Sponsors (53)
The bill gives insurance companies clearer tax treatment and longer loss carryforwards to smooth taxable income, at the cost of potential higher ordinary-tax burdens on certain debt (which could raise premiums), added compliance complexity, preferential treatment for insurers, and modest near-term revenue loss.
Applicable insurance companies (including face-amount certificate companies) get clearer, simpler tax treatment for certain debt holdings acquired after Dec. 31, 2025: gains/losses on those holdings are treated as ordinary, removing ambiguity about tax status and simplifying reporting.
Applicable insurance companies can carry net capital losses forward for 10 years for losses arising after 2025, giving insurers greater tax-timing flexibility and smoothing taxable income across years.
Insurance companies (and indirectly their customers) may face higher taxes on future sales of certain debt because gains/losses treated as ordinary could be taxed at higher ordinary rates than capital gains, which could raise insurers' tax bills and ultimately insurance premiums.
The law favors insurance companies (through extended carryforwards and specialized rules) relative to other corporations and taxpayers that remain subject to shorter loss carryover rules, creating uneven tax treatment.
Carve-outs and eligibility rules (e.g., rules for §831/§835 electors, certain foreign insurers, §833 organizations) increase compliance complexity and administrative costs for insurers and for the IRS as they determine who qualifies.
Based on analysis of 3 sections of legislative text.
Excludes certain debt held by qualifying insurance companies from being capital assets and lets those companies carry net capital losses forward for 10 years, effective after 2025.
The bill changes the federal tax code to give life/property-and-casualty insurance companies (defined narrowly as “applicable insurance companies”) two tax benefits starting for transactions after December 31, 2025: (1) certain bonds and notes they hold are excluded from the definition of "capital asset," and (2) net capital losses they incur can use a 10-year carryover rule (previously reserved for foreign expropriation losses). These changes effectively alter how insurers recognize capital gains and losses for federal tax purposes starting in taxable years beginning after 2025.
Official title: To amend the Internal Revenue Code of 1986 to exclude debt held by certain insurance companies from capital assets and to extend capital loss carryovers for such companies from 5 years to 10 years.
Introduced April 1, 2025 by Randy Feenstra · Last progress April 1, 2025