The new, combined version of H.R. 1, the Tax Cuts and Jobs Act bill, could cost life insurers about $22 billion over the period from 2018 through 2027.
Rep. Kevin Brady, R-Texas, originally proposed a version of the tax bill that would raise about $22 billion, by combining a $7 billion change in the tax rules for life insurers’ deferred acquisition cost (DAC) expenses, or spending on activities such as marketing, underwriting, and paying agents’ and brokers’ commissions, with a $14.9 billion change in life insurers’ reserving rules.
Over in the Senate, Sen. Orrin Hatch, R-Utah, proposed generating about $23 billion in revenue by simply changing the DAC rules.
The current version, which was produced by a House-Senate conference committee, appears to be more like the original Brady bill than it is like the Senate bill.
(Related: GOP Releases Final Tax Cut Bill)
The conference report version would generate $7.2 billion over 10 years with DAC accounting changes, and $15.2 billion over 10 years with life insurance tax reserve changes, according to revenue analyses posted by the congressional Joint Committee on Taxation.
The House Ways and Means Committee has posted links to information about H.R. 1, including the text, here.
The Senate Finance Committee has posted its H.R. 1 documents here.
The PDF that contains the full text of H.R. 1 is 1,101 pages long.
For laypeople, the easiest way to start to understand the bill may be to look at the “estimated revenue” tables posted by the Joint Committee on Taxation (JCT).
In the revenue tables, JCT analysts try to predict how each H.R. 1 provision is likely to affect federal government revenue.
The section for the life insurance provisions takes up less than half of a page in each revenue report.
Even if the JCT revenue forecasts turn out to be wrong, the estimates can help show which provisions seem to likely to have a big effect on insurers’ finances.
Here, for example, is the JCT revenue table for the version of H.R. 1 that Brady posted on the House Ways and Means website on Nov. 2.
Here’s a JCT revenue table for the first version of H.R. 1 that Hatch posted on the Senate Finance Committee website on Nov. 9.
Here’s the JCT revenue table for the new conference report version of H.R. 1, which reconciles the differences between the House version of the bill and the Senate version.
The House Rules Committee will be meeting to package H.R. 1 for House floor action at 5 p.m. Eastern time Monday. House leaders say they hope to vote on the bill Tuesday.
Senate Majority Leader Mitch McConnell has not yet said when the Senate might vote. For McConnell, one obstacle is that both Sen. John McCain, R-Ariz., and Sen. Thad Cochran, R-Miss., have been battling health problems that kept them off work.
In theory, lawmakers could send the bill back to the conference committee for further work, but they cannot amend the bill on the House or Senate floor.
Of course, any section in the bill could turn out to be of critical importance to some agents.
Provisions of interest to anyone who pays taxes include the ones that would nearly double the standard deduction, eliminate personal exemptions, keep the medical expense deduction, and expand the medical expense deduction for two years.
Another change that looks as if it might be critical to agents, but probably would not affect many agents in a significant way, would eliminate the Archer medical savings account. That’s a type of personal health account that existed before the health savings account (HSA). No new MSAs have opened since 2007. Elimination of the MSA may lead to paperwork for holders of MSAs, but it will have no effect on HSAs.
Here’s a look at five other H.R. 1 provisions that may be of interest to life and health agents.
1. Affordable Care Act individual major medical mandate (Page 103)
The ACA now requires many people to have what the government classifies as solid health coverage, or minimum essential coverage, or else pay a penalty. It now amounts to 2.5% of modified adjusted gross income over the income tax filing threshold,
The House left the penalty alone.