With Republicans Victorious, Expect Challenges And Opportunities
The stunning victory by Republicans on Nov. 5–not only taking control of the Senate but increasing their margin in the House–is likely to offer the life insurance industry as many challenges as opportunities in the upcoming 108th Congress.
On the positive side, Republican control of both Congress and the White House promises renewed efforts to enhance private sector-based retirement security, expand long-term care insurance and reform the liability system.
But on the negative side, Republicans remain strongly in favor of permanent repeal of the estate tax. Moreover, as recently as last year, House Ways and Means Committee Chairman Bill Thomas, R-Calif., championed an effort to cap the tax-free inside buildup of whole life insurance.
Indeed, the upcoming debate on the effort now under way at the Treasury Department to propose a major overhaul of the nations tax system reflects the risks and rewards that emerged from the election.
Life insurance companies are eyeing the tax reform effort as a golden opportunity to eliminate certain vestiges of the tax code that they have long felt have outlived their usefulness.
These include Sections 809 and 815 of the tax code (dealing, respectively, with mutual life company taxation and stock company policyholder surplus accounts), as well as the rules on consolidated returns.
Resolving these tax issues would go a long way toward modernizing taxation of life insurance companies.
But at the same time, the tax reform effort also offers a golden opportunity to put inside buildup back on the table.