COLI/BOLI Marketplace - Potential Impact of the Transfer for Value Provision
in the Tax Cuts and Jobs Act of 2017
H.R. 1 included language modifying the Transfer for Value rules related to certain life insurance contracts subject to new reportable policy sale requirements. That language carries with it a narrow, but important potential implication for the COLI/BOLI marketplace. AALU has already established with the tax writers that this potential impact was not intended, and we are working with them on a resolution.
RELEVANT FACT PATTERN: Entity A wants to acquire Entity B who owns a block of COLI/BOLI. The segment of that block of life insurance related to the lives of former employees is potentially subject to the Transfer for Value (TFV) rule in the Code.
POTENTIAL TAX IMPACT: If subject to the TFV rule then the tax-free death benefit (on the block of former employees) is limited to the amount of consideration paid for the policies plus the premiums subsequently paid by Entity A.
AALU is working on a solution: We are working with the Board and Counsel to secure positive resolution either through regulatory guidance or statutory technical correction.Through meetings with the Ways & Means Committee, Senate Finance Committee, the Joint Committee on Taxation, and the Treasury Department we have established that this potential impact was not intended.
RELEVANT FACT PATTERN: Entity A wants to acquire Entity B who owns a block of COLI/BOLI. The segment of that block of life insurance related to the lives of former employees is potentially subject to the Transfer for Value (TFV) rule in the Code.
POTENTIAL TAX IMPACT: If subject to the TFV rule then the tax-free death benefit (on the block of former employees) is limited to the amount of consideration paid for the policies plus the premiums subsequently paid by Entity A.
AALU is working on a solution: We are working with the Board and Counsel to secure positive resolution either through regulatory guidance or statutory technical correction.Through meetings with the Ways & Means Committee, Senate Finance Committee, the Joint Committee on Taxation, and the Treasury Department we have established that this potential impact was not intended.
DISCLAIMER
This information is intended solely for information and education and is not intended for use as legal or tax advice. Reference herein to any specific tax or other planning strategy, process, product or service does not constitute promotion, endorsement or recommendation by AALU. Persons should consult with their own legal or tax advisors for specific legal or tax advice.
This information is intended solely for information and education and is not intended for use as legal or tax advice. Reference herein to any specific tax or other planning strategy, process, product or service does not constitute promotion, endorsement or recommendation by AALU. Persons should consult with their own legal or tax advisors for specific legal or tax advice.
Learn more, courtesy of Ken Kies–AALU Counsel at Federal Policy Group
or call your IZALE Representative Today!
or call your IZALE Representative Today!
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