To amend the Internal Revenue Code of 1986 to establish a system for the taxation of catastrophic risk transfer companies to ensure sufficient capital to cover catastrophic insurance losses, and for other purposes.
Analysis under review: This bill has generated analysis that may be too generic or incomplete. Clause-level evidence remains available below.
Summary
What This Bill Does
This bill creates a new type of tax-advantaged company called a Catastrophic Risk Transfer Company (CART) that can provide insurance or reinsurance for major catastrophic events like hurricanes, earthquakes, and large-scale mortality risks. These companies would receive favorable tax treatment similar to Real Estate Investment Trusts (REITs), meaning they can largely avoid corporate-level taxation if they distribute most of their income to shareholders.
Who Benefits and How
Insurance and reinsurance companies benefit by gaining access to a new, tax-efficient structure for transferring catastrophic risks to capital markets. Investors (both domestic and foreign) benefit from tax-advantaged returns on catastrophe bonds and similar securities. Foreign investors receive exemption from U.S. withholding tax on qualified investment income dividends. Large corporations and government agencies facing catastrophic risks get access to more capital for catastrophic coverage as this structure attracts more investment into the catastrophe insurance market.
Who Bears the Burden and How
The U.S. Treasury bears the cost through reduced tax revenue, as income that would otherwise be taxed at the corporate level passes through to shareholders. Traditional insurance companies without CART status face competitive disadvantage as they cannot offer the same tax-efficient structures. State tax authorities lose the ability to impose premium taxes on reinsurance premiums paid to CARTs organized in other states.
Key Provisions
- Creates new IRC Sections 860M-860P establishing rules for Catastrophic Risk Transfer Companies
- Requires CARTs to distribute at least 90% of taxable income to maintain tax-advantaged status
- Exempts foreign investors from withholding tax on qualified investment income dividends from CARTs
- Preempts state taxation of reinsurance premiums paid to out-of-state CARTs
Evidence Chain:
This summary is generated from the full bill text using AI analysis. Expand "Detailed Analysis" below for identified beneficiaries/burden bearers.
At a Glance
What This Bill Does
Creates a new category of tax-advantaged insurance entities called Catastrophic Risk Transfer Companies (CARTs) that receive pass-through tax treatment similar to REITs when providing insurance or reinsurance for catastrophic risks like hurricanes, earthquakes, and large-scale mortality events.
Key Policy Areas
Tax Policy, Insurance Regulation, Financial Services
Primary Purpose
Creates a new category of tax-advantaged insurance entities called Catastrophic Risk Transfer Companies (CARTs) that receive pass-through tax treatment similar to REITs when providing insurance or reinsurance for catastrophic risks like hurricanes, earthquakes, and large-scale mortality events.
Policy Domains
Section 2 - Taxation of Catastrophic Risk Transfer Companies
Identified Gains
Contextual inference, no direct clause citation- Insurance and reinsurance companies
- Capital markets investors
- Foreign investors in catastrophe securities
- Large corporations and government agencies seeking catastrophic coverage
- Catastrophe bond issuers and underwriters
Contextual inference, no direct clause citation
Identified Costs
Contextual inference, no direct clause citation- U.S. Treasury (reduced tax revenue)
- Traditional insurers without CART status
- States losing premium tax authority
Contextual inference, no direct clause citation
Section 3 - State Taxation of Reinsurance Premiums
Identified Gains
Contextual inference, no direct clause citation- Catastrophic Risk Transfer Companies
- Insurance companies using CART reinsurance
Contextual inference, no direct clause citation
Identified Costs
Contextual inference, no direct clause citation- State and local tax authorities
Contextual inference, no direct clause citation
Sponsors
Legislative Progress
IntroducedMr. LaHood (for himself and Mr. Himes) introduced the following …
Stakeholder Effects
cui bono?How this legislation distributes effects. Mention counts reflect frequency, not effect magnitude.
CART security holders and investors, Capital markets investors in catastrophe bonds, Catastrophic risk transfer companies
Catastrophic risk transfer companies faces effects in multiple directions
State and local tax authorities, State insurance regulators
Large corporations with assets over 100 million dollars
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
- "the_secretary"
- → Secretary of the Treasury
- "state_commissioner"
- → State commissioner of insurance or other State official charged with regulation of insurance
Key Definitions
Terms defined in this bill
A domestic corporation created under State law as a special purpose insurer, regulated by the State insurance commissioner, whose principal purpose is carrying out catastrophic risk transfer activities through issuing securities, owning qualified investments, and entering into insurance/reinsurance agreements covering catastrophic risks from unrelated persons.
Any of the several States, the District of Columbia, or any territory or possession of the United States, any municipality, city, county, or any other political subdivision within the territorial limits of the United States with the authority to impose a premium tax on a policy of reinsurance.
A risk of loss which has a low likelihood of occurring but which will be large in amount (exceeding 25,000,000 dollars for direct insurance; or a pool of mortality/longevity risks).
Any company which is licensed to engage in the business of insurance in a State and which is subject to State law which regulates insurance.
Cash, interests in money market funds, and investment-grade debt securities and funds primarily holding such debt securities.
Interest that is accrued or received on, distributions in connection with, or proceeds from the disposition of, qualified investments.
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology