WASHINGTON — Life industry trade groups are urging congressional tax-writing committees to reject Obama administration proposals that could increase industry taxes by $12 billion over 10 years.
The groups express “deep concern” with, and “unified opposition” to, the tax proposals, which were unveiled earlier this week, and they call the proposals an indirect attack on the inside buildup in corporate-owned life insurance policies.
This “is the wrong time to impose additional taxes on a critical industry struggling to meet its obligations and finance corporate growth,” the groups write.
The tax increases, aimed at raising revenue that would help pay for a health care overhaul program now being drafted, represent “an attack on life insurance products, the life insurance industry and life insurance policyholders,” the groups write.
The letter was signed by the Association for Advanced Life Underwriting, Falls Church, Va.; the American Council of Life Insurers, Washington; GAMA International, Falls Church; the National Association of Insurance and Financial Advisors, Falls Church; and the National Association of Independent Life Brokerage Agencies, Fairfax, Va.
The letter was sent to the chairmen and highest-ranking Republican members of the Senate Finance Committee and the House Ways and Means Committee.
One Obama administration provision, which would disallow the deductible interest expenses of businesses to the extent that the businesses own life insurance, “is an attack on the basic tax treatment of life insurance,” says Marc Cadin, an AALU vice president.
What most upsets the industry, Cadin says, is that the “proposal has been rejected on a bipartisan basis in the past, and we believe that it will be rejected again in the future, particularly since Congress codified best practices on COLI in 2006.”
Another Obama administration proposal concerns the life insurance company “dividends-received deduction,” which would increase taxes by undercutting longstanding rules that now prevent double taxation of corporate earnings.
“All corporate taxpayers are entitled to a DRD,” the life groups write in their letter. “There is no good policy justification for singling out the life insurance industry for an additional DRD disallowance.”
The life insurance industry, like many other industries, is weathering an economic downturn not seen since the Great Depression, the groups write.
“We are keeping our promises during these difficult times, paying policyholders and beneficiaries on average nearly $2 billion every business day,” the groups write. “In addition, life insurers are the single largest U.S. source of corporate bond financing. This is the wrong time to change long-established tax policy and impair the ability of a vital industry to help families.”