The Oregon Senate Revenue Committee will hold a hearing Thursday on a proposal to tax life insurance and annuity benefits.

The federal government exempts life and annuity benefits from taxation, but Rep. Chuck Riley, D-Hillsboro, Ore., the sponsor of the Oregon bill, H.B. 2854, has argued that conformity with federal income tax rules is too costly, and that Oregon should tax some kinds of income now excluded from federal taxable income.

The federal government exempts life and annuity benefits from taxation, but Rep. Chuck Riley, D-Hillsboro, Ore., the sponsor of the Oregon bill, H.B. 2854, has argued that conformity with federal income tax rules is too costly, and that Oregon should tax some kinds of income now excluded from federal taxable income.

If passed as written, the bill would take effect on or after Jan. 1, 2010.

H.B. 2854 was first read March 2. To pass, the bill would need approval by a three-fifths majority.

The National Association for Life Brokerage Agencies, Fairfax, Va., has put out a statement opposing the bill, noting it would tax both the death benefits and earnings on the inside build-up of life insurance and annuities.

This “unfairly targets individuals and families who have taken responsibility for their financial future by preparing for retirement and planning for unforeseen circumstances,” NAILBA says in the statement. “Any changes to the tax system must not limit or disadvantage protection and security products, but rather strengthen them.”

NAILBA is urging its members to contact their local Oregon agents and Oregon legislators, voicing opposition.

NAILBA also is joining with other life producer and insurer groups to issue a joint statement opposing the bill.

In addition to NAILBA, the groups making the joint statement are the Association for Advanced Life Underwriting, Falls Church, Va.; the American Council of Life Insurers, Washington; GAMA International, Falls Church; and the National Association of Insurance and Financial Advisors, Falls Church.

“H.B. 2854 is a direct attack on hard-working Oregonians in particular, working people who need life insurance and annuity products to protect their homes, assure the education of their children and provide for lifetime retirement security,” the groups say in the statement. “Oregon families should be encouraged to prepare for the future. H.B. 2854 would unfairly and unwisely penalize those who make financial sacrifices now to provide financial protection for their families in the future.”