Neal Bill reintroduced: Deduction would be disallowed for non-taxed reinsurance premiums paid to foreign affiliates

Insurance Tax Bulletin

On May 20, 2013, Congressman Richard Neal (D-MA), with his co-sponsor Congressman William Pascrell (D-NJ), reintroduced a foreign reinsurance bill, H.R. 2054 (the ‘2013 Neal Bill’), that would limit deductions for reinsurance premiums paid by a US insurance company to its foreign affiliates. Sen. Robert Menendez (D-NJ) introduced a companion bill, S. 991, in the Senate. The bill reflects Rep. Neal’s continued concern that the use of affiliated reinsurers is a means by which US insurance risks migrate to offshore reinsurance markets to avoid US tax.

Rep. Neal has previously introduced three foreign reinsurance tax bills in recent past Congresses – H.R. 3157 (Oct. 12, 2011) (the ‘2011 Neal Bill’), H.R. 3424 (Jul. 30, 2009) (the ‘2009 Neal Bill’), and H.R. 6969 (Sep. 18, 2008) (the ‘2008 Neal Bill’). The 2013 Neal Bill is the same as the 2011 Neal Bill, despite the fact that Rep. Neal said the 2013 Neal Bill addresses concerns raised by tax experts. Similar bills were introduced by Rep. Neal in earlier Congresses. The approach of the 2013 Neal Bill is comparable to that of the Obama Administration Fiscal Year 2014 budget revenue proposal that was explained in the FY 2014 Green Book.

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