Congress has left 2004 tax relief mutual life insurers out of the conference report version of H.R. 1308.[@@]
Mutual life insurers have been trying to persuade Congress to eliminate a tax on dividends paid to policyholders. Congress created the tax in 1984, when it sought to balance the interests of stock and mutual insurers by enacting Internal Revenue Code Section 809
Lobbyists for mutual life insurers earlier this year persuaded Congress to eliminate the tax forever starting in January 2005. The tax had been suspended for the past several years under a provision that expired Dec. 31, 2003. The current bill affects only relief for 2004.
The Section 809 controversy surfaced when the House and the Senate formed a conference committee to iron out differences between their versions of H.R. 1308, the Working Families Tax Relief Act of 2004.
Senate conferees wanted to include a provision suspending the Section 809 tax for 2004, but House conferees rejected the provision late Wednesday. The revised bill was passed by both the House and Senate Thursday.
Lobbyists for Massachusetts Mutual Life Insurance Company, Springfield, Mass., have led the fight against the Section 809 tax.
The Section 809 tax forces mutual life insurers to prepay taxes on income later distributed to policyholders in the form of dividends, MassMutual lobbyists have argued.
The Joint Tax Committee estimates the Section 809 tax will cost mutual life insurers about $50 million this year but is not confident about the estimate because the provision has been suspended for the past 3 years and the tax is based on an average of dividends for the past 3 years, a lobbyist familiar with the tax says. The tax is scheduled to be eliminated in January 2005 under a provision added to a pension bill passed by Congress earlier this year.