WASHINGTON BUREAU — Life insurance company and producer groups are uniting against Obama administration efforts to impose new taxes on corporate-owned life insurance and on insurers that use separate accounts.
The administration included the COLI proposal and the separate account proposal, which would reduce the dividend-received reduction on the separate accounts that back annuity contracts and variable life policies, in the fiscal year 2011 budget proposal. Fiscal year 2011 will start July 1.
The insurance provisions are part of a package of tax increases and reporting mandates. Administration officials say the package will raise $14.4 billion over 10 years.
The proposals "amount to new taxes on products that provide security and peace of mind," according to a joint statement issued by the American Council of Life Insurers, Washington; the Association for Advanced Life Underwriting, Falls Church, Va.; 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 groups note that Congress addressed COLI benefits and tax rules in bipartisan legislation enacted in 2006.
"Businesses small and large use COLI to protect against financial loss, ensure business continuation, and protect against possible job loss from the death of owners or key employees," the groups say.
COLI also is widely used to finance and secure employee benefits and retiree benefits, the groups say.
The groups contend that the dividends-received deduction reduction would undermine longstanding rules that are designed to prevent double taxation of corporate earnings, the groups say.
The groups note that Congress rejected the same proposals last year.
"We urge the administration to withdraw its proposals on COLI and DRD," the groups say.
In addition to taxing COLI and reducing the dividends-received reduction, the Obama administration budget proposal would:
- Require the owner of an annuity or universal life policy to report information on each policy whose investment in a separate account represents at least 10% of the value of the account.
- Permit partial annuitization of a nonqualified annuity contract.
***
For earlier coverage of the fiscal year 2011 budget proposal, please see Obama Proposes COLI Tax.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.