President Obama’s proposed budget for 2013 would impose sweeping tax reversals on the insurance industry, including reduced tax benefits from dividend-received deductions and corporate-owned life insurance (COLI) designed to raise about $15 billion in additional taxes over 10 years on life insurance companies.
Estate tax would be turned back to the level that existed in 2009 of a $3.5 million exemption and a maximum tax of 45%. Currently, the exemption is $5 million and the maximum tax rate 35%.
Generation-skipping transfers (or GSTs) made after Dec. 31, 2012, would be taxed at a maximum tax rate of 45% with a life-time exclusion of $3.5 million. Gifts made after Dec. 31, 2012, would be taxed at a maximum tax rate of 45 percent with a life-time exclusion of $1 million.
The portability of unused estate and gift exclusion amounts between spouses would be made permanent and would apply to anyone dying after December 31, 2012.
The budget would set a minimum term of 10 years for grantor-retained annuity trusts.
A joint statement released by the ACLI, AALU, NAIFA, NAILBA and GAMA said that the COLI proposal would impose new taxes on life insurance used by businesses small and large.
“Many businesses use COLI to protect against financial or job loss stemming from the death of owners or key employees,” the statement said.