On February 14, 2011, the Administration released its fiscal year 2012 budget (FY 2012 Budget). Of note, the FY 2012 Budget includes a number of tax proposals that target insurance companies or that otherwise would have a direct effect on them. Those proposals include:

-Modifying the dividends-received deduction for life insurance company separate accounts. This proposal is a modified version of a proposal that was included in the fiscal year 2010 budget (FY 2010 Budget) and the fiscal year 2011 budget (FY 2011 Budget) and is estimated to raise $2.368 billion over 5 years and $5.146 billion over 10 years.

-Disallowing the deduction for “non-taxed reinsurance premiums paid to affiliates.” This proposal is a modified version of a proposal that was included in the FY 2011 Budget and is estimated to raise $1.103 billion over 5 years and $2.614 billion over 10 years.

-Extending the Subpart F “active financing” exception and “look-through” treatment for payments made between related controlled foreign corporations through December 31, 2012.

-Imposing a “financial crisis responsibility fee” on “financial institutions.” This proposal is a modified version of a proposal that was included in the FY 2011 Budget and is estimated to raise $10 billion over 5 years and $30 billion over 10 years. The Administration first proposed such a fee on January 14, 2010.

-Modifying the rules that apply to sales of life insurance contracts. This proposal is a carryover from the FY 2010 Budget and the FY 2011 Budget and is estimated to raise $344 million over 5 years and $1.243 billion over 10 years.

-Requiring information reporting for “private separate accounts” of life insurance companies. This proposal is a carryover from the FY 2010 Budget and the FY 2011 Budget and is estimated to raise $9 million over 5 years and $39 million over 10 years.

-Repealing section 847 effective for taxable years beginning after December 31, 2011. This proposal is new and is expected to be revenue neutral.