Tax Reform Act of 1986

The Tax Reform Act of 1986 made significant changes to various tax-related laws, including: 1. Corporate Provisions: * Amendments were made to sections related to life insurance companies, partnerships, and taxation. * Changes were made to the definition of "related persons" and "passenger automobile", as well as rules for certain investments and deductions. 2. Life Insurance Companies: * Life insurance companies may now use a new table when computing statutory reserves. * The Secretary is granted authority to change the table by regulation. 3. Flexible Premium Contracts: * Flexible premium contracts issued during 1984 that meet new requirements are treated as meeting section 101(f) of the Code. 4. Annuity Contracts: * Annuity contracts provided through qualified plans are exempt from certain rules. * Changes in primary annuitant for non-individual holders are treated as death for taxation purposes. 5. Cost of Group-Term Life Insurance: * The cost of group-term life insurance for key employees is determined without regard to certain subsections. * Separate treatment of former employees is applied. 6. Waiver of Interest on Underpayments of Tax: * Waiver of interest on underpayments of tax before July 19, 1984, applies for certain provisions of subtitle A of title II of the Tax Reform Act of 1984. 7. Scope of Section 255: * The scope of section 255 of the Tax Equity and Fiscal Responsibility Act of 1982 is clarified to include modified coinsurance contracts. 8. Taxation of Life Insurance Companies: * Amendments were made to sections related to taxation of life insurance companies, including rules for reinsurance, dividends, and excess equity base. 9. Nonresident Aliens: * Special rules apply for nonresident aliens described in section 6072(c) regarding estimated tax installments. 10. Transfers Between Spouses or Incident to Divorce: * Transfers between spouses or incident to divorce are clarified, and recomputation rules are established for excess front-loading of alimony payments. 11. Definitions of Related Persons and Recapture Amounts: * Definitions of related persons and recapture amounts are changed. * Subsequent decreases in nonqualified nonrecourse financing with respect to property are clarified. 12. Excess Payments for the 1st Post-Separation Year: * The excess payments for the 1st post-separation year is the excess (if any) of the amount of alimony or separate maintenance payments paid by the payor spouse during the 1st post-separation year, over the sum of the average of the alimony or separate maintenance payments paid by the payor spouse during the 2nd and 3rd post-separation years, plus $15,000. 13. Excess Payments for the 2nd Post-Separation Year: * The excess payments for the 2nd post-separation year is the excess (if any) of the amount of alimony or separate maintenance payments paid by the payor spouse during the 2nd post-separation year, over the sum of the amount of alimony or separate maintenance payments paid by the payor spouse during the 3rd post-separation year, plus $15,000. 14. Changes to Section 419(g): * Paragraph (1) of section 419(g) is amended to strike out "such a plan" and insert in lieu thereof "such a relationship". 15. Amendments to Section 13031: * The amendments specify that notice of the date on which payment of the fee imposed by subsection (a)(7) is due shall be published by the Secretary of the Treasury in the Federal Register by no later than the date that is 60 days before such due date. * A customs broker permit may be revoked or suspended for nonpayment of the fee imposed by subsection (a)(7) only if notice of the date on which payment of the fee is due was published in the Federal Register at least 60 days before such due date. 16. Technical Corrections: * Technical corrections were made to various tax-related laws, including sections 1886 and 1888 of the Social Security Act, relating to Medicare. 17. Clarification of Definitions: * A clarification was provided for the definition of a "ferry" for customs purposes. * An extension of time for filing for credit or refund with respect to certain changes involving insolvent farmers was made. 18. Amendments to the Retirement Equity Act: * Technical corrections were made to the Retirement Equity Act of 1984, including amendments related to sections 102 and 202 of the Act. * Clarifications were provided for qualified preretirement survivor annuity, transferor plan rules, coordination between qualified joint and survivor annuity and qualified preretirement survivor annuity, and requirements for spousal consent for using plan assets as security for loans. 19. Distribution of Benefits in Case of Failure to Comply with Loan Terms: * Section 205 of the Act is amended to add new subsection (j) regarding the distribution of benefits in case of a failure to comply with loan terms. * The amendments made by this section apply to loans made after August 18, 1985. 20. Explanation Regarding Qualified Preretirement Survivor Annuity: * Each plan must provide a written explanation regarding the qualified preretirement survivor annuity comparable to that required under another subsection. * The applicable period for this explanation is defined as the later of five periods, including the period beginning with the participant's 32nd birthday and ending with their 35th birthday. 21. Spousal Consent: * The spouse's consent acknowledges the effect of such election and must be witnessed by a plan representative or notary public. * This amendment applies to plan years beginning after the date of enactment. 22. Security Interest Held by the Plan: * Any security interest held by the plan reduces the participant's nonforfeitable accrued benefit. * The qualified preretirement survivor annuity is determined by taking into account any security interest held by the plan. 23. Consent of a Spouse: * No consent of a spouse shall be effective for purposes of subsections (gX1) and (gX2) unless requirements comparable to those for spousal consent to an election under subsection (cXlXA) are met. 24. Qualified Preretirement Survivor Annuity Determined: * The qualified preretirement survivor annuity is determined by taking into account any security interest held by the plan. 25. Loan Outstanding to Participants: * Any security interest held by the plan reduces the participant's nonforfeitable accrued benefit. * For loans outstanding to participants, any security interest held by the plan reduces the participant's nonforfeitable accrued benefit. 26. Qualified Preretirement Survivor Annuity Determined: * The qualified preretirement survivor annuity is determined by taking into account any security interest held by the plan.