Groups Blast Tax Proposals

One Obama administration provision, which would disallow the deductible interest expenses of businesses to the extent that the businesses own life insurance, "is an attack on the basic tax treatment of life insurance," says Marc Cadin, an AALU vice president.

What most upsets the industry, Cadin says, is that the "proposal has been rejected on a bipartisan basis in the past, and we believe that it will be rejected again in the future, particularly since Congress codified best practices on COLI in 2006."

Another Obama administration proposal concerns the life insurance company "dividends-received deduction," which would increase taxes by undercutting longstanding rules that now prevent double taxation of corporate earnings.

"All corporate taxpayers are entitled to a DRD," the life groups write in their letter. "There is no good policy justification for singling out the life insurance industry for an additional DRD disallowance."

The life insurance industry, like many other industries, is weathering an economic downturn not seen since the Great Depression, the groups write.

"We are keeping our promises during these difficult times, paying policyholders and beneficiaries on average nearly $2 billion every business day," the groups write. "In addition, life insurers are the single largest U.S. source of corporate bond financing. This is the wrong time to change long-established tax policy and impair the ability of a vital industry to help families."