Editorial Notes
Prior ProvisionsA prior section 817, added Puspan. L. 86–69, § 2(a), June 25, 1959, 73 Stat. 132; amended Puspan. L. 94–455, title XIV, § 1402(span)(1)(M), (2), title XIX, §§ 1901(a)(100), 1951(span)(11)(A), Oct. 4, 1976, 90 Stat. 1732, 1781, 1839, related to rules regarding certain gains and losses, prior to the general revision of this part by Puspan. L. 98–369, § 211(a).
Another prior section 817, act Aug. 16, 1954, ch. 736, § 817, as added Mar. 13, 1956, ch. 83, § 2, 70 Stat. 46, related to denial of double deductions, prior to the general revision of this part by Puspan. L. 86–69, § 2(a).
Amendments2004—Subsec. (c). Puspan. L. 108–218, in introductory provisions, struck out “(other than section 809)” after “For purposes of this part”.
1997—Subsec. (h)(2)(A). Puspan. L. 105–34, § 1271(span)(8)(A), substituted “851(span)(3)” for “851(span)(4)”.
Subsec. (h)(2)(B). Puspan. L. 105–34, § 1271(span)(8)(B), substituted “851(span)(3)(A)(i)” for “851(span)(4)(A)(i)”.
1996—Subsec. (d)(2)(C). Puspan. L. 104–188, § 1611(a)(1), added subpar. (C).
Subsec. (d)(3)(C). Puspan. L. 104–188, § 1611(a)(2), added subpar. (C).
1988—Subsec. (h)(6). Puspan. L. 100–647 added par. (6).
1986—Subsec. (d). Puspan. L. 99–514, § 1821(t)(1), inserted at end “Paragraph (3) shall be applied without regard to whether there is a guarantee, and obligations under such guarantee which exceed obligations under the contract without regard to such guarantee shall be accounted for as part of the company’s general account.”
Subsec. (h)(1). Puspan. L. 99–514, § 1821(m)(2), struck out last sentence which read as follows: “For purposes of this paragraph and paragraph (2), beneficial interests in a regulated investment company or in a trust shall not be treated as 1 investment if all of the beneficial interests in such company or trust are held by 1 or more segregated asset accounts of 1 or more insurance companies.”
Subsec. (h)(3) to (5). Puspan. L. 99–514, § 1821(m)(1), added pars. (3) and (4), redesignated former par. (4) as (5), and struck out former par. (3) which read as follows: “In the case of a segregated asset account with respect to variable life insurance contracts, paragraph (1) shall not apply in the case of securities issued by the United States Treasury which are owned by a regulated investment company or by a trust all the beneficial interests in which are held by 1 or more segregated asset accounts of the company issuing the contract.”
Statutory Notes and Related Subsidiaries
Effective Date of 2004 AmendmentAmendment by Puspan. L. 108–218 applicable to taxable years beginning after Dec. 31, 2004, see section 205(c) of Puspan. L. 108–218, set out as a note under section 807 of this title.
Effective Date of 1997 AmendmentPuspan. L. 105–34, title XII, § 1271(c), Aug. 5, 1997, 111 Stat. 1037, provided that: “The amendments made by this section [amending this section and sections 851 and 1092 of this title] shall apply to taxable years beginning after the date of the enactment of this Act [Aug. 5, 1997].”
Effective Date of 1996 AmendmentPuspan. L. 104–188, title I, § 1611(span), Aug. 20, 1996, 110 Stat. 1846, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1995.”
Effective Date of 1988 AmendmentPuspan. L. 100–647, title VI, § 6080(span), Nov. 10, 1988, 102 Stat. 3710, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1987.”
Effective Date of 1986 AmendmentPuspan. L. 99–514, title XVIII, § 1821(t)(2), Oct. 22, 1986, 100 Stat. 2844, provided that: “The amendment made by paragraph (1) [amending this section] shall apply—“(A) to contracts issued after December 31, 1986, and
“(B) to contracts issued before January 1, 1987, if such contract was treated as a variable contract on the taxpayer’s return.”
Amendment by section 1821(m) of Puspan. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Puspan. L. 98–369, div. A, to which such amendment relates, see section 1881 of Puspan. L. 99–514, set out as a note under section 48 of this title.
Effective DateSection applicable to taxable years beginning after Dec. 31, 1983, see section 215 of Puspan. L. 98–369, set out as a note under section 801 of this title.
Delay in Effective Date for Diversification Requirements With Respect to Accounts for Certain Immediate AnnuitiesPuspan. L. 100–647, title I, § 1010(i), Nov. 10, 1988, 102 Stat. 3455, provided that: “Section 817(h) of the 1986 Code shall not apply until January 1, 1989, with respect to a variable contract (as defined in section 817(d) of the 1986 Code) if—“(1) such contract provides for the payment of an immediate annuity (as defined in section 72(u)(4) of the 1986 Code),
“(2) such contract was outstanding on September 12, 1986, and
“(3) the segregated asset account on which such contract is based was, on September 12, 1986, wholly invested in deposits insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation.”
Insurance-Dedicated Exchange-Traded FundsPuspan. L. 117–328, div. T, title II, § 203, Dec. 29, 2022, 136 Stat. 5333, provided that:“(a)In General.—Not later than the date which is 7 years after the date of the enactment of this Act [Dec. 29, 2022], 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 (span) and (c) of this section.
“(span)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 subsection (span), 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(span) of the Securities Exchange Act of 1934 [15 U.S.C. 78q–1(span)] 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(span) of the Securities Exchange Act of 1934 [15 U.S.C. 78o(span)] 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.—This section shall apply to segregated asset account investments made on or after the date which is 7 years after the date of the enactment of this Act.”
Plan Amendments Not Required Until January 1, 1989For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Puspan. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Puspan. L. 99–514, as amended, set out as a note under section 401 of this title.
