The bill, titled the Catastrophic Risk Transfer Act of 2025 (CART Act of 2025), introduces a new tax system within the Internal Revenue Code of 1986. Its primary objective is to establish a specialized framework for catastrophic risk transfer companies. This system is designed to ensure these companies maintain sufficient capital reserves to cover significant insurance losses stemming from catastrophic events. A catastrophic risk transfer company (CRTC) is defined as a domestic corporation created and regulated under State law as a special purpose insurer. Its principal purpose must be catastrophic risk transfer, primarily involving issuing securities, owning qualified investments, and entering into insurance or reinsurance agreements for catastrophic risks. These activities must exclude general annuity business and be limited to non-related parties. To qualify as a CRTC, a company must elect this status and derive at least 90 percent of its gross income from specific sources. These include investment income from qualified investments or premiums from regulated insurance companies, governmental agencies, or large entities. Furthermore, the insurance or reinsurance provided by a CRTC must be fully collateralized to maintain its special tax treatment. CRTCs are subject to corporate income tax but with specific adjustments, notably requiring them to distribute at least 90 percent of their catastrophic risk transfer company taxable income as dividends. The bill outlines how taxable income is calculated, allowing deductions for dividends paid and certain operational expenses. Security holders of CRTCs will be taxed on dividends received as if they directly received the underlying income types, such as interest or capital gains. The legislation also provides an exemption from withholding taxes for nonresident aliens and foreign corporations on qualified investment income dividends received from CRTCs, subject to certain exceptions. This provision aims to attract foreign capital into the catastrophic risk market. To prevent double taxation, other taxing jurisdictions are prohibited from imposing a premium tax on reinsurance premiums paid to or received by a CRTC if the company is already taxed by its organizing State, with a cap on the tax rate if applicable.