The Internal Revenue Service has published draft regulations that could affect use of split-dollar life insurance in non-qualified deferred compensation arrangements.
The proposed rules, published in the Federal Register, would implement provisions of the American Jobs Creation Act of 2004. They would create a permanent version of interim guidance that the IRS issued in 2005, 2006 and 2007.
The IRS already has issued final rules dealing with nonqualified plan violations, but the final rules do not tell taxpayers how to calculate what they actually owe, officials write.
One section deals with split-dollar life insurance arrangements.
“The amount deferred under a split dollar life insurance arrangement would be determined based upon the amount that would be required to be included in income in a future year under the applicable split-dollar life insurance rules,” officials write.
“Determination of the amount includible in income would depend upon the federal tax regime and guidance applicable to such arrangement.”