RE: Proposed Treasury Regulations, [REG-108054-21], RIN 1545-BQ07: Information Reporting and Transfer for Valuable Consideration Rules for Section 1035 Exchanges of Life Insurance and Certain Other Life Insurance Contract Transactions
Internal Revenue Service
Attn: CC:PA:LPD:PR (REG-108054-21), Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044
To Whom It May Concern:
The American Bankers Association (ABA) is pleased at the opportunity to comment on the proposed Treasury regulations, [REG-108054-21], RIN 1545-BQ07: Information Reporting and Transfer for Valuable Consideration Rules for Section 1035 Exchanges of Life Insurance and Certain Other Life Insurance Contract Transactions (the "Proposed Regulations"). The Proposed Regulations include potential amendments to the regulations under Sections 101 and 6050Y, including proposed amendments to the application of the transfer for valuable consideration rules and associated information reporting requirements for reportable policy sales ("RPS").
ABA appreciates the previous guidance provided by the Department of the Treasury ("Treasury") and the Internal Revenue Service (IRS) in the 2019 final regulations, which helped clarify what constitutes an RPS. The Proposed Regulations include a new exception from the definition of RPS for certain direct acquisitions of interests in life insurance contracts by C corporations that arise as part of ordinary course mergers and acquisitions where life insurance constitutes a de minimis amount of the total assets being acquired (the "De Minimis Exception").
With that in mind, however, the De Minimis Exception should be expanded to cover certain taxable transactions between C corporations, including transactions involving one or more holding companies and their subsidiaries. Specifically, ABA recommends that the De Minimis Exception be: (i) expanded to cover certain taxable transactions; and (ii) modified such that it can apply to acquisitions of an affiliated group of companies. Both recommendations are discussed further below.
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