsured by
the corporation to the extent the corporation's assets in the calendar
year do not exceed a specified percentage of the corporation's total
insurance liabilities for the year (for example, the sum of the
corporation's ``total reserves'' (as defined in section 816(c)) plus
(to the extent not included in total reserves) the items referred to in
paragraphs (3), (4), (5), and (6) of section 807(c)). Comments are
requested with regard to what percentage would be appropriate. Also,
comments are requested with regard to whether other methods would be
more appropriate to determine the portion of assets that are held to
meet obligations under insurance and annuity contracts.
All comments will be available at www.regulations.gov or upon
request. A public hearing will be scheduled if requested in writing by
any person that timely submits comments. If a public hearing is
scheduled, notice of the date, time, and place for the public hearing
will be published in the Federal Register.
Drafting Information
The principal author of these proposed regulations is Josephine
Firehock of the Office of Associate Chief Counsel (International).
However, other personnel from the IRS and the Treasury Department
participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is proposed to be amended as follows:
PART 1--INCOME TAXES
0
Par. 1. The authority citation for part 1 is amended by adding an entry
in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1297-4 is also issued under 26 U.S.C. 1297(b)(2)(B)
and 1298(g).
0
Par. 2. Section 1.1297-4 is added to read as follows:
Sec. 1.1297-4 Exception from the definition of passive income for
certain foreign insurance company income.
(a) Income derived in the active conduct of an insurance business.
For purposes of section 1297, the term passive income does not include
income earned by a foreign corporation that would be subject to tax
under subchapter L if it were a domestic corporation, but only to the
extent the income is derived in the active conduct of an insurance
business.
(b) Definitions. The following definitions apply for purposes of
paragraph (a) of this section--
(1) Active conduct. The term active conduct has the same meaning as
in Sec. 1.367(a)-2T(b)(3), except that officers and employees are not
considered to
[[Page 22956]]
include the officers and employees of related entities as provided in
Sec. 1.367(a)-2T(b)(3).
(2) Insurance business. The term insurance business means the
business of issuing insurance and annuity contracts and the reinsuring
of risks underwritten by insurance companies, together with those
investment activities and administrative services that are required to
support or are substantially related to insurance and annuity contracts
issued or reinsured by the foreign corporation. For purposes of the
preceding sentence--
(i) An investment activity is any activity engaged in by the
foreign corporation to produce income of a kind that would be foreign
personal holding company income as defined in section 954(c); and
(ii) Investment activities are required to support or are
substantially related to insurance and annuity contracts issued or
reinsured by the foreign corporation to the extent that income from the
activities is earned from assets held by the foreign corporation to
meet obligations under the contracts.
(c) Effective/applicability date. These regulations apply beginning
[EFFECTIVE DATE OF FINAL RULE].
John M. Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2015-09630 Filed 4-23-15; 8:45 am]
BILLING CODE 4830-01-P
