Mystery COLI Amendment Defeated In House Budget Committee Vote
In the wee hours of Thursday, March 13, the House Budget Committee defeated a proposal by Rep. Rahm Emanuel, D-Ill., that would have placed limitations on corporate-owned life insurance policies in a way that is still causing confusion in the industry.
The vote came on an amendment offered by Emanuel to the fiscal year 2004 budget currently being considered by the committee. The amendment was defeated by a party line vote of 17-24.
However, the exact text of the amendment is unclear and Emanuels office had not responded to inquiries about the amendment by press time.
Initially, it was believed the amendment would be based on a proposal that was originally offered in the fiscal year 1999 budget by former President Bill Clinton.
That proposal would have, essentially, limited COLI coverage to individuals who are 20% or more owners of a business.
However, during the Budget Committees consideration, the amendment was described as allowing businesses to purchase COLI so long as the proceeds from COLI policies were used to finance Pell Grants, which are federal government payments aimed at aiding low- and middle-income students afford college tuition.
Industry lobbyists say they, too, have been trying to get the language of the amendment, but at press time have been unable to do so.
“We know Rep. Emanuels proposal was bad policy,” says Morris Goff, assistant vice president for tax with the American Council of Life Insurers, Washington.
“It appears it would have been confiscatory if adopted,” Goff adds. “This would have led to the question: Why would anyone purchase COLI?
“We wish we had been accorded the common courtesy of seeing the amendment before it was proffered,” Goff says.
Tom Korb, director of government affairs for the Association for Advanced Life Underwriting, Falls Church, Va., says he does not believe anyone has seen the actual language, but it seems like a tax penalty for owning life insurance.
That, Korb says, has already been rejected by Congress on a bipartisan basis.
“AALU,” he adds, “will oppose any attack on the tax foundation of life insurance.”
In other tax news, a bipartisan group of House Ways and Means Committee members has introduced legislation that would repeal Sections 809 and 815 of the tax code.
The legislation, H.R. 808, was introduced by Reps. Amo Houghton, R-N.Y., and Richard Neal, D-Mass., and includes numerous co-sponsors, including the committees Ranking Democrat, Rep. Charles Rangel, D-N.Y.