S.Amdt. 1826

SA 1826. Mr. SCOTT (for himself, Mr. Blunt, Mr. Portman, Mr. Isakson,
Mr. Grassley, Mr. Crapo, Mr. Roberts, Mr. Rounds, Mr. Strange, Mr.
Shelby, Mrs. Ernst, Mr. Cassidy, and Ms. Collins) submitted an
amendment intended to be proposed to amendment SA 1618 proposed by Mr.
McConnell (for Mr. Hatch (for himself and Ms. Murkowski)) to the bill
H.R. 1, to provide for reconciliation pursuant to titles II and V of
the concurrent resolution on the budget for fiscal year 2018; which was
ordered to lie on the table; as follows:

[[Page S7725]]

On page 254, strike lines 10 through 25 and insert the
following:

SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RESERVES.

(a) In General.--
(1) Computation of reserves.--Section 807(c) is amended to
read as follows:
``(c) Items Taken Into Account.--The items referred to in
subsections and (b) are as follows--
``(1) The life insurance reserves (as defined in section
816(b)).
``(2) The unearned premiums and unpaid losses included in
total reserves under section 816(c)(2).
``(3) The amounts (discounted at the appropriate rate of
interest) necessary to satisfy the obligations under
insurance and annuity contracts, but only if such obligations
do not involve (at the time with respect to which the
computation is made under this paragraph) life, accident, or
health contingencies.
``(4) Dividend accumulations, and other amounts, held at
interest in connection with insurance and annuity contracts.
``(5) Premiums received in advance, and liabilities for
premium deposit funds.
``(6) Reasonable special contingency reserves under
contracts of group term life insurance or group accident and
health insurance which are established and maintained for the
provision of insurance on retired lives, for premium
stabilization, or a combination thereof.
For purposes of paragraph (3), the appropriate rate of
interest is the highest rate or rates permitted to be used to
discount the obligations by the National Association of
Insurance Commissioners as of the date the reserve is
determined. In no case shall the amount determined under
paragraph (3) for any contract be less than the net surrender
value of such contract. For purposes of paragraph (2) and
section 805(a)(1), the amount of the unpaid losses (other
than losses on life insurance contracts) shall be the amount
of the discounted unpaid losses as defined in section 846.''.
(2) Section 807(d) is amended--
(A) by striking paragraphs (1), (2), (4), and (5),
(B) by redesignating paragraph (6) as paragraph (4),
(C) by inserting before paragraph (3) the following new
paragraphs:
``(1) Determination of reserve.--
``(A) In general.--For purposes of this part (other than
section 816), the amount of the life insurance reserves for
any contract (other than a contract to which subparagraph (B)
applies) shall be the greater of--
``(i) the net surrender value of such contract, or
``(ii) 92.87 percent of the reserve determined under
paragraph (2).
``(B) Variable contracts.--For purposes of this part (other
than section 816), the amount of the life insurance reserves
for a variable contract shall be equal to the sum of--
``(i) the greater of--

``(I) the net surrender value of such contract, or
``(II) the portion of the reserve that is separately
accounted for under section 817, plus

``(ii) 92.87 percent of the excess (if any) of the reserve
determined under paragraph (2) over the amount in clause (i).
``(C) Statutory cap.--In no event shall the reserves
determined under subparagraphs (A) or (B) for any contract as
of any time exceed the amount which would be taken into
account with respect to such contract as of such time in
determining statutory reserves (as defined in paragraph (4)).
``(2) Amount of reserve.--The amount of the reserve
determined under this paragraph with respect to any contract
shall be determined by using the tax reserve method
applicable to such contract.'',
(D) by striking ``(as of the date of issuance)'' in
paragraph (3)(A)(iv)(I) and inserting ``(as of the date the
reserve is determined)'',
(E) by striking ``as of the date of the issuance of'' in
paragraph (3)(A)(iv)(II) and inserting ``as of the date the
reserve is determined for'',
(F) by striking ``in effect on the date of the issuance of
the contract'' in paragraph (3)(B)(i) and inserting
``applicable to the contract and in effect as of the date the
reserve is determined'', and
(G) by striking ``in effect on the date of the issuance of
the contract'' in paragraph (3)(B)(ii) and inserting
``applicable to the contract and in effect as of the date the
reserve is determined''.
(3) Section 807(e) is amended--
(A) by striking paragraphs (2) and (5),
(B) by redesignating paragraphs (3), (4), (6), and (7) as
paragraphs (2), (3), (4), and (5), respectively,
(C) by amending paragraph (2) (as so redesignated) to read
as follows:
``(2) Qualified supplemental benefits.--
``(A) Qualified supplemental benefits treated separately.--
For purposes of this part, the amount of the life insurance
reserve for any qualified supplemental benefit shall be
computed separately as though such benefit were under a
separate contract.
``(B) Qualified supplemental benefit.--For purposes of this
paragraph, the term `qualified supplemental benefit' means
any supplemental benefit described in subparagraph (C) if--
``(i) there is a separately identified premium or charge
for such benefit, and
``(ii) any net surrender value under the contract
attributable to any other benefit is not available to fund
such benefit.
``(C) Supplemental benefits.--For purposes of this
paragraph, the supplemental benefits described in this
subparagraph are any--
``(i) guaranteed insurability,
``(ii) accidental death or disability benefit,
``(iii) convertibility,
``(iv) disability waiver benefit, or
``(v) other benefit prescribed by regulations,
which is supplemental to a contract for which there is a
reserve described in subsection (c).'', and
(D) by adding at the end the following new paragraph:
``(6) Reporting rules.--The Secretary shall require
reporting (at such time and in such manner as the Secretary
shall prescribe) with respect to the opening balance and
closing balance of reserves and with respect to the method of
computing reserves for purposes of determining income.''.
(4) Section 7702 is amended--
(A) by striking clause (i) of subsection (c)(3)(B) and
inserting the following:
``(i) reasonable mortality charges which meet the
requirements prescribed in regulations to be promulgated by
the Secretary or that do not exceed the mortality charges
specified in the prevailing commissioners' standard tables as
defined in subsection (f)(10),'' and
(B) by adding at the end of subsection (f) the following
new paragraph:
``(10) Prevailing commissioners' standard tables.--For
purposes of subsection (c)(3)(B)(i), the term `prevailing
commissioners' standard tables' means the most recent
commissioners' standard tables prescribed by the National
Association of Insurance Commissioners which are permitted to
be used in computing reserves for that type of contract under
the insurance laws of at least 26 States when the contract
was issued. If the prevailing commissioners' standard tables
as of the beginning of any calendar year (hereinafter in this
paragraph referred to as the `year of change') are different
from the prevailing commissioners' standard tables as of the
beginning of the preceding calendar year, the issuer may use
the prevailing commissioners' standard tables as of the
beginning of the preceding calendar year with respect to any
contract issued after the change and before the close of the
3-year period beginning on the first day of the year of
change.''.
(b) Conforming Amendments.--
(1) Section 808 is amended by adding at the end the
following new subsection:
``(g) Prevailing State Assumed Interest Rate.--For purposes
of this subchapter--
``(1) In general.--The term `prevailing State assumed
interest rate' means, with respect to any contract, the
highest assumed interest rate permitted to be used in
computing life insurance reserves for insurance contracts or
annuity contracts (as the case may be) under the insurance
laws of at least 26 States. For purposes of the preceding
sentence, the effect of nonforfeiture laws of a State on
interest rates for reserves shall not be taken into account.
``(2) When rate determined.--The prevailing State assumed
interest rate with respect to any contract shall be
determined as of the beginning of the calendar year in which
the contract was issued.''.
(2) Paragraph (1) of section 811(d) is amended by striking
``the greater of the prevailing State assumed interest rate
or applicable Federal interest rate in effect under section
807'' and inserting ``the interest rate in effect under
section 808(g)''.
(3) Subparagraph (A) of section 846(f)(6) is amended by
striking ``except that'' and all that follows and inserting
``except that the limitation of subsection (a)(3) shall
apply, and''.
(4) Subparagraph (B) of section 954(i)(5) is amended by
striking ``shall apply, and''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
(2) Transition rule.--For the first taxable year beginning
after December 31, 2017, the reserve with respect to any
contract (as determined under section 807(d)(2) of the
Internal Revenue Code of 1986) at the end of the preceding
taxable year shall be determined as if the amendments made by
this section had applied to such reserve in such preceding
taxable year.
(3) Transition relief.--
(A) In general.--If--
(i) the reserve determined under section 807(d)(2) of the
Internal Revenue Code of 1986 (determined without regard to
the amendments made by this section) with respect to any
contract as of the close of the year preceding the first
taxable year beginning after December 31, 2017, differs from
(ii) the reserve which would have been determined with
respect to such contract as of the close of such taxable year
under such section determined without regard to paragraph
(2),

then the difference between the amount of the reserve
described in clause (i) and the amount of the reserve
described in clause (ii) shall be taken into account under
the method provided in subparagraph (B).
(B) Method.--The method provided in this subparagraph is as
follows:
(i) If the amount determined under subparagraph (A)(i)
exceeds the amount determined under subparagraph (A)(ii), 1/8
of such excess shall be taken into account, for each

[[Page S7726]]

of the 8 succeeding taxable years, as a deduction under
section 805(a)(2) or 832(c)(4) of such Code, as applicable.
(ii) If the amount determined under subparagraph (A)(ii)
exceeds the amount determined under subparagraph (A)(i), 1/8
of such excess shall be included in gross income, for each of
the 8 succeeding taxable years, under section 803(a)(2) or
832(b)(1)(C) of such Code, as applicable.

SEC. 13518. MODIFICATION OF RULES FOR LIFE INSURANCE
PRORATION FOR PURPOSES OF DETERMINING THE
DIVIDENDS RECEIVED DEDUCTION.

(a) In General.--Section 812 is amended to read as follows:

``SEC. 812. DEFINITION OF COMPANY'S SHARE AND POLICYHOLDER'S
SHARE.

``(a) Company's Share.--For purposes of section 805(a)(4),
the term `company's share' means, with respect to any taxable
year beginning after December 31, 2017, 70 percent.
``(b) Policyholder's Share.--For purposes of section 807,
the term `policyholder's share' means, with respect to any
taxable year beginning after December 31, 2017, 30
percent.''.
(b) Conforming Amendment.--Section 817A(e)(2) is amended by
striking ``, 807(d)(2)(B), and 812'' and inserting ``and
807(d)(2)(B)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.

SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISITION
EXPENSES.

(a) In General.--
(1) Section 848(a)(2) is amended by striking ``120-month''
and inserting ``180-month''.
(2) Section 848(c)(1) is amended by striking ``1.75
percent'' and inserting ``2.1 percent''.
(3) Section 848(c)(2) is amended by striking ``2.05
percent'' and inserting ``2.46 percent''.
(4) Section 848(c)(3) is amended by striking ``7.7
percent'' and inserting ``9.24 percent''.
(b) Conforming Amendments.--Section 848(b)(1) is amended by
striking ``120-month'' and inserting ``180-month''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to net premiums for taxable years beginning after
December 31, 2017.
(2) Transition rule.--Specified policy acquisition expenses
first required to be capitalized in a taxable year beginning
before January 1, 2018, will continue to be allowed as a
deduction ratably over the 120-month period beginning with
the first month in the second half of such taxable year.
______