Sponsors (51)
The bill gives insurance companies clearer, more favorable timing and classification rules (ordinary treatment for certain debt, explicit inclusion of face-amount certificate companies, and a 10-year loss carryforward) to smooth insurer taxes and operations, at the cost of possible higher consumer insurance prices, added compliance complexity, reduced near-term federal revenue, and unequal tax treatment versus other taxpayers.
Applicable insurance companies can carry net capital losses forward for 10 years for losses arising after Dec 31, 2025, allowing insurers to reduce taxable income in future years and smooth tax liabilities.
Applicable insurance companies will treat gains and losses from certain debt holdings acquired after Dec 31, 2025 as ordinary income/losses, clarifying tax treatment and simplifying accounting for those bonds.
Face-amount certificate companies registered under the Investment Company Act are explicitly included, removing ambiguity about their tax status and providing regulatory clarity for those firms.
Insurance companies (and ultimately their customers) may face higher taxes on sales of certain debt because gains/losses treated as ordinary income could be taxed at higher rates than capital gains, which could push up insurance costs.
Extending a 10-year carryforward for net capital losses reduces near-term federal tax receipts, which could increase deficits or require offsetting revenue or spending changes.
The carve-outs and special rules (e.g., for §831/§835 electors, foreign insurers, §833 organizations) create additional complexity and compliance costs for insurers and for the IRS in determining eligibility.
Based on analysis of 3 sections of legislative text.
Excludes certain debt instruments held by qualifying insurers from the capital-asset definition and gives those insurers a 10-year carryover for net capital losses; effective after 2025.
Amends the federal tax code to change how certain debt instruments held by insurers are treated and to extend a special 10-year capital loss carryover to qualifying insurance companies. It excludes specified notes, bonds, debentures, and other evidences of indebtedness owned by defined "applicable insurance companies" from the definition of "capital asset," and it permits those same insurers to carry forward net capital losses for up to 10 years. The changes apply only to obligations acquired after December 31, 2025, and to net capital losses arising in taxable years beginning after December 31, 2025. Several kinds of insurers and certain investment companies are explicitly excluded from the definition of "applicable insurance company."
Introduced April 1, 2025 by Randy Feenstra · Last progress April 1, 2025