Industry Waiting For Congress’ Next Move On Taxation Issues
After a hectic week in which life insurance taxation came under fire on several fronts, the pressure seemed to ease a bit while the industry waited to see how Congress would follow up on concerns over split-dollar and corporate-owned life insurance.
On split dollar, the hearing demanded by Sen. Blanche Lincoln, D-Ark., has not been scheduled as of press time. (See NU, April 29.)
The expectation was that the hearing would take place before Congress leaves for its Memorial Day recess on May 27, but that date could slip by.
Lincoln, who has been particularly critical of split dollar following revelations that top Enron executives had large policies, was irate after a witness who was scheduled to testify on split dollar at an earlier hearing cancelled at the last minute.
But one industry representative, who asked not to be identified, attributes the controversy over split dollar to election-year politics, rather than legitimate tax issues.
This representative says Democrats see the Enron collapse and the related issue of executive compensation as ammunition against Republicans in general and President Bush in particular at a time when very few other issues are available to Democrats.
The economy is recovering from the recent recession, this representative says, and Bush still gets high ratings for his conduct of the war against terrorism.
Executive compensation and allegations of unfairness to rank-and-file workers are seen by Democrats as areas where Republicans might be vulnerable, he says.
Thus, he continues, even though concerns about split dollar are overblown, especially since the Treasury Department is already dealing with the remaining ambiguities, the issue may cause problems for the industry through this election cycle.
On COLI, the industry is also waiting to see if and when a Congressional committee schedules a hearing on so-called “janitor policies” that cover low-wage workers.
It is possible that COLI and split dollar will be taken up during a single hearing, but again, nothing has been scheduled at press time.
The only legislation introduced on COLI is H.R. 4551, which would require companies to provide workers with written notification that they are covered by a COLI policy.
David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, Falls Church, Va., notes that NAIFAs official policy goes even further.