Wyden Releases Proposal to Close Private Placement Life Insurance Tax Shelter Used by the Ultra-Rich
New Proposal Follows 18-Month Committee Investigation that Found the Ultra-Rich Used PPLI Loophole to Abuse Special Tax Rules for Life Insurance and Shelter Tens of Billions from Tax; Proposal Would Protect the Special Tax Treatment of Traditional Life Insurance
Washington, D.C. – Senate Finance Committee Chair Ron Wyden, D-Ore., released draft legislation today to close a tax loophole that allows the ultra-rich to shelter tens of billions of dollars in income from taxes through the use of private placement life insurance (PPLI) contracts. PPLI policies are related in name only to the typical life insurance policies commonly held by middle class families. Designed to mimic hedge funds and other vehicles for the benefit of sophisticated investors, they are exclusively available to the ultra-wealthy and make up just 0.003 percent of all outstanding life insurance policies. The Protecting Proper Life Insurance from Abuse Act would protect the longstanding, preferential tax treatment of traditional life insurance and make no changes to the plans that middle class families count on for financial security.
“Life insurance is an essential source of financial security for tens of millions of middle class families in America, so we cannot have a bunch of ultra-rich tax dodgers abusing its special tax treatment to set up tax-free hedge funds and shelter oodles of cash,” Wyden said. “There’s a long tradition of Congress stepping in to prevent the abuse of the preferential tax rules for life insurance, and this bill is the next step in that process. Life insurance is too important to allow it to be twisted into another garden variety tax ripoff for the top.”
A one-page summary of the proposal is available here. A section-by-section summary is available here. Legislative language is available here.
This draft legislation was prepared in connection with the report, “Private Placement Life Insurance: A Tax Shelter for the Ultra-Wealthy masquerading as Insurance,” issued by the Finance Committee on February 21, 2024, which found that the PPLI industry has helped ultra-wealthy policy holders shelter tens of billions of dollars from tax.
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