Sponsors (50)
The bill gives insurance companies clearer and more favorable timing and classification rules (ordinary treatment for certain debt and longer loss carryforwards) that simplify planning and smooth insurer tax outcomes, but it reduces near-term federal revenue, creates preferential treatment for insurers, and adds compliance complexity.
Insurance companies that acquire certain debt after Dec 31, 2025 will be able to treat gains and losses on those holdings as ordinary income/loss, simplifying the tax classification for those bond holdings.
Face-amount certificate companies registered under the Investment Company Act are explicitly included, removing ambiguity about their tax status and reducing legal/tax uncertainty for those firms.
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 potentially their policyholders) may face higher tax bills if ordinary income rates are higher than capital gains rates when those debt holdings are sold, which could increase insurance costs.
The carve-outs and special eligibility rules for various insurer categories (e.g., §831/§835 electors, foreign insurers, §833 organizations) add complexity and compliance costs for insurers and for IRS administration.
Extending the capital loss carryforward to 10 years reduces near-term federal tax receipts compared with shorter carryover rules, potentially widening deficits or requiring offsets.
Based on analysis of 3 sections of legislative text.
Excludes certain debt instruments held by qualifying insurers from being "capital assets" and grants those insurers a 10-year net capital loss carryover for post-2025 tax years.
Introduced April 1, 2025 by Randy Feenstra · Last progress April 1, 2025
Excludes certain notes, bonds, debentures, and other evidence of indebtedness held by qualifying domestic insurance companies from the tax code definition of “capital asset” for obligations acquired after Dec 31, 2025, and allows those same qualifying insurance companies to carry net capital losses forward for 10 years for taxable years beginning after Dec 31, 2025. The change narrows which insurers qualify by excluding certain small tax-electing insurers, specified foreign insurers, organizations under special tax rules, and face-amount certificate companies.