Proposed bill offers bipartisan tax code fix for insurers

A bipartisan bill unveiled in Congress on Tuesday could help secure life insurance policies at a lower cost for American families while fixing a tax code discrepancy that many insurance companies have bemoaned for years.

The Secure Family Futures Act of 2024, S. 4740, introduced by U.S. Sens. Thom Tillis (R-NC) and Bob Casey (D-PA), would make a correction to the tax code that repeals the outdated capital tax treatment of debt investments held by life insurers, such as bonds, and apply ordinary tax treatment to them, the lawmakers say.

“This common-sense legislation ensures debt investments made by insurance companies are treated equally under our tax code,” Tillis said. “By making these critical changes, insurance companies will be able to promote economic growth and investment in communities in North Carolina and across our country.”

“This bipartisan tax bill is a common sense way to reduce life insurance costs and protect a service that so many Pennsylvania families depend on,” added Casey.

Specifically, S. 4740 would amend the Internal Revenue Code of 1986 to exclude debt held by certain insurance companies from capital assets. The Senate measure is the companion bill to the same-named H.R. 5707, proposed in September 2023 by U.S. Reps. Randy Feenstra (R-IA) and Terri Sewell (D-AL). The House version has languished in the Ways and Means Committee since its introduction last year.

Nevertheless, several insurance companies and the American Council of Life Insurers (ACLI) yesterday endorsed the legislation.

“The proposal to assign ordinary treatment to debt investments, such as bonds, is a pivotal step towards rectifying the existing tax mismatch within the code,” said Rachel Nguyen, assistant vice president of federal government relations at Principal Financial Group. “It will pave the way for insurers like us to excel in our primary mission: creating opportunities for families and small businesses to achieve financial security.”

MetLife also applauded the senators’ introduction of the Secure Family Futures Act.

“We believe this bill would improve the financial resilience of families and remove a barrier to more investments in the U.S. economy,” Metlife Global Tax Director Kenneth LaGuardia said.

If enacted, LaGuardia explained that the Secure Family Futures Act would fix an inconsistency in the current tax code impacting the tax treatment of insurers’ debt investments and their role in the operations of insurance companies.

“Similar to other financial institutions, we believe these debt investments should be considered as inventory and part of an insurer’s ordinary course of business,” he said.

Likewise, Lincoln Financial Chairman, President, and CEO Ellen Cooper said the bill would enable the industry to continue to make long-term investments in growing communities across the nation.

Susan Neely, president and CEO of the ACLI, agreed, pointing out that sans the adjustment proposed in the bill, the ability of life insurers to continue such long-term investments “would lessen substantially.”

“Closing the financial protection coverage gap for families and communities most in need could be hampered due to higher costs on consumers if Congress fails to enact the legislation,” Neely said.

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