[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2951 Introduced in House (IH)]
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117th CONGRESS
1st Session
H. R. 2951
To direct the Secretary of the Treasury to modify Treasury Regulations
relating to insurance-dedicated exchange-traded funds.
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IN THE HOUSE OF REPRESENTATIVES
April 30, 2021
Mr. Wenstrup (for himself and Mr. Suozzi) introduced the following
bill; which was referred to the Committee on Ways and Means
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A BILL
To direct the Secretary of the Treasury to modify Treasury Regulations
relating to insurance-dedicated exchange-traded funds.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. INSURANCE-DEDICATED EXCHANGE-TRADED FUNDS.
(a) In General.--Not later than the date which is 5 years after the
date of the enactment of this Act, the Secretary of the Treasury (or
the Secretary's delegate) shall amend the regulation issued by the
Department of the Treasury relating to ``Income Tax; Diversification
Requirements for Variable Annuity, Endowment, and Life Insurance
Contracts'', 54 Fed. Reg. 8728 (March 2, 1989), and make any necessary
corresponding amendments to other regulations, in order to facilitate
the use of exchange-traded funds as investment options under variable
contracts within the meaning of section 817(d) of the Internal Revenue
Code of 1986, in accordance with subsections (b) and (c) of this
section.
(b) Designate Certain Authorized Participants and Market Makers as
Eligible Investors.--The Secretary of the Treasury (or the Secretary's
delegate) shall amend Treas. Reg. section 1.817-5(f)(3) to provide that
satisfaction of the requirements in Treas. Reg. section 1.817-
5(f)(2)(i) with respect to an exchange-traded fund shall not be
prevented by reason of beneficial interests in such a fund being held
by 1 or more authorized participants or market makers.
(c) Define Relevant Terms.--In amending Treas. Reg. section 1.817-
5(f)(3) in accordance with subsections (b) of this section, the
Secretary of the Treasury (or the Secretary's delegate) shall provide
definitions consistent with the following:
(1) Exchange-traded fund.--The term ``exchange-traded
fund'' means a regulated investment company, partnership, or
trust--
(A) that is registered with the Securities and
Exchange Commission as an open-end investment company
or a unit investment trust;
(B) the shares of which can be purchased or
redeemed directly from the fund only by an authorized
participant; and
(C) the shares of which are traded throughout the
day on a national stock exchange at market prices that
may or may not be the same as the net asset value of
the shares.
(2) Authorized participant.--The term ``authorized
participant'' means a financial institution that is a member or
participant of a clearing agency registered under section
17A(b) of the Securities Exchange Act of 1934 that enters into
a contractual relationship with an exchange-traded fund
pursuant to which the financial institution is permitted to
purchase and redeem shares directly from the fund and to sell
such shares to third parties, but only if the contractual
arrangement or applicable law precludes the financial
institution from--
(A) purchasing the shares for its own investment
purposes rather than for the exclusive purpose of
creating and redeeming such shares on behalf of third
parties; and
(B) selling the shares to third parties who are not
market makers or otherwise described in Treas. Reg.
section 1.817-5(f) (1) and (3).
(3) Market maker.--The term ``market maker'' means a
financial institution that is a registered broker or dealer
under section 15(b) of the Securities Exchange Act of 1934 that
maintains liquidity for an exchange-traded fund on a national
stock exchange by being always ready to buy and sell shares of
such fund on the market, but only if the financial institution
is contractually or legally precluded from selling or buying
such shares to or from persons who are not authorized
participants or otherwise described in Treas. Reg. section
1.817-5(f) (2) and (3).
(d) Effective Date.--Subsections (b) and (c) shall apply to
segregated asset account investments made on or after the date that is
5 years after the date of the enactment of this Act.
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