Editorial Notes

Amendments

2002—Subsec. (c)(3)(A)(ii). Pub. L. 107–147 repealed Pub. L. 106–554, § 1(a)(7) [title III, § 318(a)(2)]. See 2000 Amendment note below.

2000—Subsec. (a)(2). Pub. L. 106–554, § 1(a)(7) [title III, § 318(a)(1)], inserted “or this paragraph” before period at end.

Subsec. (c)(3)(A)(ii). Pub. L. 106–554, § 1(a)(7) [title III, § 318(a)(2)], which substituted “under the old contract” for “under the contract”, was repealed by Pub. L. 107–147. See Construction of 2002 Amendment note below.

1989—Subsec. (c)(3)(B). Pub. L. 101–239, § 7815(a)(1), substituted “benefit increases” for “increases in future benefits” in heading and amended text generally. Prior to amendment, text read as follows: “For purposes of subparagraph (A), the term ‘material change’ includes any increase in future benefits under the contract. Such term shall not include—

“(i) any increase which is attributable to the payment of premiums necessary to fund the lowest level of future benefits payable in the 1st 7 contract years (determined after taking into account death benefit increases described in subparagraph (A) or (B) of section 7702(e)(2)) or to crediting of interest or other earnings (including policyholder dividends) in respect of such premiums, and

“(ii) to the extent provided in regulations, any cost-of-living increase based on an established broad-based index if such increase is funded ratably over the remaining life of the the contract.”

Subsec. (c)(4). Pub. L. 101–239, § 7815(a)(4), substituted “of $10,000 or less” for “under $10,000” in heading and “the same policyholder” for “the same insurer” in concluding provisions.

Subsec. (c)(6). Pub. L. 101–239, § 7647(a), added par. (6).

Statutory Notes and Related Subsidiaries

Effective Date of 2000 Amendment

Pub. L. 106–554, § 1(a)(7) [title III, § 318(a)(3)], Dec. 21, 2000, 114 Stat. 2763, 2763A–645, provided that: “The amendments made by this subsection [amending this section] shall take effect as if included in the amendments made by section 5012 of the Technical and Miscellaneous Revenue Act of 1988 [Pub. L. 100–647].”

Effective Date of 1989 Amendment

Pub. L. 101–239, title VII, § 7647(b), Dec. 19, 1989, 103 Stat. 2383, provided that: “The amendment made by subsection (a) [amending this section] shall apply to contracts entered into on or after September 14, 1989.”

Amendment by section 7815(a)(1), (4) of Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.

Effective Date

Pub. L. 100–647, title V, § 5012(e), Nov. 10, 1988, 102 Stat. 3665, as amended by Pub. L. 101–239, title VII, § 7815(a)(2), Dec. 19, 1989, 103 Stat. 2414, provided that:

“(1)

In general.—

Except as otherwise provided in this subsection, the amendments made by this section [enacting this section and amending sections 26 and 72 of this title] shall apply to contracts entered into on or after June 21, 1988.

“(2)

Special rule where death benefit increases by more than $150,000.—

If the death benefit under the contract increases by more than $150,000 over the death benefit under the contract in effect on October 20, 1988, the rules of section 7702A(c)(3) of the 1986 Code (as added by this section) shall apply in determining whether such contract is issued on or after June 21, 1988. The preceding sentence shall not apply in the case of a contract which, as of June 21, 1988, required at least 7 level annual premium payments and under which the policyholder makes at least 7 level annual premium payments.

“(3)

Certain other material changes taken into account.—

A contract entered into before June 21, 1988, shall be treated as entered into after such date if—

“(A)

on or after June 21, 1988, the death benefit under the contract is increased (or a qualified additional benefit is increased or added) and before June 21, 1988, the owner of the contract did not have a unilateral right under the contract to obtain such increase or addition without providing additional evidence of insurability, or

“(B)

the contract is converted after June 20, 1988, from a term life insurance contract to a life insurance contract providing coverage other than term life insurance coverage without regard to any right of the owner of the contract to such conversion.

“(4)

Certain exchanges permitted.—

In the case of a modified endowment contract which—

“(A)

required at least 7 annual level premium payments,

“(B)

is entered into after June 20, 1988, and before the date of the enactment of this Act [Nov. 10, 1988], and

“(C)

is exchanged within 3 months after such date of enactment for a life insurance contract which meets the requirements of section 7702A(b),

the contract which is received in exchange for such contract shall not be treated as a modified endowment contract if the taxpayer elects, notwithstanding section 1035 of the 1986 Code, to recognize gain on such exchange.

“(5)

Special rule for annuity contracts.—

In the case of annuity contracts, the amendments made by subsection (d) [amending section 72 of this title] shall apply to contracts entered into after October 21, 1988.”

Construction of 2002 Amendment

Pub. L. 107–147, title IV, § 416(f), Mar. 9, 2002, 116 Stat. 55, provided that: “Paragraph (2) of section 318(a) of the Community Renewal Tax Relief Act of 2000 [H.R. 5662, as enacted by section 1(a)(7) of Pub. L. 106–554](114 Stat. 2763A–645) [amending this section] is repealed, and clause (ii) of section 7702A(c)(3)(A) shall read and be applied as if the amendment made by such paragraph had not been enacted.”