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.