The final version of major federal tax-cut legislation appears to be a mixed bag for the life insurance industry.

The members of the House-Senate conference committee hammering out the compromise version of the bill unveiled it Tuesday.

The primary purpose of the bill is to extend tax cuts enacted in 2001 and scheduled to expire in 2008 an additional 2 years.

Members of the House expect to vote on the bill today, and members of the Senate expect to vote on the bill Thursday.

The bill needs only a simple majority to pass in the Senate.

The conference committee pleased life insurers by leaving out a bill provision that could have imposed punitive taxes on investor-owned life insurance transactions.

But life insurance industry lobbyists worry that the IOLI provision could crop up again in a companion tax-cut bill.

The provision may resurface because it has the support of the Bush administration and could raise $267 million over 5 years, one industry lobbyist says.

Some members of Congress who are thinking about the fall elections would like to use that extra revenue to offset the cost of tax cuts with strong popular appeal, life industry lobbyists say.

Another provision in the final version of the tax-cut bill will let more taxpayers convert traditional individual retirement accounts to Roth IRAs, by removing the modified adjusted gross income limitations on rollovers from an IRA to a Roth IRA.

Under the provision, taxpayers can elect to pay tax on amounts converted in 2010 in equal installments in 2011 and 2012.

Such an expansion of Roth IRAs would reduce annuity sales to wealthier individuals who are currently not eligible for Roth IRAs, according to tax experts at Washington Analysis, a securities research firm that caters to buy-side clients such as pension and hedge funds.

Withdrawals from Roth IRAs after age 59.5 are not taxable, while withdrawals from annuities are taxed at the regular income tax rate.

According to Washington Analysis and American Council of Life Insurers’ tax experts, under current law, single taxpayers with annual incomes in excess of $110,000 and married filers with incomes of more than $160,000 are ineligible for using the Roth IRA.

Senate Finance Committee Chairman Charles Grassley, R-Iowa, has been holding off on completing the main tax-cut bill to preserve negotiating leverage on the companion tax-cut bill, which could contain a number of popular tax breaks.

The tax breaks include an education tuition tax deduction, a tax break for teachers who buy their own school supplies and a research and development tax credit for businesses. That measure also would preserve tax deductions for state and local sales taxes.

The thinking is that Republicans will seek to attach these provisions to a pension reform bill now being negotiated by House-Senate conferees.