H.R.1481 - Catastrophic Risk Transfer Act of 2025; CART Act of 2025 (119th Congress)
Summary
H.R. 1481, the Catastrophic Risk Transfer Act of 2025 (CART Act), aims to amend the Internal Revenue Code of 1986 by establishing a system for taxing catastrophic risk transfer companies. The goal is to ensure these companies maintain sufficient capital to cover catastrophic insurance losses. The bill defines 'catastrophic risk transfer companies' and sets specific criteria for their taxation, including income thresholds and collateralization requirements.
Expected Effects
The CART Act would create a new regulatory and taxation framework for companies dealing with catastrophic risk transfer. This could lead to greater stability in the insurance market by ensuring that companies have adequate capital reserves. It also incentivizes the creation of special purpose insurers regulated at the state level.
Potential Benefits
- Increased financial stability in the insurance market related to catastrophic events.
- Clearer regulatory framework for catastrophic risk transfer companies, reducing uncertainty.
- Potential for economic growth through the creation and operation of these specialized insurance entities.
- Encourages state-level regulation and expertise in managing catastrophic risk.
- Provides exemptions from certain withholding taxes for nonresident aliens and foreign corporations investing in qualified investment income dividends from these companies.
Potential Disadvantages
- Potential for increased complexity in the tax code, leading to compliance challenges.
- Possibility of unintended consequences due to the novel nature of the regulations.
- Risk that the regulations may not adequately address all potential catastrophic risks.
- Could create loopholes for tax avoidance if not carefully implemented and monitored.
- The $25,000,000 threshold for a 'large' direct insurance loss may be too low, excluding some significant events.
Constitutional Alignment
The bill's alignment with the Constitution is primarily rooted in Congress's power to lay and collect taxes, duties, imposts, and excises, as outlined in Article I, Section 8, Clause 1. The regulation of insurance, while traditionally a state matter, can be justified under the Commerce Clause (Article I, Section 8, Clause 3) if it substantially affects interstate commerce. The bill does not appear to infringe upon any individual rights or liberties protected by the Bill of Rights.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).