Title VII, SEC. 7704. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED DEATH BENEFIT RIDERS. (a) Qualified Accelerated Death Benefit Riders Treated as Life Insurance. Section 818 (relating to other definitions and special rules) is amended by adding at the end thereof the following new subsection: ``(g) Qualified Accelerated Death Benefit Riders Treated as Life Insurance. For purposes of this part ``(1) In general. Any reference to a life insurance contract shall be treated as including a reference to a qualified accelerated death benefit rider on such contract. ``(2) Qualified accelerated death benefit riders. For purposes of this subsection, the term `qualified accelerated death benefit rider' means any rider on a life insurance contract which provides for a distribution to an individual upon the insured becoming a terminally ill individual (as defined in section 101(g)(3)). (b) Definitions of Life Insurance and Modified Endowment Contracts. Paragraph (5)(A) of section 7702(f) is amended by striking ``or'' at the end of clause (iv), by redesignating clause (v) as clause (vi), and by inserting after clause (iv) the following new clause: ``(v) any qualified accelerated death benefit rider (as defined in section 818(g)), or''. (c) Effective Date. (1) In general. The amendments made by this section shall apply to contracts issued after December 31, 1993. (2) Transitional rule. For purposes of determining whether section 7702 or 7702A of the Internal Revenue Code of 1986 applies to any contract, the issuance, whether before, on, or after December 31, 1993, of a rider on a life insurance contract permitting the acceleration of death benefits (as described in section 101(g) of such Code) shall not be treated as a modification or material change of such contract.