To amend the Internal Revenue Code of 1986 to clarify the exclusion from gross income for amounts received by a policyholder from a State on account of the insolvency of an insurance company.

[AI summary unavailable — showing source text] Amends the Internal Revenue Code to exclude from gross income any payment the holder of an annuity, endowment, or life insurance contract receives from a State to indemnify such holder for any loss because of the insolvency of the insurance company, if the holder uses such payment to purchase a similar contract. Provides for reducing the basis of such contract by any amount not included in gross income.…