(Photo: Allison Bell/ALM)
The Internal Revenue Service is getting ready to print the final version of major new life insurance policy sale tax reporting regulations in the Federal Register, on Halloween.
The new IRS regulations show how life insurance policyholders, life insurers, agents, life settlement providers, and others are supposed to comply with the new transaction rules created by the Tax Cuts and Jobs Act of 2017 (TCJA).
The statute added Section 6050Y to the Internal Revenue Code.
IRC Section 6050Y requires "every person who acquires a life insurance contract or any interest in a life insurance contract in a reportable policy sale" to create a transaction notice.
The notice must give the name, address and taxpayer identification number of the policy buyer; the names, addresses and taxpayer identification numbers of each recipient of the payments; the date of the sale; the name of the policy issuer; the policy number of each contract involved; and the amount of each payment.
The policy buyer is supposed to send a sale statement to each person listed on the notice.
The IRS released draft IRC Section 6050Y regulations in March.
The Scope
In the new final regulations, IRS officials use the term "life settlement" several time.
But IRC Section 6050Y itself never uses the term life settlement, and the title of the new final regulation packet is "Information Reporting for Certain Life Insurance Contract Transactions and Modifications to the Transfer for Valuable Consideration Rules."
Officials use the term "life settlement" only in the "preamble," or introduction, to the regulations, not in the official text of the regulations.
It's possible the IRS or another state or federal agency could end up applying the 6050Y reporting requirements to life insurance policy sales that are not typically thought of as being life settlement transactions.
