[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5762 Introduced in House (IH)]
111th CONGRESS
2d Session
H. R. 5762
To amend the Internal Revenue Code of 1986 to provide for the creation
of disaster protection funds in the District of Columbia by property
and casualty insurance companies for the payment of policyholders'
claims arising from natural catastrophic events.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 15, 2010
Ms. Norton introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide for the creation
of disaster protection funds in the District of Columbia by property
and casualty insurance companies for the payment of policyholders'
claims arising from natural catastrophic events.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``District of Columbia National
Disaster Insurance Protection Act''.
SEC. 2. DISTRICT OF COLUMBIA NATURAL DISASTER PROTECTION FUNDS.
(a) Contributions to Natural Disaster Protection Funds.--Subsection
(c) of section 832 of the Internal Revenue Code of 1986 (relating to
the taxable income of insurance companies other than life insurance
companies) is amended by striking ``and'' at the end of paragraph (12),
by striking the period at the end of paragraph (13) and inserting ``;
and'', and by adding at the end the following new paragraph:
``(14) the qualified contributions during the taxable year
to a natural disaster protection fund.''
(b) Natural Disaster Protection Fund Gross Income.--Subsection (b)
of section 832 of such Code is amended by adding at the end the
following new paragraph:
``(9) Special rule for assets held in natural disaster
protection fund.--For purposes of determining gross income
under this subsection, any items of income, gain, loss, or
deduction derived from or attributable to any assets held in a
natural disaster protection fund shall not be taken into
account.''
(c) Distributions From Natural Disaster Protection Funds.--
Paragraph (1) of section 832(b) of such Code is amended by striking
``and'' at the end of subparagraph (D), by striking the period at the
end of subparagraph (E) and inserting ``, and'', and by adding at the
end the following new subparagraph:
``(F) the aggregate amount of all distributions
during the taxable year from a natural disaster
protection fund, except that a distribution made to
return to the qualified insurance company any
contribution that is not a qualified contribution for a
taxable year shall not be included in gross income if
such distribution is made prior to the filing by the
qualified insurance company of its tax return for such
taxable year.''
(d) Definitions and Other Rules Relating to Natural Disaster
Protection Funds.--Section 832 of such Code is amended by adding at the
end the following new subsection:
``(h) Definitions and Other Rules Relating to Natural Disaster
Protection Funds.--For purposes of this section--
``(1) Natural disaster protection fund.--The term `natural
disaster protection fund' (hereafter in this subsection
referred to as the `fund') means any money, securities, or
other property held by a qualified insurance company that is
identified and maintained in a segregated account--
``(A) which is designated as a `natural disaster
protection fund' and held in a bank or bank branch
located in the District of Columbia that is licensed
and regulated by the Comptroller of the Currency or the
District of Columbia Commissioner of Insurance,
Securities, and Banking,
``(B) under the terms of which--
``(i) the assets in the fund are required
to be invested in a manner consistent with the
investment requirements applicable to all
insurance companies under the laws of the
District of Columbia,
``(ii) an excess balance drawdown amount is
required to be distributed to the qualified
insurance company no later than the close of
the taxable year following the taxable year
with respect to which such amount is
determined, and
``(iii) no portion of the assets of the
fund may be paid or distributed from the fund
except for a qualified distribution.
``(2) Qualified insurance company.--The term `qualified
insurance company' means an insurer or reinsurer that--
``(A) is incorporated and domiciled in the District
of Columbia,
``(B) is subject to supervision by the District of
Columbia Commissioner of Insurance, Securities, and
Banking,
``(C) maintains an office in the District of
Columbia that employs no fewer than 10 full-time
equivalent employees, of whom no fewer than 5 are
residents of the District of Columbia,
``(D) is subject to taxes imposed by the District
of Columbia on premiums collected for natural
catastrophic risk coverage at the rates established in
section 2608 of title 47, D.C. Official Code, or any
successor law without regard to the location of the
insured risk, and
``(E) is not subject to premium taxes imposed by
any State or other taxing jurisdiction for natural
catastrophic risk coverage written through the fund.
``(3) Qualified contribution.--The term `qualified
contribution' means a contribution to a fund established by a
qualified insurance company of not more than the total of net
premiums or other payments received during a taxable year for
coverage of qualified losses, but only to the extent such
contribution, when added to all previous contributions to the
fund (including net investment earnings of the fund) and after
subtracting all qualified distributions from the fund, does not
exceed the amount reasonably at risk for the payment of
qualified losses insured through the fund, less reinsurance on
those risks, as determined actuarially on a multi-year basis.
``(4) Qualified distribution.--The term `qualified
distribution' means any amount paid or distributed for--
``(A) any payment of a qualified loss pursuant to
an insurance policy or policy of reinsurance issued by
the qualified insurance company,
``(B) any payment made to reinsure or otherwise
spread the risk of catastrophe risk written by the
qualified insurance company,
``(C) any excess balance drawdown amount,
``(D) any administrative expenses directly related
to the maintenance and investment of the fund, and
``(E) any claims investigation and adjustments
relating to a qualified loss.
``(5) Qualified loss.--The term `qualified loss' means an
insured loss on a United States risk that satisfies
subparagraphs (A) and (B).
``(A) Event.--An insured loss satisfies this
subparagraph if the loss is attributable to one or more
of the following events:
``(i) Wind (including hurricanes and
tornados).
``(ii) Earthquake (including any fire
following).
``(iii) Flood.
``(iv) Tsunami or tidal wave.
``(v) Volcanic eruption.
``(vi) Fire.
``(vii) Hail.
``(viii) Snow, ice, freezing, or other
winter catastrophes.
``(ix) Pandemic or other public health
catastrophe.
``(B) Catastrophe designation or minimum aggregate
insured loss.--An insured loss, with respect to an
event described in subparagraph (A), satisfies this
subparagraph if at least one of the following occurs:
``(i) Total insured losses from the event,
or from more than one event happening
simultaneously or immediately following,
exceeds $1,000,000,000 on an industry-wide
basis.
``(ii) The President of the United States
declares a disaster or state of emergency
because of the event.
``(iii) The Governor or chief executive of
a State, possession or territory of the United
States, or of the District of Columbia,
declares a disaster or state of emergency
because of such event.
``(iv) The Property Claims Services unit of
Insurance Services Office, Inc., declares a
catastrophic industry-wide loss because of one
or more events.
``(6) Excess balance drawdown amount.--The term `excess
balance drawdown amount' means the excess (if any) of--
``(A) the amount of the fund balance as of the end
of the taxable year, over
``(B) the total amount of exposure of the fund to
qualified losses at the end of the taxable year under
policies written by the qualified insurance company, as
determined actuarially on a multi-year basis.
``(7) United states risk.--The term `United States risk'
means any hazard, risk, loss, or liability attributable to
property situated, or an activity conducted, in the United
States, or its territories or possessions.
``(8) Exclusion of premiums and losses on certain puerto
rican risks.--Notwithstanding any other provision of this
subsection, premiums and losses with respect to risks covered
by a catastrophe reserve established under the laws or
regulations of the Commonwealth of Puerto Rico shall not be
taken into account under this subsection in determining the
amount of the qualified contributions allowed or the amount of
qualified losses.
``(9) Contributions in kind.--A transfer of property other
than money to a fund shall be treated as a sale or exchange of
such property for an amount equal to its fair market value as
of the date of transfer, and appropriate adjustment shall be
made to the basis of such property. Section 267 shall apply to
any loss realized upon such a transfer.
``(10) Distributions in kind.--A distribution of property
other than money from a fund to a qualified insurance company
shall be treated as a sale or exchange of such property, and
any gain or loss realized on such sale or exchange shall be
excluded from the gross income of the qualified insurance
company.
``(11) Regulations.--The Secretary shall prescribe
regulations as may be necessary or appropriate to carry out the
purposes of this subsection.''
(e) Additional Tax on Certain Distributions From a Natural Disaster
Protection Fund.--Subsection (d) of section 831 of such Code (relating
to the tax on insurance companies other than life insurance companies)
is amended by redesignating subsection (d) as subsection (e) and
inserting after subsection (c) the following new subsection:
``(d) Tax on Nonqualified Distributions.--
``(1) In general.--In the case of a qualified insurance
company, the tax imposed by this section for the current year
shall be increased by an amount equal to 20 percent of the
aggregate amount of nonqualified distributions made by such
company during such year from a natural disaster protection
fund.
``(2) Definitions.--
``(A) Nonqualified distributions.--The term
`nonqualified distributions' means any distribution
from a natural disaster protection fund other than a
qualified distribution (as defined in section
832(h)(4)).
``(B) Other definitions.--The terms `qualified
insurance company' and `natural disaster protection
fund' shall have the meanings ascribed to such terms in
section 832(h).''
(f) Effective Date.--The amendments made by this bill shall apply
to taxable years beginning after December 31, 2009.
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