Notice 2018-41

as industrial emission of greenhouse gas
or lead to such release, and is measured at
the source of capture and verified at the
point of disposal, injection, or utilization;
(2) any carbon dioxide or other carbon
oxide which is captured from an industrial
source by carbon capture equipment
which is originally placed in service on or
after the date of the enactment of the
Bipartisan Budget Act of 2018, which
would otherwise be released into the atmosphere as industrial emission of greenhouse gas or lead to such release, and is
measured at the source of capture and
verified at the point of disposal, injection,
or utilization; or (3) in the case of a direct
air capture facility, any carbon dioxide
which is captured directly from the ambient air, and is measured at the source of
capture and verified at the point of disposal, injection, or utilization.
Section 45Q(d) defines the term “qualified facility” any industrial facility or direct air capture facility (1) the construction of which begins before January 1,
2024, and (A) construction of carbon capture equipment begins before such date, or
(B) the original planning and design for
such facility includes installation of carbon capture equipment; and (2) which
captures (A) in the case of a facility which
emits not more than 500,000 metric tons
of carbon oxide into the atmosphere during the taxable year, not less than 25,000
metric tons of qualified carbon oxide during the taxable year which is utilized in a
manner described in § 45Q(f)(5), (B) in the
case of an electricity generating facility
which is not described in § 45Q(d)(2)(A),
not less than 500,000 metric tons of qualified carbon oxide during the taxable year, or
(C) in the case of a direct air capture facility
or any facility not described in § 45Q(d)(2)
(A) or (B), not less than 100,000 metric tons
of qualified carbon oxide during the taxable
year.
Under § 45Q(f)(7), for taxable years beginning in a calendar year after 2009, the
dollar amounts contained in § 45Q(a)(1) and
(2) must be adjusted for inflation by multiplying such dollar amount by the inflation
adjustment factor for such calendar year determined under § 43(b)(3)(B), determined
by substituting “2008” for “1990.”
Section 43(b)(3)(B) defines the term
“inflation adjustment factor” as, with respect to any calendar year, a fraction the

May 14, 2018

numerator of which is the GNP implicit
price deflator for the preceding calendar
year and the denominator of which is the
GNP implicit price deflator for 1990. For
purposes of § 45Q(f)(7), for the 2018 calendar year, the inflation adjustment factor
is a fraction the numerator of which is the
GNP implicit price deflator for 2017
(113.500) and the denominator of which is
the GNP implicit price deflator for 2008
(99.239).
Section 45Q(g) provides that in the
case of any carbon capture equipment
placed in service before the date of the
enactment of the Bipartisan Budget Act
of 2018, the credit under § 45Q shall
apply with respect to qualified carbon
oxide captured using such equipment
before the end of the calendar year in
which the Secretary, in consultation
with the Administrator of the Environmental Protection Agency, certifies that,
during the period beginning after October 3, 2008, a total of 75,000,000 metric
tons of qualified carbon oxide have been
taken into account in accordance with
(1) § 45Q(a), as in effect on the day
before the date of the enactment of the
Bipartisan Budget Act of 2018, and (2)
§ 45Q(a)(1) and (2).
SECTION 3. INFLATION
ADJUSTMENT FACTOR
The inflation adjustment factor for calendar year 2017 is 1.1437. The § 45Q
credit for calendar year 2018 is $22.87 per
metric ton of qualified carbon oxide under
§ 45Q(a)(1) and $11.44 per metric ton of
qualified carbon oxide under § 45Q(a)(2).
SECTION 4. TAX CREDIT
UTILIZATION
Section 6 of Notice 2009 – 83 requires
taxpayers to file annual reports that
provide (among other information) the
amounts (in metric tons) of qualified CO2
for the taxable year that has been taken
into account for purposes of claiming the
§ 45Q credit. The annual reports must be
filed with the Service not later than the
last day of the second calendar month
following the month during which the tax
return on which the § 45Q credit is
claimed was due (including extensions).
Based on the most recent annual reports filed with the Internal Revenue Ser-

584

vice, the aggregate amount of qualified
carbon oxide taken into account for purposes of § 45Q is 59,767,924 metric tons.
SECTION 5. DRAFTING
INFORMATION
The principal author of this notice is
David Selig of the Office of Associate
Chief Counsel (Passthroughs & Special
Industries). For further information regarding this notice contact David Selig at
(202) 317-6853 (not a toll-free number).

Information Reporting for
Certain Life Insurance
Contract Transactions and
a Modification to the
Transfer for Valuable
Consideration Rules
Notice 2018 – 41
SECTION 1. PURPOSE
This notice announces that the Department of the Treasury (“Treasury”) and the
Internal Revenue Service (“IRS”) intend
to issue proposed regulations providing
guidance to assist taxpayers in complying
with new information reporting obligations for certain life insurance contract
transactions under § 6050Y, which was
added to the Internal Revenue Code (the
“Code”) by section 13520 of “[a]n Act to
provide for reconciliation pursuant to titles II and V of the concurrent resolution
on the budget for fiscal year 2018,” P.L.
115–97 (the “Act”). The proposed regulations also will provide guidance on a
modification to the transfer for valuable
consideration rules for life insurance contracts added to § 101(a) by section 13522
of the Act. This notice requests public
comments on the implementation of these
provisions of the Act.
This notice also provides transitional
guidance under § 6050Y. Specifically, as
provided in section 3.A.iv. of this notice,
to ensure efficient administration of this
new provision, reporting will not be required under § 6050Y until final regulations are issued. For reportable policy
sales and payments of reportable death
benefits occurring after December 31,
2017, and before the date final regulations

Bulletin No. 2018 –20

under § 6050Y are published in the Federal Register, Treasury and the IRS intend
to allow additional time after the date final
regulations are published to file the returns and furnish the written statements
required by § 6050Y.
SECTION 2. BACKGROUND
A. Sales of Life Insurance Contracts
A life insurance policyholder who sells
a life insurance contract may have taxable
gain on the sale.2 Rev. Rul. 2009 –13,
2009 –21 I.R.B. 1029, holds that gain on
the sale of a life insurance contract is
included in gross income under § 61(a)(3).
The gain is capital gain, except to the
extent of the amount that would be recognized as ordinary income if the contract
were surrendered, which is ordinary income under the substitute for ordinary income doctrine. See Rev. Rul. 2009 –13;
see also Rev. Rul. 2009 –14, 2009 –21
I.R.B. 1031. The amount that would be
recognized as ordinary income under
§ 72(e)(5) if the contract were surrendered
is the “inside buildup” – the excess of the
amount that would be received upon surrender over the investment in the contract
as defined in § 72(e)(6).3 Section 72(e)(6)
defines the “investment in the contract” as
of any date as the aggregate amount of
premiums or other consideration paid for
the contract before that date, less the aggregate amount received under the contract before that date to the extent that
such amount was excludable from gross
income.
Life insurance contracts may be sold in
transactions known as life settlement
transactions. In a typical life settlement
transaction, the policyholder, often the individual insured under the life insurance
contract, sells his or her life insurance
contract to an unrelated person. The consideration paid generally is a lump-sum
cash payment that is less than the death
benefit on the policy, but more than the
amount that would be received by the
policyholder upon surrender of the life
insurance contract. In general, life settlement transactions may be arranged by a
life settlement broker, who negotiates the
2

sale of a life insurance contract on behalf
of the policyholder in exchange for a fee
or commission.
Over 40 states regulate life settlement
transactions. State law may require that
life settlement brokers be licensed and
that the contract of sale (the life settlement
contract) only be entered into by the policyholder and a licensed life settlement
provider. A life settlement provider may
purchase a life insurance contract on its
own behalf. Alternatively, the life settlement provider may purchase a life insurance contract on behalf of the ultimate
beneficial owner (for example, a financing
entity that provides the funds to purchase
the life insurance contract). The ultimate
beneficial owner of the life insurance contract may continue to pay the premiums
on the life insurance contract and receive
death benefits under the contract on the
death of the insured, or may, in a separate
transaction, sell the life insurance contract
to another investor in life insurance contracts.
A viatical settlement, a subset of life
settlement transactions, may involve the
sale of a life insurance contract, but may
not be taxed as a sale. Under a viatical
settlement, a policyholder may sell or assign a life insurance contract after the
insured has become terminally ill or
chronically ill. If any portion of the death
benefit under a life insurance contract on
the life of an insured who is terminally ill
or chronically ill (within the meaning of
§ 101(g)) is sold (through the sale of the
life insurance contract) or assigned in a
viatical settlement to a viatical settlement
provider, the amount paid for the sale or
assignment of that portion is treated as an
amount paid under the life insurance contract by reason of the death of the insured,
rather than gain from the sale or assignment. See §§ 101(a) and (g). Amounts
received under a life insurance contract
paid by reason of the death of the insured
are excluded from federal income tax. See
§ 101(a)(1). For this purpose, a viatical
settlement provider is a person regularly
engaged in the trade or business of purchasing, or taking assignments of, life insurance contracts insuring the lives of ter-

minally ill or chronically ill individuals
(provided certain requirements are met).
See Rev. Rul. 2002– 82, 2002–51 I.R.B.
978.
B. Information Reporting for Certain
Life Insurance Contract Transactions
Section 13520 of the Act added
§ 6050Y to the Code. In general, § 6050Y
imposes information reporting requirements on the acquirer and issuer in the case
of the acquisition, or notice of the acquisition, of an existing life insurance contract in
a reportable policy sale, and on each person
who makes a payment (the “payor”) of reportable death benefits. The reporting requirements set forth in § 6050Y are effective for reportable policy sales that occur
after December 31, 2017, and for reportable
death benefits paid after December 31,
2017.
The term “reportable policy sale” is defined in § 6050Y(d)(2), by cross-reference
to § 101(a)(3)(B), which was added by section 13522 of the Act, to mean “the acquisition of an interest in a life insurance contract, directly or indirectly, if the acquirer
has no substantial family, business, or financial relationship with the insured apart from
the acquirer’s interest in such life insurance
contract.” Section 101(a)(3)(B) provides
that, for purposes of determining whether an
acquisition of an interest in a life insurance
contract is a reportable policy sale, “the term
‘indirectly’ applies to the acquisition of an
interest in a partnership, trust, or other entity
that holds an interest in the life insurance
contract.” The term “reportable death benefits” is defined in § 6050Y(d)(4) to mean
“amounts paid by reason of the death of the
insured under a life insurance contract that
has been transferred in a reportable policy
sale.”
Section 6050Y(a) imposes reporting
requirements on every person who acquires
a life insurance contract, or any interest in a
life insurance contract, in a reportable policy
sale during the taxable year (the “acquirer”).
Under § 6050Y(a)(1), the acquirer must file
a return with the IRS setting forth (1) the
acquirer’s name, address, and taxpayer identification number (TIN); (2) the name, address, and TIN of each recipient of payment

In this notice, a reference to a sale of a life insurance contract includes a sale of any interest in a life insurance contract.

3

For some contracts, such as term life insurance contracts, the amount that would be received upon surrender of the contract is zero and the policyholder therefore has no ordinary income
on the sale of the contract.

Bulletin No. 2018 –20

585

May 14, 2018

in the reportable policy sale; (3) the date of
the sale; (4) the name of the issuer of the life
insurance contract sold and the policy number of such contract; and (5) the amount
of each payment. Under § 6050Y(a)(2),
the acquirer must furnish written statements to each payment recipient and the
issuer named in the return required by
§ 6050Y(a)(1). The statement furnished
by the acquirer to any payment recipient
must include items (1) through (5),
above. The statement furnished by the
acquirer to the issuer must include items
(1) through (4), above; however, the
statement is not required to include item
(5) (the amount of each payment). The
statements furnished by the acquirer to
each payment recipient and the issuer
must also include the name, address, and
phone number of the acquirer’s information contact. The term “payment” is defined by § 6050Y(d)(1) with respect to
any reportable policy sale as “the
amount of cash and the fair market value
of any consideration transferred in the
sale.” The term “issuer” is defined by
§ 6050Y(d)(3) as “any life insurance
company that bears the risk with respect
to a life insurance contract on the date
any return or statement is required to be
made under this section.”
Section 6050Y(b) imposes reporting
requirements on an issuer of a life insurance contract upon the receipt of a written
statement furnished by an acquirer under
§ 6050Y(a)(2), or upon any notice of the
transfer of a life insurance contract to a
foreign person. Under § 6050Y(b)(1), the
issuer must file a return with the IRS
setting forth (1) the name, address, and
TIN of the seller who transfers any interest in such contract in such sale; (2) the
seller’s investment in the contract within
the meaning of § 72(e)(6); and (3) the
policy number of the contract. Under
§ 6050Y(b)(2), the issuer must furnish the
seller with a written statement that includes items (1) through (3), above, as
well as the name, address, and phone
number of the issuer’s information contact.
Section 6050Y(c) imposes reporting requirements on every person who makes a
payment of reportable death benefits during
any taxable year. Under § 6050Y(c)(1), the
payor must file a return with the IRS setting
forth (1) the payor’s name, address, and

May 14, 2018

TIN; (2) the name, address, and TIN of each
recipient of such payment; (3) the date of
each such payment; (4) the gross amount of
each such payment; and (5) the payor’s estimate of the buyer’s investment in the contract within the meaning of § 72(e)(6). Under § 6050Y(c)(2), the payor must furnish to
each recipient of such payment a written
statement that includes items (1) through
(5), above, as well as the name, address, and
phone number of the payor’s information
contact.
C. Proceeds of Life Insurance Contracts
Payable by Reason of Death
Generally, amounts received under a
life insurance contract that are paid by
reason of death of the insured are excluded from federal income tax. See
§ 101(a)(1). However, if a life insurance
contract is sold or otherwise transferred
for valuable consideration (such as in a
life settlement transaction or viatical settlement), the excludable portion of the
amount paid by reason of the death of the
insured is limited. See § 101(a)(2). In general, under the § 101(a)(2) limitation, the
excludable amount following a transfer
for valuable consideration may not exceed the sum of (1) the actual value of
the consideration paid by the transferee
to acquire the life insurance contract and
(2) the premiums and other amounts
subsequently paid by the transferee. The
second sentence of § 101(a)(2) provides
that the § 101(a)(2) limitation does not
apply if (1) the transferee’s basis in the
contract is determined in whole or in
part by reference to the transferor’s basis in the contract or (2) the transfer is to
the insured, to a partner of the insured,
to a partnership in which the insured is a
partner, or to a corporation in which the
insured is a shareholder or officer. See
§ 101(a)(2).
Rev. Rul. 2009 –14 holds that a portion
of the death benefit received by a buyer of
a life insurance contract on the death of
the insured is included in income under
§ 101(a)(2). The portion included in income is the excess of the death benefit
over the premiums or other consideration
the buyer paid for the contract. Rev. Rul.
2009 –14 holds that the receipt of a death
benefit from the issuer under the terms of
the contract does not produce a capital
gain and, therefore, the income recog-

586

nized by the buyer upon the receipt of
death benefits under the contract is ordinary income.
D. A Modification to the Transfer for
Valuable Consideration Rules
Section 13522 of the Act added
§ 101(a)(3), which provides that the exception to the § 101(a)(2) limitation provided in the second sentence of § 101(a)
(2) does not apply in the case of a reportable policy sale. Accordingly, in the case
of a reportable policy sale, the amount of
death benefits excluded from gross income under § 101(a)(1) shall not exceed
an amount equal to the sum of the actual
value of the consideration the buyer
paid for the contract and the premiums
or other amounts subsequently paid by
the buyer. As a result, some portion of
the death benefit ultimately payable under such a contract may be includable in
income under § 101(a)(2) (for example,
if the life insurance contract is transferred for valuable consideration and the
death benefit exceeds the sum of the
actual value of the consideration and
the premiums or other amounts subsequently paid by the transferee of the
contract). The modification to the rules
for transfers for valuable consideration
is effective for transfers occurring after
December 31, 2017.
SECTION 3. INTENDED
PROPOSED GUIDANCE
A. Information Reporting for Certain
Life Insurance Contract Transactions
Section 6050Y provides that each of
the returns required by § 6050Y are to be
made “at such time and in such manner as
the Secretary shall prescribe.” Treasury
and the IRS intend to propose regulations
under § 6050Y describing the manner by
which and time at which the reporting
requirements of § 6050Y must be satisfied. The proposed regulations will also
clarify which parties are subject to the
reporting requirements and other definitional issues. For example, Treasury and
the IRS intend to define the term “reportable policy sale” in the proposed regula-

Bulletin No. 2018 –20

tions to include a viatical settlement.4 In
addition, Treasury and the IRS intend to
clarify the extent to which § 6050Y applies to sales or acquisitions effected by
transferors and transferees outside the
U.S. and to sellers and issuers that are
foreign persons for purposes of reporting
under § 6050Y(b) or (c).
i. Section 6050Y(a) Reporting of
Payments by Acquirer in a Reportable
Policy Sale
Treasury and the IRS intend to propose
regulations under § 6050Y(a)(1) requiring
every person who acquires a life insurance
contract or any interest in a life insurance
contract in a reportable policy sale to file
an information return, to be made according to forms and instructions to be published by the IRS, reporting the following
information to the IRS: (1) the acquirer’s
name, address, and TIN; (2) the name,
address, and TIN of each recipient of payment in the reportable policy sale; (3) the
date of the sale; (4) the name of the issuer
of the life insurance contract sold and the
policy number of such contract; and (5)
the amount of each payment.
Treasury and the IRS intend to propose
regulations under § 6050Y(a)(2) requiring
every person required to file a return under § 6050Y(a)(1) to furnish written statements to each payment recipient and issuer whose name is required to be set
forth in such return. The statements will
be required to set forth the name, address,
and phone number of the information contact of the acquirer, together with the information required to be reported to the
IRS under § 6050Y(a)(1), except that the
amount of each payment and the name,
address, and TIN of payment recipients
other than the seller need not be reported
to the issuer. The requirement to provide
such statements may be satisfied by furnishing a copy of the information return
provided to the IRS (provided the return
includes the name, address, and phone
number of the acquirer’s information contact, or this information is added to the
copy furnished to the payment recipient),
or an acceptable substitute statement.
Treasury and the IRS intend to propose
regulations that will define “acquirer” for
4

purposes of § 6050Y to be any person
who acquires a life insurance contract, or
an interest in a life insurance contract,
directly or indirectly, and who has no substantial family, business, or financial relationship with the insured apart from the
acquirer’s interest in such life insurance
contract. The proposed regulations may
further refine the definition of an “acquirer” for purposes of § 6050Y. For example, the proposed regulations may define “acquirer” in a reportable policy sale
to include any person, including the life
settlement or viatical settlement provider
or financing entity, that takes title or possession for state law purposes or acquires
a beneficial interest in the life insurance
contract at any time. The statute defines
“indirectly,” for purposes of a reportable
policy sale, as the acquisition of an interest in a partnership, trust, or other entity
that holds an interest in the life insurance
contract. The proposed regulations may
further refine the definition of “indirectly”
for purposes of § 6050Y reporting.
Treasury and the IRS intend to propose regulations regarding the definition
of a reportable payment for purposes of
§ 6050Y. Section 6050Y(d)(1) defines
“payment,” with respect to any reportable policy sale, as “the amount of cash
and the fair market value of any consideration transferred in the sale.” Treasury
and the IRS intend to clarify that a reportable payment may include payments
to persons other than the seller, such as
brokers and, potentially, life settlement
providers acting as intermediaries. Additionally, Treasury and the IRS intend
to clarify that the “payment” to the
seller reported under § 6050Y(a) is the
seller’s net proceeds. The net proceeds
equal the gross proceeds minus any selling expenses (for example, broker’s fees
and commissions).
ii. Section 6050Y(b) Reporting of
Transferor’s Investment in the Contract
by Issuer (Reportable Policy Sale or
Transfer to a Foreign Person)
Treasury and the IRS intend to propose
regulations implementing reporting obligations under § 6050Y(b) on any issuer
of a life insurance contract who has either

(1) received the statement required by
§ 6050Y(a)(2) to be furnished by the acquirer in a reportable policy sale or (2) has
received notice of a transfer of a life insurance contract to a foreign person.
Section 6050Y(d)(3) defines “issuer”
to mean “any life insurance company that
bears the risk with respect to a life insurance contract on the date any return or
statement is required to be made under
this section.” Treasury and the IRS intend
to limit the information reporting obligations imposed under § 6050Y(b) to the life
insurance company that is responsible for
administering the contract, including paying death benefits under the life insurance
contract. Under the proposed regulations,
the reporting obligations would not apply,
for instance, to a reinsurer in an indemnity
contract covering all or a portion of the
risks that the original issuer (and continuing contract administrator) might otherwise have incurred with respect to a life
insurance contract. This proposed definition of “issuer” will reduce the burden on
reporting life insurance companies and
prevent duplicative reporting.
Treasury and the IRS intend to propose
regulations under § 6050Y(b)(1) requiring
issuers who have received a statement under § 6050Y(a)(2) reporting a reportable
policy sale or notice of a transfer of a life
insurance contract to a foreign person to
file an information return, to be made according to forms and instructions to be
published by the IRS, reporting the following information to the IRS: (1) the
name, address, and TIN of each seller who
transfers an interest in a life insurance
contract; (2) the investment in the contract
(as defined in § 72(e)(6)) with respect to
such seller; (3) the policy number of such
contract; and (4) the amount that would
have been received by the policyholder
upon surrender of the contract. Treasury
and the IRS intend to propose regulations
requiring the issuer to report the amount
that would have been received by the policyholder upon surrender of the contract
because this information is needed to determine the amount of the seller’s gain
that is ordinary income. See Rev. Rul.
2009 –13; see also Rev. Rul. 2009 –14.
Treasury and the IRS intend to propose
regulations under § 6050Y(b)(2) requiring

Treasury and the IRS are also considering how to distinguish viatical settlements from other life settlement transactions for information reporting purposes.

Bulletin No. 2018 –20

587

May 14, 2018

every issuer required to make a return
under § 6050Y(b)(1) to furnish written
statements to each seller whose name is
required to be set forth in a return made
under § 6050Y(b)(1). The statements will
be required to set forth the name, address,
and phone number of the information contact of the issuer, together with the information required to be reported to the IRS
under § 6050Y(b)(1) and the proposed
regulations. The requirement to provide
such statements may be satisfied by furnishing a copy of the information return
provided to the IRS (provided the return
includes the name, address, and phone
number of the issuer’s information contact, or this information is added to the
copy furnished to the seller), or an acceptable substitute statement.
Treasury and the IRS intend to propose
regulations defining “seller” for purposes
of § 6050Y(b) to include any person who
transfers an interest in a life insurance
contract to an acquirer in a reportable policy sale or to a foreign person.
Treasury and the IRS intend to define
the term “investment in the contract” that
is required to be reported by the issuer
with respect to a seller. Section 6050Y(b)
requires an issuer to report the “investment in the contract (as defined in section
72(e)(6)) with respect to such seller.” Section 72(e)(6) defines the “investment in
the contract” as of any date as the aggregate amount of premiums or other consideration paid for the contract before that
date, less the aggregate amount received
under the contract before that date to the
extent that amount was excludable from
gross income. With respect to the original
policyholder, the issuer will have all of the
information required to determine the seller’s investment in the contract. With respect to a seller other than the original
policyholder, an issuer may not have all
the information required to determine the
seller’s investment in the contract, as defined in § 72(e)(6), because the acquirer of
the contract from the original policyholder
is not required under § 6050Y(a) to report
to the issuer the amount paid for the contract. For this reason, the issuer’s obligation to report the “investment in the
contract” on any date will be limited to
the information that is known to the
issuer (in general, the amount of premiums received from the seller for the

May 14, 2018

contract before that date, less the aggregate amount paid to the seller under the
contract before that date).
Treasury and the IRS intend to propose
regulations defining notice of a transfer of
a life insurance contract to a foreign person for purposes of § 6050Y(b) as any
notice, including information provided for
nontax purposes such as change of address notices for purposes of sending
statements or for other purposes, or information relating to loans, premiums, or
death benefits with respect to the contract.
See H.R. Rep. No. 115– 466, at 485
(2017) (Conf. Rep.).
Issuers of life insurance contracts acquired by a domestic person in a reportable policy sale are subject to the reporting obligations of § 6050Y(b) only if the
issuer receives the statement required by
§ 6050Y(a)(2) to be furnished by the acquirer in a reportable policy sale to the
issuer. Treasury and the IRS intend to
propose regulations providing that issuers
who have not received a written statement
from an acquirer under § 6050Y(a)(2), but
who have received notice of a transfer of a
life insurance contract to a domestic person,
may optionally file a return with the IRS
under § 6050Y(b)(1) and furnish written
statements to sellers under § 6050Y(b)(2),
unless the issuer knows the transfer is not a
reportable policy sale.
iii. Section 6050Y(c) Reporting of
Reportable Death Benefits by Payor
Treasury and the IRS intend to propose
regulations related to the reporting obligations under § 6050Y(c) on persons making
payments of reportable death benefits during any taxable year. Every person making
payments of reportable death benefits during any taxable year is subject to the reporting obligations of § 6050Y(c), regardless of
whether such person received a statement
from the acquirer in the reportable policy
sale under § 6050Y(a)(2).
Treasury and the IRS intend to propose
regulations under § 6050Y(c)(1) requiring
a payor of reportable death benefits to file
an information return, to be made according to forms and instructions to be
published by the IRS, reporting the following information to the IRS: (1) the
payor’s name, address, and TIN; (2) the
name, address, and TIN of each recipi-

588

ent of such payment; (3) the date of each
such payment; (4) the gross amount of
each such payment; and (5) the payor’s
estimate of the investment in the contract (as defined in § 72(e)(6)) with respect to the buyer.
Treasury and the IRS intend to propose
regulations under § 6050Y(c)(2) requiring
every person required to file a return under
§ 6050Y(c)(1) to furnish written statements
to each recipient of reportable death benefits
whose name is required to be set forth in a
return made under § 6050Y(c)(1). The statements will be required to set forth the name,
address, and phone number of the information contact of the payor, together with the
information required to be reported to the
IRS under § 6050Y(c)(1). The requirement
to provide such statements may be satisfied
by furnishing a copy of the information return provided to the IRS (provided the return includes the name, address, and phone
number of the payor’s information contact,
or this information is added to the copy
furnished to the payment recipient), or an
acceptable substitute statement.
Treasury and the IRS intend to define
the term “estimate of the investment in the
contract” that is required to be reported by
the payor with respect to a buyer to include only the amount of premiums paid
by the buyer under the contract, less the
aggregate amount received by the buyer
under the contract. In addition, Treasury
and the IRS intend to define “buyer” in the
proposed regulations. For example, the
proposed regulations may define “buyer”
to include any person either holding a
beneficial interest in the life insurance
contract or taking title or possession for
state law purposes.
Section 6050Y(d)(4) defines “reportable death benefits” as “amounts paid by
reason of the death of the insured under a
life insurance contract that has been transferred in a reportable policy sale.” The
definition of “reportable policy sale” applies only to transfers made after December 31, 2017. Accordingly, death benefits
are “reportable death benefits” under
§ 6050Y(d)(4), and are subject to the reporting requirements of § 6050Y(c), only
if the death benefits are paid by reason of
the death of the insured under a life insurance contract transferred after December
31, 2017, in a reportable policy sale.

Bulletin No. 2018 –20

iv. Timing of Section 6050Y Reporting
Among other requirements, § 6050Y(a)
requires the acquirer in a reportable policy
sale to report the amount of each payment made in a reportable policy sale to
the IRS and each payment recipient.
Section 6050Y(b) requires each issuer
of a life insurance contract who receives
notice of a reportable policy sale via
receipt of a statement required under
§ 6050Y(a)(2), or who receives notice
of a transfer of a life insurance contract
to a foreign person, to report the seller’s
investment in the life insurance contract
to the IRS and the seller. Section
6050Y(c) requires the payor of a reportable death benefit to report the payment
to the IRS and each payment recipient.
The recipients of the written statements
required to be furnished under § 6050Y
may use the information therein to determine their taxable income. To facilitate
recipients’ proper tax reporting, Treasury
and the IRS intend to require that an acquirer furnish the written statements required under § 6050Y(a)(2) to an issuer
by the later of (1) 20 days after the reportable policy sale, or (2) 5 days after the end
of the applicable state law rescission period, if any, but in no event later than
January 15 of the year following the calendar year in which the reportable policy
sale occurs. Treasury and the IRS intend
to require that all other written statements
required under §§ 6050Y(a)(2), (b)(2),
and (c)(2) be furnished to the recipients
identified in the statute and regulations
no later than January 31 of the year
following the calendar year in which the
reportable policy sale or reportable
death benefit payment occurs. The earlier deadline for acquirers to furnish issuers with the written statements required under § 6050Y(a)(2) is needed
because reporting under § 6050Y(b) is
contingent on the issuer receiving either
notice of a reportable policy sale via
a written statement furnished under
§ 6050Y(a)(2) or notice of the transfer
of a life insurance contract to a foreign
person.
Treasury and the IRS intend to propose
regulations requiring the returns required
by §§ 6050Y(a)(1), (b)(1), and (c)(1) to be
filed with the IRS no later than February
28 of the year following the calendar year

Bulletin No. 2018 –20

in which the reportable policy sale or reportable death benefit payment occurs, for
paper returns, and no later than March 31
of the year following the calendar year in
which the reportable policy sale or reportable death benefit payment occurs, for
electronically filed returns.
Treasury and the IRS intend to propose
regulations regarding reporting obligations upon the rescission of a reportable
policy sale or transfer to a foreign person.
Upon receiving notice of the rescission,
any person who has filed a return required
by § 6050Y with respect to the reportable
policy sale or transfer would have 15 days
to file a corrected return. Upon receiving
notice of the rescission, any person who
has furnished a written statement under
§ 6050Y with respect to the reportable
policy sale or transfer would have 15 days
to furnish the recipient of that statement
with a corrected statement reporting the
rescission.
The reporting requirements of § 6050Y
apply to reportable policy sales that occur
after December 31, 2017, and reportable
death benefits paid after December 31,
2017. For reportable policy sales and payments of reportable death benefits occurring after December 31, 2017, and before
the date final regulations under § 6050Y
are published in the Federal Register,
Treasury and the IRS intend to allow additional time after the date final regulations are published to file the returns and
furnish the written statements required by
§ 6050Y.
B. A Modification to the Transfer for
Valuable Consideration Rules
Treasury and the IRS intend to propose
amendments to § 1.101–1 to reflect the
addition of § 101(a)(3) by section 13522
of the Act.
SECTION 4. REQUEST FOR
COMMENTS
Treasury and the IRS request comments on the proposed rules described in
this notice and on any additional issues
that should be addressed by the regulations, including the following:
(a) The time and manner for reporting
certain life insurance contract transactions
under § 6050Y, including the timing of
reporting under the transition relief for

589

reportable policy sales and payment of
reportable death benefits occurring prior
to the issuance of final regulations;
(b) Identification of the “acquirer” in a
reportable policy sale for purposes of
§ 6050Y reporting; whether for purposes
of § 6050Y there might be more than one
person taking title or possession for state
law purposes of an insurance contract or
acquiring a beneficial interest in a life
insurance contract with respect to a series
of transfers involving a reportable policy
sale and, if so, how § 6050Y should apply;
and whether the proposed definition of
“acquirer” would lead to duplicate reporting of payments in reportable policy sales;
(c) If each person who takes possession
or title as owner or beneficial owner of a
life insurance contract as part of a series
of transactions is required to report under
§ 6050Y(a), should the proposed regulations allow each person’s reporting obligation to be discharged through one unified reporting by one of the persons or a
third party information reporting contractor;
(d) The application of the rules in
§ 6050Y(a) to the series of prearranged
transfers of an insurance contract as part
of the initial reportable policy sale, also
known as a secondary market sale, and
whether these title and ownership transfers should be aggregated into one reportable policy sale or whether each transfer
should be treated as a separate reporting
event for purposes of § 6050Y(a);
(e) The application of the rules in
§ 6050Y(a) to a reportable policy sale that
occurs after an initial reportable policy
sale, also known as a tertiary market policy sale;
(f) Identification of “payment recipients” in reportable policy sales, other than
the seller, for purposes of § 6050Y(a);
whether requiring reporting of payments
to such persons would duplicate existing
information reporting; whether payments
to multiple payment recipients in a reportable policy sale should be reported on a
single return; and what information reported on the return should be provided to
each payment recipient;
(g) Whether there could be payments
to payment recipients other than the seller
in a reportable policy sale that are not
selling expenses, and if so, whether the
seller’s net proceeds would include or be

May 14, 2018

net of those amounts, and the extent to
which the acquirer would have knowledge
of all such payments;
(h) The definition of “reportable policy
sale” set forth in § 101(a)(3)(B) and the
need for additional guidance regarding the
definition (for example, the types of transactions covered by the term, as well as the
extent to which the definition should exclude sales or acquisitions effected by
transferors and transferees outside the
U.S.), as well as how to distinguish viatical settlements from other life settlement
transactions for information reporting purposes;
(i) The rules under § 6050Y(b), including the definition of “issuer,” “seller,” and
of “notice of a transfer to a foreign person”;
(j) The definition of “buyer” for purposes of § 6050Y(c), including whether it
should include the beneficial owner of the
life insurance contract and the person
holding title or possession for state law
purposes, and identification of the person
or persons holding the information necessary to determine the investment in the
contract made by the “buyer”;
(k) The definition of “investment in the
contract” for purposes of §§ 6050Y(b) and
(c);
(l) Documentation requirements that
should be applied by acquirers and issuers
to determine whether a payment recipient/
seller is a non-U.S. person for purposes of
excluding their respective reporting under
§ 6050Y, including addressing any foreign sellers that might be included in the
reporting and presumption rules to be applied in the absence of reliable documentation establishing a seller’s non-U.S. status (to the extent permitted for excluding
reporting); and
(m) Rules to coordinate any of the provisions of § 6050Y with other sections of
the Code addressing withholding and reporting requirements, including coordination with the provisions of chapters 3 and
4 of the Code.
Comments should be submitted in
writing on or before June 13, 2018, and
should contain reference to this Notice
2018 – 41. All comments will be available
for public inspection and copying. Comments may be submitted in one of three
ways:

May 14, 2018

(1) By mail to Internal Revenue Service, CC:PA:LPD:PR (Notice
2018 – 41), Room 5203, P.O.
Box 7604, Ben Franklin Station,
Washington, DC 20044.
(2) Electronically to Notice.Comments@
irscounsel.treas.gov. Please include “Notice 2018 – 41” in both
the body of the comment and on
the subject line of any electronic
communications.
(3) By hand-delivery Monday through
Friday between the hours of 8 a.m.
and 4 p.m. to CC:PA:LPD:PR (Notice 2018 – 41), Courier’s Desk, Internal Revenue Service, 1111 Constitution Ave., NW, Washington,
DC 20224.
DRAFTING INFORMATION
The principal author of this notice is
Kathryn M. Sneade of the Office of Associate Chief Counsel (Financial Institutions
& Products). For further information regarding this notice, contact Ms. Sneade at (202)
317-6995 (not a toll-free number).

Section 101.—Certain
death benefits
26 C.F.R. 1.101-1: Exclusion from gross income
of proceeds of life insurance contracts payable by
reason of death.
Information reporting obligations with respect to
amounts paid by reason of the death of the insured
under a life insurance contract that has been transferred in a reportable policy sale. See Notice 201841, page 584.

Public Comment Invited on
Recommendations for
2018 –2019 Priority
Guidance Plan
Notice 2018 – 43
The Department of the Treasury (Treasury Department) and the Internal Revenue Service (Service) invite public comment on recommendations for items that
should be included on the 2018 –2019 Priority Guidance Plan.
The Treasury Department’s Office of
Tax Policy and the Service use the Priority Guidance Plan each year to identify

590

and prioritize the tax issues that should be
addressed through regulations, revenue rulings, revenue procedures, notices, and other
published administrative guidance. The
2018 –2019 Priority Guidance Plan will
identify guidance projects that the Treasury
Department and the Service intend to work
on as priorities during the period from July
1, 2018, through June 30, 2019.
The Treasury Department and the Service recognize the importance of public
input in formulating a Priority Guidance
Plan that focuses resources on guidance
items that are most important to taxpayers
and tax administration. Published guidance plays an important role in increasing
voluntary compliance by helping to clarify ambiguous areas of the tax law. The
published guidance process is most successful if the Treasury Department and the
Service have the benefit of the experience
and knowledge of taxpayers and practitioners who must apply the rules implementing the internal revenue laws.
On December 22, 2017, P.L. 115–97,
“An Act to provide for the reconciliation
pursuant to titles II and V of the concurrent resolution on the budget for fiscal
year 2018,” commonly referred to as the
Tax Cuts and Jobs Act (the Act), was
enacted. Since that time the Treasury Department and the Service have focused
their efforts on guidance projects necessary to implement the Act.
The Treasury Department and the Service expect to continue to concentrate on
guidance implementing the Act for the balance of the current plan year and during the
2018 –2019 plan year. As a result, the Treasury Department and the Service do not
expect to be able to complete a number of
the guidance projects on the 2017–2018 Priority Guidance Plan, but they currently expect that many of these projects will be
carried over to the 2018 –2019 Priority
Guidance Plan.
In reviewing recommendations and selecting additional projects for inclusion on
the 2018 –2019 Priority Guidance Plan,
the Treasury Department and the Service
will consider the following:
1. Whether the recommended guidance
resolves significant issues relevant to
many taxpayers;
2. Whether the recommended guidance
reduces controversy and lessens the
burden on taxpayers or the Service;

Bulletin No. 2018 –20