FASB EITF 06-10: Accounting for Collateral Assignment Split-Dollar Arrangements
On December 6, 2006, FASB released FASB EITF 06-10 (Draft Abstract). EITF 06-10 is very similar to EITF 06-04 (which dealt with endorsement split dollar) only it applies to collateral assignment split dollar plans. This summary authored by AALU provides additional information.
The draft requested public comments by January 22, 2007 so we expect further discussion and comments by FASB in the near future. We will provide updates as available.
IRS Private Letter Rulings Regarding Partitioning of Policies
The IRS recently released two PLRs (plr 200651023, plr 200652043) relating to the partitioning of a life insurance policy between two banks as the result of a corporate reorganization. Among other things, the partitioning did not cause the bank(s) to recognize income, did not constitute a sale, did not result in new issue dates (therefore loan interest disallowance under 264(f) did not apply) and did not negatively affect the tax characteristics of the resulting policies.
IRS Revenue Ruling 2007-7
The IRS recently released Revenue Ruling 2007-7 which provides further clarification/guidance regarding investor control. Specifically, it addresses inconsistencies between an earlier Revenue Ruling (RR 2003-92) and Treas. Regs. Sections 817-5(f)(3).
In short, it rules, favorably for taxpayers, that the investors (e.g. qualified pension plans, insurance company general accounts) in a regulated investment company that are described in Section 1.817-5(f)(3) are not members of the general public as the term is used in RR 2003-92.
The AALU also released an explanation regarding this revenue ruling.
IRS Request for Comments on Procedures for Correcting Inadvertent Failures of Life Insurance Contracts to Satisfy Certain IRC Requirements
The IRS recently released Notice 2007-15 which requests comments (due by June 2007) regarding procedures that apply to correct inadvertent failures where life insurance and annuity contracts do not satisfy the requirements of 817(h), 7702 or 7702A. In addition to requesting comments on improving the procedures for obtaining closing agreements to correct inadvertent failures to satisfy the requirements of 817(h), 7702 or 7702A, the notice also provides background on the existing procedures and four draft model closing agreements for comment. Closing agreements spell out the costs and procedural requirements for carriers to rectify inadvertent failures.
We will be discussing with carriers their plans for submitting commentary.
IRS Updates Correction Procedure for Inadvertent Failures to Comply with MEC Rules
The IRS recently released Revenue Procedure 2007-19 which modifies the existing procedure insurance carriers utilize to remedy inadvertent, non-egregious failures to comply with the MEC rules under IRC Section 7702A. The changes to the existing procedures (RP 2001-42) are intended to make it easier and more expeditious for carriers to seek relief.