Economic Package An Insurer Win
By Steven Brostoff, Washington Editor
NU Online News Service, March 11, 11:57 a.m. EST?Insurance companies won a major legislative victory last week when the Senate joined the House in passing an economic stimulus package retroactively extending the 2001 treatment of investment income earned by foreign subsidiaries of U.S. financial services firms.
The legislation, which President Bush has said he will sign, extends the 2001 treatment of the affected income under Subpart F of the tax code for five years retroactive to Jan. 1, 2002.
The five-year extension was an added victory for the industry. In his fiscal year 2003 budget, the president proposed only a two-year extension.
Gary Karr, a representative of the Washington-based American Insurance Association, said AIA is very pleased with the extension. It was an important item for the insurance industry, he said, which helps assure a level-playing field for insurers that compete overseas.
The extension was also strongly supported by the Washington-based American Council of Life Insurers.
Once the legislation is signed, the affected income will be subject to U.S. taxation only after the parent company receives it.
Without the extension, the income would have been immediately subject to U.S. tax as soon as it was earned by the subsidiary, even if the parent had not received it.
Financial services companies argued that this treatment differs from that afforded similar income earned by commercial companies. Moreover, they said, this puts U.S. financial service companies at a competitive disadvantage versus foreign companies.
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