PlainBillCongress, translated.Legislation. Context. Public interest.Referred to the Committee on Ways and Means, and in addition to the Committee on the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Congressional Research Service
No official summary is available in the imported record yet.
People & committees
Rep. LaHood, Darin [R-IL-16] · R–IL
Legislative record
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Referred to the Committee on Ways and Means, and in addition to the Committee on the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committee on the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Introduced in House
Introduced in House
Primary sources
Text links open the official source. We also preserved the text version used in the PlainBill explanation below.
No related bills are listed in this snapshot. This does not establish whether the proposal has appeared in earlier Congresses.
Source last updated: May 7, 2025. Consult Congress.gov for the current record.
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PlainBill explanation
Based on the full Introduced in House · 2025-02-21 text. This explanation has not received human editorial review. This overview describes the proposal’s major provisions; it does not establish what its real-world effects would be.
The bill would create special tax rules for qualifying U.S. companies that finance insurance against rare, large losses by issuing securities to investors. These companies could deduct qualifying payments to investors, subject to income, distribution, licensing and other requirements. Certain investment-income payments to foreign investors would receive a federal tax exemption, with exceptions. The bill would also limit state and local taxes on premiums for reinsurance—insurance covering an insurer’s risks. These are proposed changes, not evidence of enacted law.
such activities are limited to— (i) issuing equity and debt securities, (ii) owning qualified investments, and (iii) entering into one or more insurance or reinsurance agreements covering catastrophic risks
The deduction for dividends paid (as defined in section 561) shall be allowed.
(b) Exemption from withholding taxes on nonresident aliens and foreign corporations
A taxing jurisdiction other than the State under the laws of which a catastrophic risk transfer company is created or organized shall not impose a premium tax on any premiums paid to, or received by, such company on a policy of reinsurance.
Section 1 would name the legislation the Catastrophic Risk Transfer Act of 2025, or CART Act of 2025.
This Act may be cited as the Catastrophic Risk Transfer Act of 2025 or the CART Act of 2025.
A qualifying company would have to be a domestic corporation organized under a state law enabling special-purpose insurers, licensed and regulated as such an insurer, and authorized by the state insurance regulator to transfer catastrophic risks.
the term catastrophic risk transfer company means any domestic corporation which— (1) is— (A) created or organized under the laws of a State which has enacted a State law which enables the organization and licensure of a special purpose insurer
(B) regulated and licensed as such a special purpose insurer by the State commissioner of insurance or other State official charged with regulation of insurance within the State
(3) is authorized by the State commissioner of insurance or other State official charged with regulation of insurance within the State to carry out the activities of catastrophic risk transfer.
The company’s principal purpose would have to be catastrophic risk transfer, with substantially all such activities outside general annuity business. Its activities would be limited to issuing ownership and debt securities, holding qualified investments, and making catastrophic insurance or reinsurance agreements with parties that remain unrelated throughout those agreements. Related-party status would depend on existing tax-code provisions.
the principal purpose of which is the carrying out of the activities of catastrophic risk transfer, but only if— (A) substantially all of such activities relate to business other than general annuity business, and (B) such activities are limited to— (i) issuing equity and debt securities, (ii) owning qualified investments, and (iii) entering into one or more insurance or reinsurance agreements covering catastrophic risks from persons who are not related to such corporation at any time during the period beginning with the date such agreements are entered into and ending with the last day of the period such agreements are in effect
A person shall be treated as related person to another person if such person bears a relationship to such other person described in section 267(b) or 707(b).
A catastrophic risk would mean a low-probability loss that would be large. For direct insurance, the loss would have to exceed $25 million. Mortality risks could count only when transferred as a pool of mortality or longevity risks—risks involving death or length of life.
The term catastrophic risk means a risk of loss which has a low likelihood of occurring but which will be large in amount.
(i) in the case of direct insurance, a risk of loss shall not be treated as large in amount unless such loss would exceed $25,000,000 if it occurs, and (ii) in the case of mortality risk, the risk of loss transferred may be taken into account under subparagraph (A) only if it involves a pool of mortality or longevity risks.
Qualified investments would be cash, money-market fund interests, investment-grade debt securities and funds primarily holding those securities. Investment income would include interest, distributions and proceeds from disposing of those investments.
The term qualified investment means— (i) cash, (ii) interests in money market funds, and (iii) investment-grade debt securities and funds primarily holding such debt securities.
The term investment income means interest that is accrued or received on, distributions in connection with, or proceeds from the disposition of, qualified investments.
A company would have to elect this tax status and fully back its insurance or reinsurance coverage limit with collateral. At least 90% of gross income would have to come from qualified investments or specified premiums. Eligible premiums would include reinsurance premiums from regulated insurers, and direct insurance premiums from government agencies, companies with assets exceeding $100 million, or companies transferring a sufficiently large pool of one type of risk to meet the stated insurance-business test.
(1) it files with its return for the taxable year an election to be a catastrophic risk transfer company or has made such election for a previous taxable year, (2) at least 90 percent of its gross income is derived from— (A) investment income from qualified investments, and (B) (i) reinsurance premiums received from a regulated insurance company, or (ii) insurance premiums from— (I) a governmental agency, (II) a company the assets of which exceed $100,000,000, or (III) a company that is transferring a sufficiently large pool of a single type of underlying risk that the insurance of such pool of risk would on a stand-alone basis constitute operation of an insurance business under part II of subchapter L, and (3) the limit of the insurance or reinsurance being provided is fully collateralized.
Certain separate series or classes of securities would be treated as separate corporations for federal tax purposes when primarily linked to a designated reinsurance agreement and asset pool. That separation would not apply when testing the basic company requirements in proposed section 860M(a).
If a catastrophic risk transfer company (within the meaning of subsection (a)), or a protected cell of such company, issues a series or class of securities which primarily has recourse to, or is primarily linked to, a designated reinsurance agreement and pool of collateral or assets, such series or class shall be treated as a separate corporation for purposes of this title (other than determining whether the requirements of subsection (a) are met).
A company that missed the 90% income test could still qualify if it filed the required income schedule and the failure resulted from reasonable cause rather than willful neglect. It would owe a special tax equal to nonqualifying gross income minus one-ninth of qualifying gross income.
a description of each item of its gross income described in such paragraph is set forth in a schedule for such taxable year filed in the manner provided by the Secretary, and (B) the failure to meet such requirement is due to reasonable cause and not due to willful neglect.
there is hereby imposed on such company a tax in an amount equal to the excess of— (A) the gross income of such company which is not derived from sources referred to in subsection (b)(2), over (B) one-ninth of the gross income of such company which is derived from such sources.
Most of the special tax rules would apply only if the company’s dividends-paid deduction equaled at least 90% of its specially calculated taxable income before that deduction. At year-end, it would also need to have no accumulated earnings and profits—a tax measure of corporate earnings—from years outside this tax regime. The separate earnings-and-profits rules would remain applicable.
The provisions of this part (other than subsection (c) of this section) shall not be applicable to a catastrophic risk transfer company for a taxable year unless— (1) the deduction for dividends paid during the taxable year (as defined in section 561) equals or exceeds 90 percent of its catastrophic risk transfer company taxable income for the taxable year determined without regard to subsection (b)(2)(C), and (2) as of the close of the taxable year, the catastrophic risk transfer company has no earnings and profits accumulated in any taxable year to which the provisions of this part (or the corresponding provisions of prior law) did not apply to it.
Companies would pay corporate income tax under existing section 11 on specially adjusted taxable income. They could deduct qualifying dividends paid and the special tax for failing the income test, but could not take the net operating loss deduction or the specified corporate deductions, except section 248.
a tax computed as provided in section 11, as though the catastrophic risk transfer company taxable income were the taxable income referred to in section 11.
(A) The net operating loss deduction provided in section 172 shall not be allowed. (B) The deductions for corporations provided in part VIII (except section 248) in subchapter B (section 241 and following, relating to the deduction for dividends received, etc.) shall not be allowed. (C) The deduction for dividends paid (as defined in section 561) shall be allowed.
(F) There shall be deducted an amount equal to the tax imposed by subsection (d)(2) of section 860M for the taxable year.
Taxable income would be computed without applying section 443(b), concerning a change in annual accounting period. A company could also elect not to apply section 454(b), concerning short-term debt issued at a discount. The bill does not reproduce those existing rules.
(D) The taxable income shall be computed without regard to section 443(b) (relating to computation of tax on change of annual accounting period). (E) The taxable income shall be computed without regard to section 454(b) (relating to short-term obligations issued on a discount basis) if the company so elects in a manner prescribed by the Secretary.
Companies could deduct claim-adjustment expenses, expenses of the listed professional and administrative service providers, and other specified costs reasonably related to issuing securities.
There will be allowed as a deduction loss adjustment expenses and expenses of— (i) modeling firms, claims reviewers, loss reserve specialists, attorneys, accountants, actuaries, indenture trustees (including reinsurance trustees and paying agents), independent directors, administrators of the catastrophic risk transfer company, rating agencies of any securities issued by the catastrophic risk transfer company, reset and calculation agents, reporting agencies, data providers, model escrow agents, securities listings, and securities listing agents, and (ii) other professionals or service providers, or other out-of-pocket costs incurred with issuing securities, reasonably related thereto.
Existing section 311(b) would not apply to distributions redeeming a qualifying company’s stock or securities at the holder’s demand. The supplied text does not reproduce that section’s underlying tax rule.
Section 311(b) shall not apply to any distribution by a catastrophic risk transfer company to which this part applies, if such distribution is in redemption of its stock or securities upon the demand of the holder.
A dividend declared during a calendar year for holders recorded on a specified date that year would generally count as received and paid on December 31. This rule would apply only if actual payment occurred before the 15th day of the ninth month of the following calendar year; another proposed rule could give the company an earlier payment date.
any dividend declared by a catastrophic risk transfer company during any calendar year and payable to security holders of record on a specified date in such a year shall be deemed— (A) to have been received by each security holder on December 31 of such calendar year, and (B) to have been paid by such company on December 31 of such calendar year (or, if earlier, as provided in section 860P). The preceding sentence shall apply only if such dividend is actually paid by the company prior to the 15th day of the 9th month of the following calendar year.
Distributions made to clear earnings accumulated outside the regime would be allocated to those earnings oldest first. To that extent, they would not count for the dividends-paid deduction or the rule allowing certain later payments to count in an earlier tax year.
Any distribution which is made in order to comply with the requirements of subsection (a)(2)— (A) shall be treated for purposes of this subsection and subsection (a)(2) as made from earnings and profits which, but for the distribution, would result in a failure to meet such requirements (and allocated to such earnings on a first-in, first-out basis), and (B) to the extent treated under subparagraph (A) as made from accumulated earnings and profits, shall not be treated as a distribution for purposes of subsection (b)(2)(C) and section 860P.
After a determination that the regime did not apply for a year, a company could make corrective distributions to address the accumulated-earnings condition for later years. If accumulated earnings were the sole reason for disqualification, this relief could also address that condition for the affected year. The provision would not broadly restore every tax benefit for a disqualified year.
then, for purposes of applying subsection (a)(2) to subsequent taxable years, the provisions of this part shall be treated as applying to such catastrophic risk transfer company for the non-CART year. If the determination under subparagraph (A) is solely as a result of the failure to meet the requirements of subsection (a)(2), the preceding sentence shall also apply for purposes of applying subsection (a)(2) to the non-CART year
Corrective distributions would generally be due within 90 days after the determination, unless the Secretary allowed longer. They would have to cover the relevant accumulated earnings minus the required interest, satisfy section 301, and be formally designated under regulations. They would not qualify for a dividends-paid deduction.
within the 90-day period beginning on the date of the determination (or within such longer period as the Secretary may permit), the catastrophic risk transfer company makes 1 or more qualified designated distributions and the amount of such distributions is not less than the excess of— (i) the portion of the accumulated earnings and profits of the catastrophic risk transfer company (as of the date of the determination) which are attributable to the non-CART year, over (ii) any interest payable under paragraph (3).
(i) section 301 applies to such distribution, and (ii) such distribution is designated (at such time and in such manner as the Secretary shall by regulations prescribe) as being taken into account under this paragraph with respect to the non-CART year.
Any qualified designated distribution shall not be included in the amount of dividends paid for purposes of computing the dividends paid deduction for any taxable year.
Corrective-distribution relief would require interest at the tax-underpayment rate on 50% of the relevant accumulated earnings, running from the original tax-payment deadline without extensions to the determination date. Interest could be assessed and collected during the assessment period for the determination year. Relief would be unavailable for a finding of fraud intended to evade tax; a qualifying determination could include the company’s own filing with the Secretary.
shall pay interest at the underpayment rate established under section 6621— (i) on an amount equal to 50 percent of the amount referred to in paragraph (2)(A)(i), and (ii) for the period— (I) which begins on the last day prescribed for payment of the tax imposed for the non-CART year (determined without regard to extensions), and (II) which ends on the date the determination is made.
Any interest payable under subparagraph (A) may be assessed and collected at any time during the period during which any tax imposed for the taxable year in which the determination is made may be assessed and collected.
The provisions of this subsection shall not apply if the determination contains a finding that the failure to meet any requirement of this part was due to fraud with intent to evade tax.
Such term also includes a determination by the catastrophic risk transfer company filed with the Secretary that the provisions of this part do not apply to the catastrophic risk transfer company for a taxable year.
For this regime, dividends and distributions would include payments to debt investors as well as shareholders. Companies would have to tell each investor which portions came from interest, tax-exempt interest, qualified or other dividends, capital gains, and insurance or reinsurance premiums.
(1) the terms dividend and distribution shall include payments made to holders of debt securities, and (2) the term security holder shall include holders of equity and debts securities issued by a catastrophic risk transfer company.
Each catastrophic risk transfer company shall identify in a statement issued to each security holder the portion of its dividends paid with respect to the year, under the rules of section 860N, which are attributable to the following types of income of the catastrophic risk transfer company: (1) Interest. (2) Tax-exempt interest. (3) Qualified dividend income, within the meaning of subparagraph (B) of section 1(h)(11) of this title. (4) Dividends other than qualified dividend income. (5) Capital gains. (6) Insurance or reinsurance premiums.
Investors would generally be taxed as though they had received each identified type of income directly, subject to the proposed foreign-investor exemptions. For the section 243 deduction, dividend-income portions would be treated as coming from a corporation that was not 20%-owned. Capital-gain portions would be treated as gains from an asset held for more than one year.
Except as provided in subsection (n) of section 871 or subsection (f) of section 881 of this title, each security holder shall be subject to taxation under this title on the dividends received from a catastrophic risk transfer company in the same manner as if such security holder had received the portions of each dividend identified on the statement provided under subsection (a) directly.
In computing any deduction under section 243 with respect to the portion of a dividend identified on the statement under subsection (a) as dividend income referenced in paragraphs (3) or (4) of such subsection, such portion shall be treated as received from a corporation which is not a 20-percent owned corporation.
shall be treated by the security holders as a gain from the sale or exchange of a capital asset held for more than 1 year.
A company could elect to count certain dividends paid after year-end in the prior tax year. It would need to declare them by the later of the 15th day of the ninth month after year-end or its extended return deadline, then pay within 12 months after year-end and no later than its first subsequent dividend payment of the same type. Under this rule, investors would count receipt in the year actually distributed.
declares a dividend on or before the later of— (A) the 15th day of the 9th month following the close of the taxable year, or (B) in the case of an extension of time for filing the company's return for the taxable year, the due date for filing such return taking into account such extension
distributes the amount of such dividend to security holders in the 12-month period following the close of such taxable year and not later than the date of the first dividend payment of the same type of dividend made after such declaration, the amount so declared and distributed shall, except as provided in subsection (b) and to the extent the company elects in such return in accordance with regulations prescribed by the Secretary, be considered as having been paid during such taxable year.
Amounts to which subsection (a) applies shall be treated as received by the security holder in the taxable year in which the distribution is made.
For nonresident foreign individuals, the bill would exempt qualified investment-income dividends from the specified section 871 tax, subject to exceptions. The company would need to meet the basic company requirements for the relevant year. The income would also have to come from qualified investments earned in a year meeting the specified eligibility and distribution requirements and be reported in written investor statements.
Section 871 of the Internal Revenue Code of 1986 is amended
Except as provided in paragraph (2), no tax shall be imposed under paragraph (1)(A) of subsection (a) on any qualified investment income dividend received from a catastrophic risk transfer company which meets the requirements of section 860M(a) for the taxable year with respect to which the dividend is paid.
(A) which is attributable to investment income from qualified investments earned during a taxable year in which the catastrophic risk transfer company meets the requirements of subsection (b) of section 860M and subsection (a) of section 860N, and (B) which is reported by the company as a qualified investment income dividend in written statements furnished to its security holders.
The foreign-individual exemption would exclude income attributable to debt issued by the recipient or by a corporation or partnership in which the recipient is a 10% shareholder. For dividends on stock, the withholding party would need a qualifying statement that the beneficial owner is not a U.S. person.
Paragraph (1) shall not apply— (A) to any qualified investment income dividend received from a catastrophic risk transfer company by a person to the extent such dividend is attributable to investment income received by such company on indebtedness issued by such person or by any corporation or partnership with respect to which such person is a 10-percent shareholder
(B) to any qualified investment income dividend with respect to stock of a catastrophic risk transfer company unless the person who would otherwise be required to deduct and withhold tax from such dividend under chapter 3 receives a statement (which meets requirements similar to the requirements of subsection (h)(5)) that the beneficial owner of such stock is not a United States person
The exemption would also exclude certain payments to people or entities in a foreign country during a period specified by existing section 871(h)(6). This country-based exception would not apply to dividends on stock acquired on or before publication of the Secretary’s determination. The underlying country-restriction rules are not reproduced.
(C) to any qualified investment income dividend paid to any person within a foreign country (or any such dividend payment addressed to, or for the account of, persons within such foreign country) during any period described in subsection (h)(6) with respect to such country. Subparagraph (C) shall not apply to any dividend with respect to any stock which was acquired on or before the date of the publication of the Secretary's determination under subsection (h)(6).
Foreign corporations would receive a parallel qualified investment-income dividend exemption under proposed section 881(f), using the same dividend definition and exceptions as the foreign-individual provision. Its reference to the existing tax is written as subsection (a)(1)(A); the supplied bundle does not reproduce that existing provision.
(2) Foreign corporations Section 881 of such Code is amended
(f) Exemption for qualified investment income dividends of catastrophic risk transfer companies (1) In general Except as provided in paragraph (2), no tax shall be imposed under paragraph (1)(A) of subsection (a) on any qualified investment income dividend received from a catastrophic risk transfer company which meets the requirements of section 860M(a) for the taxable year with respect to which the dividend is paid. (2) Exceptions Paragraph (1) shall not apply any dividend described in section 871(n)(2). (3) Qualified investment income dividend For purposes of this paragraph, the term qualified investment income dividend has the same meaning given such term by section 871(n)(3).
Section 3 would prohibit any covered taxing jurisdiction other than the company’s organizing state from taxing premiums paid to or received by the company on reinsurance policies. Covered jurisdictions would include states, the District of Columbia, U.S. territories and possessions, and local governments with authority to impose such taxes.
A taxing jurisdiction other than the State under the laws of which a catastrophic risk transfer company is created or organized shall not impose a premium tax on any premiums paid to, or received by, such company on a policy of reinsurance.
The term taxing jurisdiction means any of the several States, the District of Columbia, or any territory or possession of the United States, any municipality, city, county, or any other political subdivision within the territorial limits of the United States with the authority to impose a premium tax on a policy of reinsurance.
The organizing state could still tax reinsurance premiums, but the amount could not exceed the federal tax that section 4371 would impose if the premiums went to a foreign insurer or reinsurer. The bill would use section 4372(f)’s definition of a reinsurance policy. Neither that definition nor the applicable federal tax rate is reproduced.
If a State allowed under subsection (a) imposes a premium tax on a catastrophic risk transfer company on premiums on a policy of reinsurance, the amount of such tax shall not exceed the tax which would have been imposed under section 4371 of the Internal Revenue Code of 1986 if such premiums were paid to a foreign insurer or reinsurer.
The term policy of reinsurance has the meaning given such term by section 4372(f) of such Code.
The supplied official-actions snapshot, updated May 7, 2025, records introduction in the House on February 21, 2025, and referral that day to the Ways and Means and Judiciary Committees for provisions within their respective jurisdictions. This snapshot does not establish subsequent action or enactment.
Source snapshot updated 2025-05-07T14:12:27Z.
2025-02-21: Introduced in House
2025-02-21: Referred to the Committee on Ways and Means, and in addition to the Committee on the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
A closer look
Reviewed version: Introduced in House · 2025-02-21. These findings describe provisions and who may benefit; they are not judgments of waste, corruption, or motive.
This review covers the supplied bill text. “None identified” does not rule out provisions in later versions or accompanying reports and disclosures.
Provisions outside the bill’s main subject, or policy changes attached to appropriations.
None identified in the reviewed text
No unrelated provision or policy change attached to appropriations was identified in the complete supplied introduced text. This conclusion is limited to that version and does not establish what appears in other versions or accompanying materials.
Spending directed to particular recipients or places outside ordinary competitive or formula-based allocation.
None identified in the reviewed text
No congressionally directed spending for particular recipients or places was identified in the complete supplied introduced text. This conclusion is limited to that version; absent accompanying materials prevent a broader formal earmark assessment.
Narrow exceptions, exemptions, or preferential treatment that warrant a closer look.
Findings to examine
The supplied text contains specialized tax deductions, exemptions and tax limits for a narrowly defined business class and certain investors. These benefits are part of the bill’s main policy; classification does not establish improper purpose.
Qualifying catastrophic risk transfer companies would receive a specialized dividends-paid deduction, subject to a 90% distribution-related test. This is preferential tax treatment for a restricted class of corporations, central to the bill’s proposed regime.
The deduction for dividends paid (as defined in section 561) shall be allowed.
the deduction for dividends paid during the taxable year (as defined in section 561) equals or exceeds 90 percent of its catastrophic risk transfer company taxable income for the taxable year determined without regard to subsection (b)(2)(C)
the principal purpose of which is the carrying out of the activities of catastrophic risk transfer
Nonresident foreign individuals and foreign corporations receiving qualified investment-income dividends from qualifying companies would receive a specialized exemption from the specified federal tax. The exemption would be conditional, including related-debt, ownership-documentation and country-based exceptions. This investor benefit is directly tied to the main tax regime.
(b) Exemption from withholding taxes on nonresident aliens and foreign corporations
Except as provided in paragraph (2), no tax shall be imposed under paragraph (1)(A) of subsection (a) on any qualified investment income dividend received from a catastrophic risk transfer company which meets the requirements of section 860M(a) for the taxable year with respect to which the dividend is paid.
Paragraph (1) shall not apply— (A) to any qualified investment income dividend received from a catastrophic risk transfer company by a person to the extent such dividend is attributable to investment income received by such company on indebtedness issued by such person or by any corporation or partnership with respect to which such person is a 10-percent shareholder
receives a statement (which meets requirements similar to the requirements of subsection (h)(5)) that the beneficial owner of such stock is not a United States person
(C) to any qualified investment income dividend paid to any person within a foreign country (or any such dividend payment addressed to, or for the account of, persons within such foreign country) during any period described in subsection (h)(6) with respect to such country.
(2) Exceptions Paragraph (1) shall not apply any dividend described in section 871(n)(2).
Qualifying companies would receive special protection against state and local reinsurance-premium taxes: only the organizing state could impose the tax, and its amount would be capped by the referenced federal tax on premiums paid to foreign insurers or reinsurers. This protection is another targeted part of the bill’s main tax policy.
A taxing jurisdiction other than the State under the laws of which a catastrophic risk transfer company is created or organized shall not impose a premium tax on any premiums paid to, or received by, such company on a policy of reinsurance.
If a State allowed under subsection (a) imposes a premium tax on a catastrophic risk transfer company on premiums on a policy of reinsurance, the amount of such tax shall not exceed the tax which would have been imposed under section 4371 of the Internal Revenue Code of 1986 if such premiums were paid to a foreign insurer or reinsurer.
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