SECTION 2. BACKGROUND

.01 Section 4371 of the Internal Revenue Code generally imposes a tax (the "insurance excise tax") on each policy of insurance or reinsurance with respect to United States risks issued by any foreign insurer or reinsurer, unless the premiums paid are taxed as income effectively connected with the conduct of a United States trade or business.

.02 Section 4374 provides that the insurance excise tax shall be paid by any person who makes, signs, issues, or sells any of the documents and instruments subject to the tax, or for whose use or benefit the same are made, signed, issued or sold.

.03 Section 46.4374–1(c) of the Excise Tax Regulations provides that the insurance excise tax shall be paid on the basis of a return. Such return shall be filed and tax remitted by the person who makes the payment of a premium to a foreign insurer or reinsurer. If the tax is not paid by the person who makes payment of a premium, the insurance excise tax shall be paid on the basis of a return by any person who makes,

signs, issues or sells any of the documents or instruments subject to the tax imposed by section 4371, or for whose use or benefit such document or instrument is made, signed, issued or sold.

.04 Pursuant to income tax treaties between the United States and several countries, policies issued by a foreign insurer or reinsurer that is a resident of any of such countries may be exempt from the insurance excise tax. This revenue procedure applies to a treaty excise tax exemption that is either a qualified exemption (for example, the exemption in the treaties with Germany and France) or an exemption subject to an anti-conduit arrangement limitation (for example, the exemption in the treaty with the United Kingdom), depending on the treaty.