HR2547-119

What This Bill Does

The Secure Family Futures Act changes two Internal Revenue Code rules for insurance-company investment portfolios. First, it adds notes, bonds, debentures, and other evidence of indebtedness held by an applicable insurance company to the list of assets that are not capital assets. The definition covers many domestic insurance companies and face-amount certificate companies while excluding small electing insurers, certain foreign insurers, and Blue Cross-style section 833 organizations. Second, it allows capital losses incurred by applicable insurance companies to be carried forward for 10 succeeding taxable years, parallel to the treatment already available for foreign expropriation losses. The debt rule applies to instruments acquired after December 31, 2025, and the carryover rule applies to net capital losses in taxable years beginning after December 31, 2025.

Who Benefits and How

Applicable insurance companies benefit because debt instruments in their portfolios would receive ordinary tax treatment rather than capital-asset treatment. Life insurers and other covered domestic insurers benefit because losses on debt holdings can be matched more flexibly against taxable income. Face-amount certificate companies benefit because they are included in the applicable-insurance-company definition for the new debt rule. Insurance tax planners benefit from a clearer statutory rule for debt holdings and a 10-year capital loss carryover window.

Who Bears the Burden and How

The Internal Revenue Service must administer a new section 1221 debt exception and police which insurance companies qualify. Federal taxpayers bear the revenue cost if covered insurers use ordinary loss treatment or longer loss carryovers to reduce tax liability. Excluded insurers, including small electing insurers and certain foreign insurers, do not receive the new tax treatment. Treasury tax rule writers must update guidance for debt classification and capital loss carryovers after 2025.

Key Provisions

• Amends section 1221 to exclude certain insurance-company debt instruments from capital-asset treatment.
• Defines applicable insurance company while excluding small electing insurers, certain foreign insurers, and section 833 organizations.
• Extends a 10-year capital loss carryover rule to losses incurred by applicable insurance companies.
• Applies the debt rule to instruments acquired after December 31, 2025, and the loss rule to taxable years after 2025.