Rules relating to certain life insurance and annuity contracts of applicable taxpayers

(a) Treatment of amounts received (1) In general Section 72(e) is amended by redesignating paragraph (12) as paragraph (13) and by inserting after paragraph (11) the following: (12) Treatment of certain amounts received under certain life insurance and annuity contracts of applicable taxpayers (A) In general In the case of any applicable amount which is received during any taxable year, notwithstanding paragraph (5)(A) or (5)(E)— (i) if such amount is received on or after the annuity starting date, paragraph (2)(A) shall apply, and (ii) if such amount is received before the annuity starting date or is received with respect to a life insurance contract to which this section applies, the rules of clauses (i) and (ii) of paragraph (2)(B) shall apply. (B) Applicable amount (i) In general For purposes of this paragraph, the term applicable amount means— (I) any amount to which this subsection applies which is received under an applicable private placement life insurance or annuity contract, and (II) in the case of an applicable taxpayer, notwithstanding paragraph (5)(A), (5)(E), or (10)(A), any amount or portion described in paragraph (4)(A) with respect to a life insurance or annuity contract, except that any applicable taxpayer or any related person (as defined in section 144(a)(3)) to an applicable taxpayer shall be substituted for an individual in applying such paragraph. (ii) Treatment of refunds, surrenders, redemptions and maturities Notwithstanding paragraph (5)(A) or (5)(E), amounts described in clause (i)(I) shall include amounts described in clause (i) or (ii) of paragraph (5)(E) received under an applicable private placement life insurance or annuity contract. (iii) Amounts under pre-1982 and qualified plan contracts, etc. excluded Such term shall not include amounts received— (I) under a contract which is described in paragraph (5)(B) or (5)(D), or (II) under a qualified tuition program (as defined in section 529(b)) or under a Coverdell education savings account (as defined in section 530(b)). (C) Applicable private placement life insurance or annuity contract For purposes of this paragraph— (i) In general The term applicable private placement life insurance or annuity contract means a private placement life insurance or annuity contract the holder of which (whether directly or indirectly) is an applicable taxpayer. (ii) Secretarial authority The Secretary shall prescribe regulations or other guidance which treat a private placement life insurance or annuity contract as an applicable private placement life insurance or annuity contract in cases where an applicable taxpayer (or a related person) has an interest in such contract not described in clause (i) if such treatment is necessary to prevent the avoidance of the purposes of this paragraph. (D) Private placement life insurance or annuity contract For purposes of this paragraph, the term private placement life insurance or annuity contract means any contract— (i) which is an annuity contract or a life insurance contract, and (ii) with respect to which the holder of the contract is required, for purposes of obtaining a registration exemption under securities laws as in effect on the date of enactment of this section (including the Securities Exchange Act of 1934 and the Investment Advisors Act of 1940), to make a representation that such owner— (I) has a specified minimum amount of income or assets, (II) has completed a specified minimum level of education, or (III) holds a specific license or credential. (E) Applicable taxpayer For purposes of this paragraph, the term applicable taxpayer has the meaning given such term under section 495.. (2) Conforming amendment Section 72(e)(5)(C) is amended by inserting or (12) after (10). (3) Effective date The amendments made by this subsection shall apply to amounts received in taxable years beginning after December 31, 2025. (b) 10-Percent additional tax for distributions from applicable private placement life insurance or annuity contracts (1) In general Section 72(v) is amended— (A) by inserting or an applicable private placement life insurance or annuity contract (as defined in subsection (e)(12)) after a modified endowment contract (as defined in section 7702A) in paragraph (1), and (B) by inserting and applicable private placement life insurance or annuity contracts after modified endowment contracts in the heading thereof. (2) Effective date The amendments made by this subsection shall apply to amounts received in taxable years beginning after December 31, 2025. (c) Repeal of exclusion for death benefits (1) In general Section 101 is amended by adding at the end the following new subsection: (k) Exclusion not To apply (1) In general Subsection (a)(1) shall not apply to amounts received by reason of the death of the insured under an applicable private placement life or annuity contract (within the meaning of section 72(e)(12)). (2) Amounts previously included The Secretary shall prescribe rules to ensure that paragraph (1) shall not apply to any portion of any amount received which was previously included in gross income.. (2) Conforming amendment Section 101(a)(1) is amended by striking and subsection (j), and inserting subsection (j), and subsection (k),. (3) Effective date The amendments made by this subsection shall apply to amounts received in taxable years beginning after December 31, 2025. (d) Reporting requirements (1) In general Subpart B of part III of subchapter A of chapter 61, as amended by this Act, is amended by adding at the end the following new section: 6050BB. Returns relating to amounts received under certain life insurance and annuity contracts (a) In general Every person who issues a life insurance or annuity contract or who reinsures such a contract shall make an annual return (at such time and in such manner as the Secretary shall prescribe) setting forth— (1) the name, address, and TIN of such person, (2) the name, address, and TIN of each person who receives an applicable amount (as defined in section 72(e)(12)) during the year with respect to any life insurance or annuity contract issued or reinsured by such person, (3) the aggregate applicable amounts received by each person identified in paragraph (2), and (4) such other information as the Secretary may require. (b) Statement To be furnished to taxpayers with respect to whom information is required (1) In general Every person that is required to make a return under subsection (a) shall furnish to each person whose identity is required to be set forth under subsection (a)(2) a written statement showing— (A) the name, address, and phone number of the information contact of the person required to make such return, and (B) the information required to be shown on such return with respect to the person described in subsection (a)(2) and with respect to applicable amounts received by such person. (2) Furnishing of information The written statement required under paragraph (1) shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made. (c) Regulatory authority The Secretary may prescribe such regulations and other guidance as necessary for purposes of carrying out this section, including regulations or other guidance to require reporting under this section by such other persons as necessary to carry out the purposes of section 72(e)(12).. (2) Penalties (A) Returns Section 6724(d)(1)(B), as amended by this Act, is amended by striking or at the end of clause (xxviii), by striking and at the end of clause (xxix) and inserting or, and by inserting after clause (xxix) the following new clause: (xxx) section 6050BB(a) (relating to returns of information with respect to private placement life insurance and annuity contracts),. (B) Statements Section 6724(d)(2), as so amended, is amended— (i) by striking or at the end of subparagraph (LL), (ii) by striking the period at the end of subparagraph (MM) and inserting, or, and (iii) by inserting after subparagraph (MM) the following new subparagraph: (NN) section 6050BB(b) (relating to statements of information with respect to private placement life insurance and annuity contracts).. (3) Clerical amendment The table of sections for subpart B of part III of subchapter A of chapter 61, as amended by this Act, is amended by inserting after the item relating to section 6050AA the following new item: Sec. 6050BB. Returns relating to amounts received under certain life insurance and annuity contracts.. (4) Effective date The amendments made by this subsection shall apply to taxable years beginning after December 31, 2025.