Internal Revenue Code:Sec. 807. Rules for certain reserves
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Contents |
Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter L - Insurance Companies
PART I - LIFE INSURANCE COMPANIES
Subpart C - Life Insurance Deductions
Statute
Sec. 807. Rules for certain reserves
(a) Decrease treated as gross income
If for any taxable year -
(1) the opening balance for the items described in subsection
(c), exceeds
(2)(A) the closing balance for such items, reduced by
(B) the amount of the policyholders' share of
tax-exempt interest and the amount of the policyholder's share of
the increase for the taxable year in policy cash values (within
the meaning of section 805(a)(4)(F)) of life insurance policies
and annuity and endowment contracts to which section 264(f)
applies,
such excess shall be included in gross income under section
803(a)(2).
(b) Increase treated as deduction
If for any taxable year -
(1)(A) the closing balance for the items described in
subsection (c), reduced by
(B) the amount of the policyholders' share of
tax-exempt interest and the amount of the policyholder's share of
the increase for the taxable year in policy cash values (within
the meaning of section 805(a)(4)(F)) of life insurance policies
and annuity and endowment contracts to which section 264(f)
applies, exceeds
(2) the opening balance for such items,
such excess shall be taken into account as a deduction under
section 805(a)(2).
(c) Items taken into account
The items referred to in subsections (a) and (b) are as follows:
(1) The life insurance reserves (as defined in section 816(b)).
(2) The unearned premiums and unpaid losses included in total
reserves under section 816(c)(2).
(3) The amounts (discounted at the appropriate rate of
interest) necessary to satisfy the obligations under insurance
and annuity contracts, but only if such obligations do not
involve (at the time with respect to which the computation is
made under this paragraph) life, accident, or health
contingencies.
(4) Dividend accumulations, and other amounts, held at interest
in connection with insurance and annuity contracts.
(5) Premiums received in advance, and liabilities for premium
deposit funds.
(6) Reasonable special contingency reserves under contracts of
group term life insurance or group accident and health insurance
which are established and maintained for the provision of
insurance on retired lives, for premium stabilization, or for a
combination thereof.
For purposes of paragraph (3), the appropriate rate of interest for
any obligation is whichever of the following rates is the highest
as of the time such obligation first did not involve life,
accident, or health contingencies: the applicable Federal interest
rate under subsection (d)(2)(B)(i), the prevailing State assumed
interest rate under subsection (d)(2)(B)(ii), or the rate of
interest assumed by the company in determining the guaranteed
benefit. In no case shall the amount determined under paragraph
(3) for any contract be less than the net surrender value of such
contract. For purposes of paragraph (2) and section 805(a)(1), the
amount of the unpaid losses (other than losses on life insurance
contracts) shall be the amount of the discounted unpaid losses as
defined in section 846.
(d) Method of computing reserves for purposes of determining income
(1) In general
For purposes of this part (other than section 816), the amount
of the life insurance reserves for any contract shall be the
greater of -
(A) the net surrender value of such contract, or
(B) the reserve determined under paragraph (2).
In no event shall the reserve determined under the preceding
sentence for any contract as of any time exceed the amount which
would be taken into account with respect to such contract as of
such time in determining statutory reserves (as defined in
paragraph (6)).
(2) Amount of reserve
The amount of the reserve determined under this paragraph with
respect to any contract shall be determined by using -
(A) the tax reserve method applicable to such contract,
(B) the greater of -
(i) the applicable Federal interest rate, or
(ii) the prevailing State assumed interest rate, and
(C) the prevailing commissioners' standard tables for
mortality and morbidity adjusted as appropriate to reflect the
risks (such as substandard risks) incurred under the contract
which are not otherwise taken into account.
(3) Tax reserve method
For purposes of this subsection -
(A) In general
The term ''tax reserve method'' means -
(i) Life insurance contracts
The CRVM in the case of a contract covered by the CRVM.
(ii) Annuity contracts
The CARVM in the case of a contract covered by the CARVM.
(iii) Noncancellable accident and health insurance contracts
In the case of any noncancellable accident and health
insurance contract (other than a qualified long-term care
insurance contract, as defined in section 7702B(b)), a 2-year
full preliminary term method.
(iv) Other contracts
In the case of any contract not described in clause (i),
(ii), or (iii) -
(I) the reserve method prescribed by the National
Association of Insurance Commissioners which covers such
contract (as of the date of issuance), or
(II) if no reserve method has been prescribed by the
National Association of Insurance Commissioners which
covers such contract, a reserve method which is consistent
with the reserve method required under clause (i), (ii), or
(iii) or under subclause (I) of this clause as of the date
of the issuance of such contract (whichever is most
appropriate).
(B) Definition of CRVM and CARVM
For purposes of this paragraph -
(i) CRVM
The term ''CRVM'' means the Commissioners' Reserve
Valuation Method prescribed by the National Association of
Insurance Commissioners which is in effect on the date of the
issuance of the contract.
(ii) CARVM
The term ''CARVM'' means the Commissioners' Annuities
Reserve Valuation Method prescribed by the National
Association of Insurance Commissioners which is in effect on
the date of the issuance of the contract.
(C) No additional reserve deduction allowed for deficiency
reserves
Nothing in any reserve method described under this paragraph
shall permit any increase in the reserve because the net
premium (computed on the basis of assumptions required under
this subsection) exceeds the actual premiums or other
consideration charged for the benefit.
(4) Applicable Federal interest rate; prevailing State assumed
interest rate
For purposes of this subsection -
(A) Applicable Federal interest rate
(i) In general
Except as provided in clause (ii), the term ''applicable
Federal interest rate'' means the annual rate determined by
the Secretary under section 846(c)(2) for the calendar year
in which the contract was issued.
(ii) Election to recompute Federal interest rate every 5
years
(I) In general
In computing the amount of the reserve with respect to
any contract to which an election under this clause applies
for periods during any recomputation period, the applicable
Federal interest rate shall be the annual rate determined
by the Secretary under section 846(c)(2) for the 1st year
of such period. No change in the applicable Federal
interest rate shall be made under the preceding sentence
unless such change would equal or exceed 1/2 of 1
percentage point.
(II) Recomputation period
For purposes of subclause (I), the term ''recomputation
period'' means, with respect to any contract, the 5
calendar year period beginning with the 5th calendar year
beginning after the calendar year in which the contract was
issued (and each subsequent 5 calendar year period).
(III) Election
An election under this clause shall apply to all
contracts issued during the calendar year for which the
election was made or during any subsequent calendar year
unless such election is revoked with the consent of the
Secretary.
(IV) Spread not available
Subsection (f) shall not apply to any adjustment required
under this clause.
(B) Prevailing State assumed interest rate
(i) In general
The term ''prevailing State assumed interest rate'' means,
with respect to any contract, the highest assumed interest
rate permitted to be used in computing life insurance
reserves for insurance contracts or annuity contracts (as the
case may be) under the insurance laws of at least 26 States.
For purposes of the preceding sentence, the effect of
nonforfeiture laws of a State on interest rates for reserves
shall not be taken into account.
(ii) When rate determined
The prevailing State assumed interest rate with respect to
any contract shall be determined as of the beginning of the
calendar year in which the contract was issued.
(5) Prevailing commissioners' standard tables
For purposes of this subsection -
(A) In general
The term ''prevailing commissioners' standard tables'' means,
with respect to any contract, the most recent commissioners'
standard tables prescribed by the National Association of
Insurance Commissioners which are permitted to be used in
computing reserves for that type of contract under the
insurance laws of at least 26 States when the contract was
issued.
(B) Insurer may use old tables for 3 years when tables change
If the prevailing commissioners' standard tables as of the
beginning of any calendar year (hereinafter in this
subparagraph referred to as the ''year of change'') is
different from the prevailing commissioners' standard tables as
of the beginning of the preceding calendar year, the issuer may
use the prevailing commissioners' standard tables as of the
beginning of the preceding calendar year with respect to any
contract issued after the change and before the close of the
3-year period beginning on the first day of the year of change.
(C) Special rule for contracts for which there are no
commissioners' standard tables
If there are no commissioners' standard tables applicable to
any contract when it is issued, the mortality and morbidity
tables used for purposes of paragraph (2)(C) shall be
determined under regulations prescribed by the Secretary. When
the Secretary by regulation changes the table applicable to a
type of contract, the new table shall be treated (for purposes
of subparagraph (B) and for purposes of determining the issue
dates of contracts for which it shall be used) as if it were a
new prevailing commissioner's standard table adopted by the
twenty-sixth State as of a date (no earlier than the date the
regulation is issued) specified by the Secretary.
(D) Special rule for contracts issued before 1948
If -
(i) a contract was issued before 1948, and
(ii) there were no commissioners' standard tables
applicable to such contract when it was issued,
the mortality and morbidity tables used in computing statutory
reserves for such contracts shall be used for purposes of
paragraph (2)(C).
(E) Special rule where more than 1 table or option applicable
If, with respect to any category of risks, there are 2 or
more tables (or options under 1 or more tables) which meet the
requirements of subparagraph (A) (or, where applicable,
subparagraph (B) or (C)), the table (and option thereunder)
which generally yields the lowest reserves shall be used for
purposes of paragraph (2)(C).
(6) Statutory reserves.--The term `statutory reserves'
means the aggregate amount set forth in the annual statement
with respect to items described in section 807(c). Such term
shall not include any reserve attributable to a deferred and
uncollected premium if the establishment of such reserve is not
permitted under section 811(c).
(e) Special rules for computing reserves
(1) Net surrender value
For purposes of this section -
(A) In general
The net surrender value of any contract shall be determined -
(i) with regard to any penalty or charge which would be
imposed on surrender, but
(ii) without regard to any market value adjustment on
surrender.
(B) Special rule for pension plan contracts
In the case of a pension plan contract, the balance in the
policyholder's fund shall be treated as the net surrender value
of such contract. For purposes of the preceding sentence, such
balance shall be determined with regard to any penalty or
forfeiture which would be imposed on surrender but without
regard to any market value adjustment.
(2) Issuance date in case of group contracts
For purposes of this section, in the case of a group contract,
the date on which such contract is issued shall be the date as of
which the master plan is issued (or, with respect to a benefit
guaranteed to a participant after such date, the date as of which
such benefit is guaranteed).
(3) Supplemental benefits
(A) Qualified supplemental benefits treated separately
For purposes of this part, the amount of the life insurance
reserve for any qualified supplemental benefit -
(i) shall be computed separately as though such benefit
were under a separate contract, and
(ii) shall, except to the extent otherwise provided in
regulations, be the reserve taken into account for purposes
of the annual statement approved by the National Association
of Insurance Commissioners.
(B) Supplemental benefits which are not qualified supplemental
benefits
In the case of any supplemental benefit described in
subparagraph (D) which is not a qualified supplemental benefit,
the amount of the reserve determined under paragraph (2) of
subsection (d) shall, except to the extent otherwise provided
in regulations, be the reserve taken into account for purposes
of the annual statement approved by the National Association of
Insurance Commissioners.
(C) Qualified supplemental benefit
For purposes of this paragraph, the term ''qualified
supplemental benefit'' means any supplemental benefit described
in subparagraph (D) if -
(i) there is a separately identified premium or charge for
such benefit, and
(ii) any net surrender value under the contract
attributable to any other benefit is not available to fund
such benefit.
(D) Supplemental benefits
For purposes of this paragraph, the supplemental benefits
described in this subparagraph are any -
(i) guaranteed insurability,
(ii) accidental death or disability benefit,
(iii) convertibility,
(iv) disability waiver benefit, or
(v) other benefit prescribed by regulations,
which is supplemental to a contract for which there is a
reserve described in subsection (c).
(4) Certain contracts issued by foreign branches of domestic life
insurance companies
(A) In general
In the case of any qualified foreign contract, the amount of
the reserve shall be not less than the minimum reserve required
by the laws, regulations, or administrative guidance of the
regulatory authority of the foreign country referred to in
subparagraph (B) (but not to exceed the net level reserves for
such contract).
(B) Qualified foreign contract
For purposes of subparagraph (A), the term ''qualified
foreign contract'' means any contract issued by a foreign life
insurance branch (which has its principal place of business in
a foreign country) of a domestic life insurance company if -
(i) such contract is issued on the life or health of a
resident of such country,
(ii) such domestic life insurance company was required by
such foreign country (as of the time it began operations in
such country) to operate in such country through a branch,
and
(iii) such foreign country is not contiguous to the United
States.
(5) Treatment of substandard risks
(A) Separate computation
Except to the extent provided in regulations, the amount of
the life insurance reserve for any qualified substandard risk
shall be computed separately under subsection (d)(1) from any
other reserve under the contract.
(B) Qualified substandard risk
For purposes of subparagraph (A), the term ''qualified
substandard risk'' means any substandard risk if -
(i) the insurance company maintains a separate reserve for
such risk,
(ii) there is a separately identified premium or charge for
such risk,
(iii) the amount of the net surrender value under the
contract is not increased or decreased by reason of such
risk, and
(iv) the net surrender value under the contract is not
regularly used to pay premium charges for such risk.
(C) Limitation on amount of life insurance reserve
The amount of the life insurance reserve determined for any
qualified substandard risk shall in no event exceed the sum of
the separately identified premiums charged for such risk plus
interest less mortality charges for such risk.
(D) Limitation on amount of contracts to which paragraph
applies
The aggregate amount of insurance in force under contracts to
which this paragraph applies shall not exceed 10 percent of the
insurance in force (other than term insurance) under life
insurance contracts of the company.
(6) Special rules for contracts issued before January 1, 1989,
under existing plans of insurance, with term insurance or
annuity benefits
For purposes of this part -
(A) In general
In the case of a life insurance contract issued before
January 1, 1989, under an existing plan of insurance, the life
insurance reserve for any benefit to which this paragraph
applies shall be computed separately under subsection (d)(1)
from any other reserve under the contract.
(B) Benefits to which this paragraph applies
This paragraph applies to any term insurance or annuity
benefit with respect to which the requirements of clauses (i)
and (ii) of paragraph (3)(C) are met.
(C) Existing plan of insurance
For purposes of this paragraph, the term ''existing plan of
insurance'' means, with respect to any contract, any plan of
insurance which was filed by the company using such contract in
one or more States before January 1, 1984, and is on file in
the appropriate State for such contract.
(7) Special rules for treatment of certain nonlife reserves
(A) In general
The amount taken into account for purposes of subsections (a)
and (b) as -
(i) the opening balance of the items referred to in
subparagraph (C), and
(ii) the closing balance of such items,
shall be 80 percent of the amount which (without regard to this
subparagraph) would have been taken into account as such
opening or closing balance, as the case may be.
(B) Transitional rule
(i) In general
In the case of any taxable year beginning on or after
September 30, 1990, and before September 30, 1996, there
shall be included in the gross income of any life insurance
company an amount equal to 3 1/3 percent of such company's
closing balance of the items referred to in subparagraph (C)
for its most recent taxable year beginning before September
30, 1990.
(ii) Termination as life insurance company
Except as provided in section 381(c)(22), if, for any
taxable year beginning on or before September 30, 1996, the
taxpayer ceases to be a life insurance company, the aggregate
inclusions which would have been made under clause (i) for
such taxable year and subsequent taxable years but for such
cessation shall be taken into account for the taxable year
preceding such cessation year.
(C) Description of items
For purposes of this paragraph, the items referred to in this
subparagraph are the items described in subsection (c) which
consist of unearned premiums and premiums received in advance
under insurance contracts not described in section
816(b)(1)(B).
(f) Adjustment for change in computing reserves
(1) 10-year spread
(A) In general
For purposes of this part, if the basis for determining any
item referred to in subsection (c) as of the close of any
taxable year differs from the basis for such determination as
of the close of the preceding taxable year, then so much of the
difference between -
(i) the amount of the item at the close of the taxable
year, computed on the new basis, and
(ii) the amount of the item at the close of the taxable
year, computed on the old basis,
as is attributable to contracts issued before the taxable year
shall be taken into account under the method provided in
subparagraph (B).
(B) Method
The method provided in this subparagraph is as follows:
(i) if the amount determined under subparagraph (A)(i)
exceeds the amount determined under subparagraph (A)(ii),
1/10 of such excess shall be taken into account, for each of
the succeeding 10 taxable years, as a deduction under section
805(a)(2); or
(ii) if the amount determined under subparagraph (A)(ii)
exceeds the amount determined under subparagraph (A)(i), 1/10
of such excess shall be included in gross income, for each of
the 10 succeeding taxable years, under section 803(a)(2).
(2) Termination as life insurance company
Except as provided in section 381(c)(22) (relating to
carryovers in certain corporate readjustments), if for any
taxable year the taxpayer is not a life insurance company, the
balance of any adjustments under this subsection shall be taken
into account for the preceding taxable year.
Sources
(Added Pub. L. 98-369, div. A, title II, Sec. 211(a), July 18,
1984, 98 Stat. 726; amended Pub. L. 99-514, title X, Sec. 1023(b),
title XVIII, Sec. 1821(a), (s), Oct. 22, 1986, 100 Stat. 2399,
2837, 2843; Pub. L. 100-203, title X, Sec. 10241(a)-(b)(2)(A), Dec.
22, 1987, 101 Stat. 1330-419, 1330-420; Pub. L. 101-508, title XI,
Sec. 11302(a), Nov. 5, 1990, 104 Stat. 1388-449; Pub. L. 104-188,
title I, Sec. 1704(t)(61), Aug. 20, 1996, 110 Stat. 1890; Pub. L.
104-191, title III, Sec. 321(b), Aug. 21, 1996, 110 Stat. 2058;
Pub. L. 105-34, title X, Sec. 1084(b)(2), Aug. 5, 1997, 111 Stat.
954.)
Codification
CODIFICATION
Another section 1084(b) of Pub. L. 105-34 amended sections 101
and 264 of this title.
Miscellaneous
PRIOR PROVISIONS
A prior section 807, act Aug. 16, 1954, ch. 736, 68A Stat. 259,
related to adjustment for certain reserves, prior to the general
revision of this part by act Mar. 13, 1956, ch. 83, Sec. 2, 70
Stat. 36.
AMENDMENTS
2004 - Subsec.205(b)(1),Pub.L.108-218, amended Sec.807
(a)(2)(B) and (b)(1)(B)by striking ``the sum of (i)''
and by striking ``plus (ii) any excess described in
section 809(a)(2) for the taxable year,''.
Sec.807 was also amended by adding a new paragraph (d)(6).
Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2004.
1997 - Subsec. (a)(2)(B). Pub. L. 105-34, Sec. 1084(b)(2)(A),
substituted ''interest and the amount of the policyholder's share
of the increase for the taxable year in policy cash values (within
the meaning of section 805(a)(4)(F)) of life insurance policies and
annuity and endowment contracts to which section 264(f) applies,''
for ''interest,''.
Subsec. (b)(1)(B). Pub. L. 105-34, Sec. 1084(b)(2)(B),
substituted ''interest and the amount of the policyholder's share
of the increase for the taxable year in policy cash values (within
the meaning of section 805(a)(4)(F)) of life insurance policies and
annuity and endowment contracts to which section 264(f) applies,''
for ''interest,''.
1996 - Subsec. (d)(3)(A)(iii). Pub. L. 104-191 inserted ''(other
than a qualified long-term care insurance contract, as defined in
section 7702B(b))'' after ''insurance contract''.
Subsec. (d)(3)(B)(ii). Pub. L. 104-188 substituted
''Commissioners' Annuities'' for ''Commissoners' Annuities''.
1990 - Subsec. (e)(7). Pub. L. 101-508 added par. (7).
1987 - Subsec. (c). Pub. L. 100-203, Sec. 10241(b)(2)(A),
substituted ''whichever of the following rates is the highest as of
the time such obligation first did not involve life, accident, or
health contingencies: the applicable Federal interest rate under
subsection (d)(2)(B)(i), the prevailing State assumed interest rate
under subsection (d)(2)(B)(ii), or the rate of interest assumed by
the company in determining the guaranteed benefit.'' for ''the
higher of the prevailing State assumed interest rate as of the time
such obligation first did not involve life, accident, or health
contingencies or the rate of interest assumed by the company (as of
such time) in determining the guaranteed benefit.'' in third to
last sentence.
Subsec. (d)(2)(B). Pub. L. 100-203, Sec. 10241(a), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: ''the prevailing State assumed interest rate, and''.
Subsec. (d)(4). Pub. L. 100-203, Sec. 10241(b)(1), substituted
''Applicable Federal interest rate; prevailing State assumed
interest rate'' for ''Prevailing State assumed interest rate'' in
heading and amended text generally, revising and restating as
subpars. (A) and (B) provisions of former subpars. (A) to (D).
1986 - Subsec. (c). Pub. L. 99-514, Sec. 1023(b), inserted at end
''For purposes of paragraph (2) and section 805(a)(1), the amount
of the unpaid losses (other than losses on life insurance
contracts) shall be the amount of the discounted unpaid losses as
defined in section 846.''
Pub. L. 99-514, Sec. 1821(a), inserted at end ''In no case shall
the amount determined under paragraph (3) for any contract be less
than the net surrender value of such contract.''
Subsec. (d)(5)(C). Pub. L. 99-514, Sec. 1821(s), inserted at end
''When the Secretary by regulation changes the table applicable to
a type of contract, the new table shall be treated (for purposes of
subparagraph (B) and for purposes of determining the issue dates of
contracts for which it shall be used) as if it were a new
prevailing commissioner's standard table adopted by the
twenty-sixth State as of a date (no earlier than the date the
regulation is issued) specified by the Secretary.''
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 applicable to contracts issued after
June 8, 1997, in taxable years ending after such date, with special
provisions relating to changes in contracts to be treated as new
contracts, see section 1084(d) of Pub. L. 105-34, set out as a note
under section 101 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-191 applicable to contracts issued after
Dec. 31, 1997, see section 321(f) of Pub. L. 104-191, set out as an
Effective Date note under section 7702B of this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11302(b) of Pub. L. 101-508 provided that: ''The
amendment made by subsection (a) (amending this section) shall
apply to taxable years beginning on or after September 30, 1990.''
EFFECTIVE DATE OF 1987 AMENDMENT
Section 10241(c) of Pub. L. 100-203 provided that: ''The
amendments made by this section (amending this section and section
812 of this title) shall apply to contracts issued in taxable years
beginning after December 31, 1987.''
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1023(b) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, except as otherwise
provided, see section 1023(e) of Pub. L. 99-514, set out as an
Effective Date note under section 846 of this title.
Amendment by section 1821(a), (s) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1983, see section 215 of Pub. L. 98-369, set out as a note under
section 801 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177) or title
XVIII (Sec. 1800-1899A) of Pub. L. 99-514 require an amendment to
any plan, such plan amendment shall not be required to be made
before the first plan year beginning on or after Jan. 1, 1989, see
section 1140 of Pub. L. 99-514, as amended, set out as a note under
section 401 of this title.
TREATMENT OF CERTAIN ASSESSMENT LIFE INSURANCE COMPANIES
Section 217(f) of subtitle A (Sec. 211-219) of title II of div.
A of Pub. L. 98-369, as amended by Pub. L. 99-514, Sec. 2, Oct. 22,
1986, 100 Stat. 2095, provided that:
''(1) Mortality and morbidity tables. - In the case of a contract
issued by an assessment life insurance company, the mortality and
morbidity tables used in computing statutory reserves for such
contract shall be used for purposes of paragraph (2)(C) of section
807(d) of the Internal Revenue Code of 1986 (formerly I.R.C. 1954)
(as amended by this subtitle) if such tables were -
''(A) in use since 1965, and
''(B) developed on the basis of the experience of assessment
life insurance companies in the State in which such assessment
life insurance company is domiciled.
''(2) Treatment of certain mutual assessment life insurance
companies. - In the case of any contract issued by a mutual
assessment life insurance company which -
''(A) has been in existence since 1965, and
''(B) operates under chapter 13 or 14 of the Texas Insurance
Code,
for purposes of part I of subchapter L of chapter 1 of the Internal
Revenue Code of 1986, the amount of the life insurance reserves for
such contract shall be equal to the amount taken into account with
respect to such contract in determining statutory reserves.
''(3) Statutory reserves. - For purposes of this subsection, the
term 'statutory reserves' has the meaning given to such term by
section 809(b)(4)(B) of such Code.''
SPECIAL RULE FOR COMPANIES USING NET LEVEL RESERVE METHOD FOR
NONCANCELLABLE ACCIDENT AND HEALTH INSURANCE CONTRACTS
Section 217(n) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, title XVIII, Sec. 1823, Oct. 22, 1986, 100 Stat. 2095,
2845, provided that: ''A company shall be treated as meeting the
requirements of section 807(d)(3)(A)(iii) of the Internal Revenue
Code of 1986 (formerly I.R.C. 1954), as amended by this Act, with
respect to any directly-written noncancellable accident and health
insurance contract (whether under existing or new plans of
insurance) for any taxable year if -
''(1) such company -
''(A) was using the net level reserve method to compute at
least 99 percent of its statutory reserves on such contracts as
of December 31, 1982, and
''(B) received more than half its total direct premiums in
1982 from directly-written noncancellable accident and health
insurance,
''(2) after December 31, 1983, and through such taxable year,
such company has continuously used the net level reserve method
for computing at least 99 percent of its tax and statutory
reserves on such contracts, and
''(3) for any such contract for which the company does not use
the net level reserve method, such company uses the same method
for computing tax reserves as such company uses for computing its
statutory reserves.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 412, 415, 417, 803, 805,
809, 811, 812, 817, 817A, 818, 832, 842, 846, 848, 954, 1351, 7702
of this title; title 29 sections 1055, 1082.
