Senate Finance Committee Chairman Wyden Exposes Private Placement Life Insurance as Tax Shelter for Ultra-Wealthy Holding at Least $40B

WASHINGTON, Feb. 22 -- Sen. Ron Wyden, D-Oregon, chairman of the Senate Finance Committee, issued the following news release on Feb. 21, 2024:

Senate Finance Committee Chairman Ron Wyden, D-Ore., today released the results of an 18-month investigation into the use of private placement life insurance (PPLI) as a "buy, borrow, die" tax shelter for the ultra-wealthy. The investigation, the first of its kind into PPLI, found that the domestic PPLI industry is now a tax shelter made up of at least $40 billion in policies held by only a few thousand individuals, who have net-worths reaching into the hundreds of millions or billions of dollars. Marketing materials obtained by the committee from the largest PPLI providers revealed how PPLI products were explicitly promoted as tax-free investments in private equity and hedge funds, as well as a means to dodge income, gift and estate taxes. Policyholders were also able to borrow against those assets at extremely favorable rates.

The investigation found that PPLI represents just 0.003 percent of all individual life insurance policies in force in the United States. The IRS is largely unable to enforce investor control rules in place to prevent the abuse of tax-advantaged financial products like PPLI. At the moment, there is no requirement to report ownership of PPLI on a tax return, allowing wealthy investors to use PPLI to shield lucrative investments in alternative assets from scrutiny by the IRS. The report on Senator Wyden's investigation includes a framework for forthcoming legislation that will curb the use of PPLI as a tax shelter.

"I'm a strong defender of life insurance as a source of financial security for hardworking American families and retirees, but that's not what's going on with these tax-dodging private placement policies that are available only to the ultra-wealthy. When you subject these policies to even the slightest bit of scrutiny, it's clear that this is just a tax shelter for the investments of the mega-rich masquerading as life insurance. None of this is available to middle-class Americans," Senator Wyden said. "As is often the case with our tax code and the ultra-wealthy, the scandal here is what's legal. The companies weren't even trying to hide the fact that their PPLI policies were tax dodges for the very top -- that's precisely how they were promoted. It's obvious that this is an abuse of the rules that are intended to protect typical American families, so Congress must change the law to put a stop to it."

This investigation continues Senator Wyden's work examining the tax practices of the ultra-wealthy. Previous efforts, some ongoing, include investigations of foreign banks enabling U.S. tax evasion, private equity billionaire Leon Black's tax planning and financial ties with Jeffrey Epstein, billionaire Republican donor Harlan Crow's tax deductions related to his pleasure yacht and other financial dealings, the prevalence of millionaires getting away with failing to file tax returns, and the need to address the "buy, borrow, die" strategy with a Billionaires Income Tax.

The full report on the investigation is available here (https://www.finance.senate.gov/imo/media/doc/ppli_report_final.pdf). Key findings include:

* The PPLI industry is now a tax shelter made up of at least $40 billion in policies held by only a few thousand wealthy Americans.

* Unlike traditional insurance policies, PPLI policies are an ultra-niche financial product that is not available to middle-class families.

* PPLI policies are actively promoted to ultra-wealthy Americans as tax-free hedge and private equity fund investments.

* PPLI policies are actively promoted to millionaires and billionaires as a way to transfer significant wealth to their heirs while bypassing income, gift and estate taxes.

* Guardrails against abuse of PPLI policies are nearly impossible for the IRS to enforce due to a lack of disclosure requirements.

* The IRS should increase scrutiny of the PPLI industry's compliance with investor control rules.

* Legislation is needed to increase oversight of PPLI and curb abuse of these products as tax avoidance by the wealthiest 1 percent of Americans.

* * *

Original text here: https://www.finance.senate.gov/chairmans-news/wyden-exposes-private-placement-life-insurance-as-a-tax-shelter-for-the-ultra-wealthy-holding-at-least-40-billion