October 20, 2003 News Archive

Board Releases Latest Beige Book
The Board released its most recent Beige Book dated October 15, 2003, with ten Districts reporting that the pace of economic expansion has picked up since the last report. Details are available in the full report, including individual Reserve Bank summaries.

Treasury And IRS Issue Final Rules On a Split-Dollar Life Insurance Arrangements
The Internal Revenue Service and the Treasury Department issued (PDF) final regulations effective September 17, 2003 on the tax treatment of split-dollar life insurance arrangements. The regulations provide comprehensive tax rules for split-dollar life insurance arrangements that are entered into or materially modified after September 17, 2003. "The regulations provide tax rules that reflect the underlying economics of split-dollar life insurance arrangements," stated Pamela Olson, Treasury Assistant Secretary for Tax. "Under these rules, companies cannot use split-dollar life insurance arrangements to provide tax-free compensation to their executives. By insuring that split-dollar arrangements are appropriately taxed, the regulations curb a backdoor form of executive compensation and promote greater transparency." The Treasury Department stated that the final rules arose in part from recommendations that congressional investigators made concerning Enron's tax abuses.

IRS Notice 2002-8, which was issued on January 3, 2002, included certain transition rules for split-dollar arrangements entered into prior to January 28, 2002. Those transition rules expire on December 31, 2003. The Treasury Department and the Internal Revenue Service also released a revenue ruling on September 12, 2003 stating that certain prior administrative guidance on split-dollar life insurance arrangements is now obsolete.

The Treasury/IRS final regulations do not cover "key-man" life insurance policies under which a company purchases a life insurance contract to insure the life of a "key" employee or shareholder but retains all the rights and benefits of the contract (including the rights to all death benefits and cash value).