Insurance Tax Overhaul: New Law Changes How Companies Account for Debt and Capital Losses Starting 2026

The “Secure Family Futures Act of 2025” is a highly technical piece of legislation focused squarely on adjusting the tax accounting rules for a specific group of financial entities: what the bill calls “applicable insurance companies.” If you’re not an accountant or a tax lawyer working for a major insurer, this bill might sound like pure bureaucratic noise. But these changes to how insurers manage debt and losses can subtly affect the stability and pricing decisions of companies that hold massive amounts of capital—which, eventually, trickles down to everyone else.

The Fine Print on Debt: What’s a Capital Asset?

Section 2 of the bill changes the definition of a capital asset for these applicable insurance companies. Currently, when an insurer buys or sells debt—like notes, bonds, or debentures—that debt is often treated as a capital asset for tax purposes. This bill says that for debt purchased after December 31, 2025, these instruments will no longer be considered capital assets. Why does this matter? When something isn't a capital asset, the gains or losses from selling it are taxed as ordinary income or loss, not at the usually lower capital gains rate. For an insurer, this means greater certainty about how their investment portfolio will be taxed, potentially simplifying their financial planning. It’s a technical shift, but it’s a big deal for the balance sheet of the companies it applies to.

Extending the Safety Net for Big Losses

Section 3 addresses capital losses. Normally, companies have specific, often shorter, time limits for carrying over capital losses to offset future gains. This bill extends that window significantly for applicable insurance companies. Specifically, if they incur a capital loss in a tax year starting after December 31, 2025, they can carry that loss forward for up to 10 years. This extension is particularly aimed at losses resulting from foreign expropriation—say, if a foreign government suddenly seizes assets the insurer holds overseas. Think of it like a long-term insurance policy for the insurer itself: it gives them a full decade to use that loss to reduce their tax bill, offering a substantial financial buffer after a major, unexpected event.

Who Gets to Play by These Rules?

Crucially, these changes only apply to “applicable insurance companies.” The bill provides a detailed, if jargon-heavy, definition that excludes several types of insurers—like certain small insurance companies or foreign corporations that operate under specific tax codes. This means only a specific, sophisticated subset of the industry benefits from this tax flexibility. If you run a small, local insurance agency, these rules won’t affect you, but if you’re a massive multinational insurer, this provides new tools for managing your tax liability and financial risk. Since these provisions are highly technical and rely heavily on cross-references to existing tax law, they are primarily aimed at simplifying the complex tax structure for large, sophisticated financial players who deal heavily in debt instruments and international investments.