PHOENIX, Ariz. - Insurance industry products and variable annuities in particular have always been targets for government revenue-raising measures due to their tax-preferred treatment, according to Stephen Zimmerman, a partner at Dykema Gossett PLLC of Washington D.C. As the new administration settles in, a panel of lawyers discussed legislative issues likely to arise that could affect the annuity industry at the National Association for Variable Annuities marketing conference held here last month.
In 1998, the Clinton administration tried unsuccessfully to initiate a tax on transfers within annuities, Zimmerman said. While the new administration is unlikely to propose a similar bill, the 2002 elections will decide which party controls Congress and that in turn will affect how large the tax cuts proposed by the Bush administration will actually be. The tax-cut legislation is not likely to pass for another two years, according to Joe McKeever, a partner at Davis & Harman LLP of Washington, D.C. While the full $1.6 trillion tax cut is unlikely, there will be some reductions, which does not bode well for the annuity industry, said McKeever.