The insurance industry has escaped added taxation in the long-anticipated legislation that was introduced on Oct. 25 by Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee.

Rangel’s Tax Reduction and Reform Act of 2007 proposes to end the impact of the alternative minimum tax by closing loopholes and raising taxes on those who earn more than $250,000 a year.

It also proposes to restore the overall limitation on itemized deductions and the phase-out of the deduction for personal expenses to the same extent that existed before the 2001 tax cut legislation gained by President Bush.

Under the Rangel bill, the differences between present law limitations and the complete restoration of these limitations would be phased in for taxpayers with adjusted gross income between $250,000 and $270,000, and between $500,000 and $520,000 for those filing jointly.

But it would be raised immediately for those with incomes above $250,000, or $500,000 for those filing jointly.

But, unlike industry anticipation, the bill unveiled by Rangel did not embrace language proposed earlier this year in the Senate Finance Committee that would cap annual contributions to non-qualified deferred compensation packages.

The bill would repeal the AMT, which is estimated to cost $800 billion over 10 years, through a package of tax increases on the wealthy and closing of tax loopholes. The revenue yielded by the increases suggested by Rangel’s legislation is estimated at $1 trillion over 10 years.

Two provisions potentially affecting the financial services industry would bar hedge fund managers from using offshore tax haven corporations to defer taxes on compensation received for providing investment services, raising $23 billion.

And another provision would require financial institutions to report the cost basis on transactions involving publicly-traded securities. A number of insurance companies operate mutual funds and other investment subsidiaries that would be affected by this provision.

Officials of the Association for Advanced Life Underwriting said the Rangel bill makes “sweeping changes” to the rules for taxing individuals and businesses.

Larry Raymond, AALU president, said this “demonstrates conclusively the strong desire among key leaders in Congress to make significant changes to the tax code in the coming year and beyond.”

Raymond also said Rangel’s bill shows “the willingness in Congress to aggressively pursue revenue offsets in support of their tax agenda and sets the stage on how one important piece of a broader tax agenda will be dealt with.”

But AALU CEO David Stertzer said he found it “hard to see how this legislation moves forward in its entirety–particularly given the President’s opposition to a number of the revenue raisers.”

But he said that he expects some portions of the Rangel bill, such as extending the expiring tax provisions and providing a one-year “patch” to the individual alternative minimum tax, to move forward this year.

“It remains unclear how these provisions will be offset,” Stertzer said.