§801 — Tax imposed
81 citing cases
Statute Text — 26 U.S.C. §801
A tax is hereby imposed for each taxable year on the life insurance company taxable income of every life insurance company. Such tax shall consist of a tax computed as provided in section 11 as though the life insurance company taxable income were the taxable income referred to in section 11.
For purposes of this part, the term “life insurance company taxable income” means—
life insurance gross income, reduced by
life insurance deductions.
Treasury Regulations
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Treas. Reg. §1.801-1Definitions
(a) Life insurance company. The term life insurance company as used in subtitle A of the Code is defined in section 801. For the purpose of determining whether a company is a “life insurance company” within the meaning of that term as used in section 801, it must first be determined whether the company is taxable as an insurance company under the Code. For the definition of an “insurance company”, see paragraph (b) of this section. In determining whether an insurance company is a life insurance company, the life insurance reserves (as defined in section 803(b)) plus any unearned premiums and unpaid losses on noncancellable life, health, or accident policies, not included in “life insurance reserves” must comprise more than 50 percent of its total reserves (as defined in section 801). An insurance company writing only noncancellable life, health, or accident policies and having no “life insurance reserves” may qualify as a life insurance company if its unearned premiums and unpaid losses on such policies comprise more than 50 percent of its total reserves. A noncancellable insurance policy means a contract which the insurance company is under an obligation to renew or continue at a specified premium and with respect to which a reserve in addition to the unearned premium must be carried to cover that obligation. For the purpose of the preceding sentence, the term “unearned premium” means the amount which will cover the cost of carrying the insurance risk for the period for which the premium has been paid in advance. A burial or funeral benefit insurance company qualifying as a life insurance company engaged directly in the manufacture of funeral supplies or the performance of funeral services will be taxable under section 821 or section 831 as an insurance company other than life.
(b) Insurance companies. (1) Insurance companies include both stock and mutual companies, as well as mutual benefit insurance companies. A voluntary unincorporated association of employees formed for the purpose of relieving sick and aged members and the dependents of deceased members is an insurance company, whether the fund for such purpose is created wholly by membership dues or partly by contributions from the employer. A corporation which merely sets aside a fund for the insurance of its employees is not required to file a separate return for such fund, but the income therefrom shall be included in the return of the corporation.
(2) Though its name, charter powers, and subjection to State insurance laws are significant in determining the business which a corporation is authorized and intends to carry on, the character of the business actually done in the taxable year determines whether it is taxable as an insurance company under the Code. For example, during the year 1954 the M Corporation, incorporated under the insurance laws of the State of R, carried on the business of lending money in addition to guaranteeing the payment of principal and interest of mortgage loans. Of its total income for the year, one-third was derived from its insurance business of guaranteeing the payment of principal and interest of mortgage loans and two-thirds was derived from its noninsurance business of lending money. The M Corporation is not an insurance company for the year 1954 within the meaning of the Code and the regulations thereunder.
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Treas. Reg. §1.801-1(a)Life insurance company.
Life insurance company. The term life insurance company as used in subtitle A of the Code is defined in section 801. For the purpose of determining whether a company is a “life insurance company” within the meaning of that term as used in section 801, it must first be determined whether the company is taxable as an insurance company under the Code. For the definition of an “insurance company”, see paragraph (b) of this section. In determining whether an insurance company is a life insurance company, the life insurance reserves (as defined in section 803(b)) plus any unearned premiums and unpaid losses on noncancellable life, health, or accident policies, not included in “life insurance reserves” must comprise more than 50 percent of its total reserves (as defined in section 801). An insurance company writing only noncancellable life, health, or accident policies and having no “life insurance reserves” may qualify as a life insurance company if its unearned premiums and unpaid losses on such policies comprise more than 50 percent of its total reserves. A noncancellable insurance policy means a contract which the insurance company is under an obligation to renew or continue at a specified premium and with respect to which a reserve in addition to the unearned premium must be carried to cover that obligation. For the purpose of the preceding sentence, the term “unearned premium” means the amount which will cover the cost of carrying the insurance risk for the period for which the premium has been paid in advance. A burial or funeral benefit insurance company qualifying as a life insurance company engaged directly in the manufacture of funeral supplies or the performance of funeral services will be taxable under section 821 or section 831 as an insurance company other than life.
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Treas. Reg. §1.801-1(b)Insurance companies.
Insurance companies. (1) Insurance companies include both stock and mutual companies, as well as mutual benefit insurance companies. A voluntary unincorporated association of employees formed for the purpose of relieving sick and aged members and the dependents of deceased members is an insurance company, whether the fund for such purpose is created wholly by membership dues or partly by contributions from the employer. A corporation which merely sets aside a fund for the insurance of its employees is not required to file a separate return for such fund, but the income therefrom shall be included in the return of the corporation.
(2) Though its name, charter powers, and subjection to State insurance laws are significant in determining the business which a corporation is authorized and intends to carry on, the character of the business actually done in the taxable year determines whether it is taxable as an insurance company under the Code. For example, during the year 1954 the M Corporation, incorporated under the insurance laws of the State of R, carried on the business of lending money in addition to guaranteeing the payment of principal and interest of mortgage loans. Of its total income for the year, one-third was derived from its insurance business of guaranteeing the payment of principal and interest of mortgage loans and two-thirds was derived from its noninsurance business of lending money. The M Corporation is not an insurance company for the year 1954 within the meaning of the Code and the regulations thereunder.
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Treas. Reg. §1.801-2Taxable years affected
Section 1.801-1 is applicable only to taxable years beginning after December 31, 1953, and before January 1, 1955, and all references to sections of part I, subchapter L, chapter 1 of the Code are to the Internal Revenue Code of 1954, before amendments. Sections 1.801-3 through 1.801-6 are applicable only to taxable years beginning after December 31, 1957, and all references to sections of part I, subchapter L, chapter 1 of the Code are to the Internal Revenue Code of 1954, as amended by the Life Insurance Company Income Tax Act of 1959 (73 Stat. 112). Section 1.801-8 is applicable only to taxable years beginning after December 31, 1961, and all references to sections of part I, subchapter L, chapter 1 of the Code are to the Internal Revenue Code of 1954, as amended by the Life Insurance Company Income Tax Act of 1959 (73 Stat. 112) and section 3 of the Act of October 23, 1962 (76 Stat. 1134).
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Treas. Reg. §1.801-3Definitions
For purposes of part I, subchapter L, chapter 1 of the Code, this section defines the following terms, which are to be used in determining if a taxpayer is a life insurance company (as defined in section 801(a) and paragraph (b) of this section):
(a) Insurance company. (1) The term insurance company means a company whose primary and predominant business activity during the taxable year is the issuing of insurance or annuity contracts or the reinsuring of risks underwritten by insurance companies. Thus, though its name, charter powers, and subjection to State insurance laws are significant in determining the business which a company is authorized and intends to carry on, it is the character of the business actually done in the taxable year which determines whether a company is taxable as an insurance company under the Internal Revenue Code.
(2) Insurance companies include both stock and mutual companies, as well as mutual benefit insurance companies. For taxable years beginning before January 1, 1970, a voluntary unincorporated association of employees, including an association fulfilling the requirements of section 801(b)(2)(B) (as in effect for such years), formed for the purpose of relieving sick and aged members and the dependents of deceased members, is an insurance company, whether the fund for such purpose is created wholly by membership dues or partly by contributions from the employer. A corporation which merely sets aside a fund for the insurance of its employees is not an insurance company, and the income from such fund shall be included in the return of the corporation.
(b) Life insurance company. (1) The term life insurance company, as used in subtitle A of the Code, is defined in section 801(a). For the purpose of determining whether a company is a “life insurance company” within the meaning of that term as used in section 801(a), it must first be determined whether the company is taxable as an insurance company (as defined in paragraph (a) of this section). An insurance company shall be taxed as a life insurance company if it is engaged in the business of issuing life insurance and annuity contracts (either separately or combined with health and accident insurance), or noncancellable contracts of health and accident insurance, and its life insurance reserves (as defined in section 801(b) and § 1.801-4), plus unearned premiums, and unpaid losses (whether or not ascertained), on noncancellable life, health, or accident policies not included in life insurance reserves, comprise more than 50 percent of its total reserves (as defined in section 801(c) and § 1.801-5). For purposes of determining whether it satisfies the percentage requirements of the preceding sentence, a company shall first make any adjustments to life insurance reserves and total reserves required by section 806(a) (relating to adjustments for certain changes in reserves and assets) and then as required by section 801(d) (relating to adjustments in reserves for policy loans). For examples of the adjustments required under section 806(a), see paragraph (b)(4) of § 1.806-3. For an example of the adjustments required under section 801(d), see paragraph (c) of § 1.801-6. Furthermore, if an insurance company which computes its life insurance reserves on a preliminary term basis elects to revalue such reserves on a net level premium basis under section 818(c), such revalued basis shall be disregarded for purposes of section 801.
(2) An insurance company writing only noncancellable life, health, or accident policies and having no “life insurance reserves” may qualify as a life insurance company if its unearned premiums, and unpaid losses (whether or not ascertained), on such policies comprise more than 50 percent of its total reserves.
(3) Section 801(f) provides that a burial or funeral benefit insurance company engaged directly in the manufacture of funeral supplies or the performance of funeral services shall not be taxable under section 802 but shall be taxable under section 821 or section 831 as an insurance company other than life.
(c) Noncancellable life, health, or accident insurance policy. The term noncancellable life, health, or accident insurance policy means a health and accident contract, or a health and accident contract combined with a life insurance or annuity contract, which the insurance company is under an obligation to renew or continue at a specified premium and with respect to which a reserve in addition to the unearned premiums (as defined in paragraph (e) of this section) must be carried to cover that obligation. Such a health and accident contract shall be considered noncancellable even though it states a termination date at a stipulated age, if, with respect to the health and accident contract, such age termination date is 60 or over. Such a contract, however, shall not be considered to be noncancellable after the age termination date stipulated in the contract has passed. However, if the age termination date stipulated in the contract occurs during the period covered by a premium received by the life insurance company prior to such date, and the company cannot cancel or modify the contract during such period, the age termination date shall be deemed to occur at the expiration of the period for which the premium has been received.
(d) Guaranteed renewable life, health, and accident insurance policy. The term guaranteed renewable life, health, and accident insurance policy means a health and accident contract, or a health and accident contract combined with a life insurance or annuity contract, which is not cancellable by the company but under which the company reserves the right to adjust premium rates by classes in accordance with its experience under the type of policy involved, and with respect to which a reserve in addition to the unearned premiums (as defined in paragraph (e) of this section) must be carried to cover that obligation. Section 801(e) provides that such policies shall be treated in the same manner as noncancellable life, health, and accident insurance policies. For example, the age termination date requirements applicable to noncancellable health and accident insurance policies shall also apply to guaranteed renewable life, health, and accident insurance policies. See paragraph (c) of this section.
(e) Unearned premiums. The term unearned premiums means those amounts which shall cover the cost of carrying the insurance risk for the period for which the premiums have been paid in advance. Such term includes all unearned premiums, whether or not required by law.
(f) Life insurance reserves. For the definition of the term “life insurance reserves”, see section 801(b) and § 1.801-4.
(g) Unpaid losses (whether or not ascertained). The term unpaid losses (whether or not ascertained) means a reasonable estimate of the amount of the losses (based upon the facts in each case and the company's experience with similar cases):
(1) Reported and ascertained by the end of the taxable year but where the amount of the loss has not been paid by the end of the taxable year,
(2) Reported by the end of the taxable year but where the amount thereof has not been either ascertained or paid by the end of the taxable year, or
(3) Which have occurred by the end of the taxable year but which have not been reported or paid by the end of the taxable year.
(h) Total reserves. For the definition of the term total reserves, see section 801(c) and § 1.801-5.
(i) Amount of reserves. For purposes of subsections (a), (b), and (c) of section 801 and this section, section 801(b)(5) provides that the amount of any reserve (or portion thereof) for any taxable year shall be the mean of such reserve (or portion thereof) at the beginning and end of the taxable year.
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Treas. Reg. §1.801-3(a)Insurance company.
Insurance company. (1) The term insurance company means a company whose primary and predominant business activity during the taxable year is the issuing of insurance or annuity contracts or the reinsuring of risks underwritten by insurance companies. Thus, though its name, charter powers, and subjection to State insurance laws are significant in determining the business which a company is authorized and intends to carry on, it is the character of the business actually done in the taxable year which determines whether a company is taxable as an insurance company under the Internal Revenue Code.
(2) Insurance companies include both stock and mutual companies, as well as mutual benefit insurance companies. For taxable years beginning before January 1, 1970, a voluntary unincorporated association of employees, including an association fulfilling the requirements of section 801(b)(2)(B) (as in effect for such years), formed for the purpose of relieving sick and aged members and the dependents of deceased members, is an insurance company, whether the fund for such purpose is created wholly by membership dues or partly by contributions from the employer. A corporation which merely sets aside a fund for the insurance of its employees is not an insurance company, and the income from such fund shall be included in the return of the corporation.
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Treas. Reg. §1.801-3(b)Life insurance company.
Life insurance company. (1) The term life insurance company, as used in subtitle A of the Code, is defined in section 801(a). For the purpose of determining whether a company is a “life insurance company” within the meaning of that term as used in section 801(a), it must first be determined whether the company is taxable as an insurance company (as defined in paragraph (a) of this section). An insurance company shall be taxed as a life insurance company if it is engaged in the business of issuing life insurance and annuity contracts (either separately or combined with health and accident insurance), or noncancellable contracts of health and accident insurance, and its life insurance reserves (as defined in section 801(b) and § 1.801-4), plus unearned premiums, and unpaid losses (whether or not ascertained), on noncancellable life, health, or accident policies not included in life insurance reserves, comprise more than 50 percent of its total reserves (as defined in section 801(c) and § 1.801-5). For purposes of determining whether it satisfies the percentage requirements of the preceding sentence, a company shall first make any adjustments to life insurance reserves and total reserves required by section 806(a) (relating to adjustments for certain changes in reserves and assets) and then as required by section 801(d) (relating to adjustments in reserves for policy loans). For examples of the adjustments required under section 806(a), see paragraph (b)(4) of § 1.806-3. For an example of the adjustments required under section 801(d), see paragraph (c) of § 1.801-6. Furthermore, if an insurance company which computes its life insurance reserves on a preliminary term basis elects to revalue such reserves on a net level premium basis under section 818(c), such revalued basis shall be disregarded for purposes of section 801.
(2) An insurance company writing only noncancellable life, health, or accident policies and having no “life insurance reserves” may qualify as a life insurance company if its unearned premiums, and unpaid losses (whether or not ascertained), on such policies comprise more than 50 percent of its total reserves.
(3) Section 801(f) provides that a burial or funeral benefit insurance company engaged directly in the manufacture of funeral supplies or the performance of funeral services shall not be taxable under section 802 but shall be taxable under section 821 or section 831 as an insurance company other than life.
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Treas. Reg. §1.801-3(c)Noncancellable life, health, or accident insurance policy.
Noncancellable life, health, or accident insurance policy. The term noncancellable life, health, or accident insurance policy means a health and accident contract, or a health and accident contract combined with a life insurance or annuity contract, which the insurance company is under an obligation to renew or continue at a specified premium and with respect to which a reserve in addition to the unearned premiums (as defined in paragraph (e) of this section) must be carried to cover that obligation. Such a health and accident contract shall be considered noncancellable even though it states a termination date at a stipulated age, if, with respect to the health and accident contract, such age termination date is 60 or over. Such a contract, however, shall not be considered to be noncancellable after the age termination date stipulated in the contract has passed. However, if the age termination date stipulated in the contract occurs during the period covered by a premium received by the life insurance company prior to such date, and the company cannot cancel or modify the contract during such period, the age termination date shall be deemed to occur at the expiration of the period for which the premium has been received.
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Treas. Reg. §1.801-3(d)Guaranteed renewable life, health, and accident insurance policy.
Guaranteed renewable life, health, and accident insurance policy. The term guaranteed renewable life, health, and accident insurance policy means a health and accident contract, or a health and accident contract combined with a life insurance or annuity contract, which is not cancellable by the company but under which the company reserves the right to adjust premium rates by classes in accordance with its experience under the type of policy involved, and with respect to which a reserve in addition to the unearned premiums (as defined in paragraph (e) of this section) must be carried to cover that obligation. Section 801(e) provides that such policies shall be treated in the same manner as noncancellable life, health, and accident insurance policies. For example, the age termination date requirements applicable to noncancellable health and accident insurance policies shall also apply to guaranteed renewable life, health, and accident insurance policies. See paragraph (c) of this section.
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Treas. Reg. §1.801-3(e)Unearned premiums.
Unearned premiums. The term unearned premiums means those amounts which shall cover the cost of carrying the insurance risk for the period for which the premiums have been paid in advance. Such term includes all unearned premiums, whether or not required by law.
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Treas. Reg. §1.801-3(f)Life insurance reserves.
Life insurance reserves. For the definition of the term “life insurance reserves”, see section 801(b) and § 1.801-4.
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Treas. Reg. §1.801-3(g)Unpaid losses (whether or not ascertained).
Unpaid losses (whether or not ascertained). The term unpaid losses (whether or not ascertained) means a reasonable estimate of the amount of the losses (based upon the facts in each case and the company's experience with similar cases):
(1) Reported and ascertained by the end of the taxable year but where the amount of the loss has not been paid by the end of the taxable year,
(2) Reported by the end of the taxable year but where the amount thereof has not been either ascertained or paid by the end of the taxable year, or
(3) Which have occurred by the end of the taxable year but which have not been reported or paid by the end of the taxable year.
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Treas. Reg. §1.801-3(h)Total reserves.
Total reserves. For the definition of the term total reserves, see section 801(c) and § 1.801-5.
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Treas. Reg. §1.801-3(i)Amount of reserves.
Amount of reserves. For purposes of subsections (a), (b), and (c) of section 801 and this section, section 801(b)(5) provides that the amount of any reserve (or portion thereof) for any taxable year shall be the mean of such reserve (or portion thereof) at the beginning and end of the taxable year.
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Treas. Reg. §1.801-4Life insurance reserves
(a) Life insurance reserves defined. For purposes of part I, subchapter L, chapter 1 of the Code, the term life insurance reserves (as defined in section 801(b)) means those amounts:
(1) Which are computed or estimated on the basis of recognized mortality or morbidity tables and assumed rates of interest;
(2) Which are set aside to mature or liquidate, either by payment or reinsurance, future unaccrued claims arising from life insurance, annuity, and noncancellable health and accident insurance contracts (including life insurance or annuity contracts combined with noncancellable health and accident insurance) involving, at the time with respect to which the reserve is computed, life, health, or accident contingencies; and
(3) Which, except as otherwise provided by section 801(b)(2) and paragraphs (b) and (c) of this section, are required by law. For the meaning of the term “reserves required by law”, see paragraph (b) of § 1.801-5.
For purposes of determining life insurance reserves, only those amounts shall be taken into account which must be reserved either by express statutory provisions or by rules and regulations of the insurance department of a State, Territory, or the District of Columbia when promulgated in the exercise of a power conferred by statute. Moreover, such amounts must actually be held by the company during the taxable year for which the reserve is claimed. However, reserves held by the company with respect to the net value of risks reinsured in other solvent companies (whether or not authorized) shall be deducted from the company's life insurance reserves. For example, if an ordinary life policy with a reserve of $100 is reinsured in another solvent company on a yearly renewable term basis, and the reserve on such yearly renewable term policy is $10, the reinsured company shall include $90 ($100 minus $10) in determining its life insurance reserves. Generally, life insurance reserves, as in the case of level premium life insurance, are held to supplement the future premium receipts when the latter, alone, are insufficient to cover the increased risk in the later years. For examples of reserves which qualify as life insurance reserves, see paragraph (d) of this section. For examples of reserves which do not qualify as life insurance reserves, see paragraph (e) of this section.
(b) Certain reserves which need not be required by law. Section 801(b)(2) sets forth certain reserves which, though not required by law, may still qualify as life insurance reserves, provided, however, that they first satisfy the requirements of section 801(b)(1) (A) and (B) and paragraph (a) (1) and (2) of this section. Thus, reserves need not be required by law:
(1) In the case of policies covering life, health, and accident insurance combined in one policy issued on the weekly premium payment plan, continuing for life and not subject to cancellation, and
(2) For taxable years beginning before January 1, 1970, in the case of policies issued by an organization which met the requirements of section 501(c)(9) (as it existed prior to amendment by the Tax Reform Act of 1969) other than the requirement of subparagraph (B) thereof.
(c) Assessment companies. Section 801(b)(3) provides that in the case of an assessment life insurance company or association, the term life insurance reserves includes:
(1) Sums actually deposited by such company or association with officers of a State or Territory pursuant to law as guaranty or reserve funds, and
(2) Any funds maintained, under the charter or articles of incorporation or association of such company or association (or bylaws approved by the State insurance commissioner) of such company or association, exclusively for the payment of claims arising under certificates of membership or policies issued upon the assessment plan and not subject to any other use.
For purposes of part I, subchapter L, chapter 1 of the Code, the reserves described in this paragraph shall be included as life insurance reserves even though such reserves do not meet the requirements of section 801(b) and paragraph (a) of this section. However, for such reserves to be included as life insurance reserves, they must be deposited or maintained to liquidate future unaccrued claims arising from life insurance, annuity, or noncancellable health and accident insurance contracts (including life insurance or annuity contracts combined with noncancellable health and accident insurance) involving, at the time with respect to which the reserve is deposited or maintained, life, health, or accident contingencies. The rate of interest assumed in calculating the reserves described in this paragraph shall be 3 percent, regardless of the rate of interest (if any) specified in the contract in respect of such reserves.
(d) Reserves which qualify as life insurance reserves. The following reserves, provided they meet the requirements of section 801(b) and paragraph (a) of this section, are illustrative of reserves which shall be included as life insurance reserves:
(1) Reserves held under life insurance contracts.
(2) Reserves held under annuity contracts (including reserves held under variable annuity contracts as described in section 801(g)(1)).
(3) Reserves held under noncancellable health and accident insurance contracts (as defined in paragraph (c) of § 1.801-3) and reserves held under guaranteed renewable health and accident insurance contracts (as defined in paragraph (d) of § 1.801-3).
(4) Reserves held either separately or combined under contracts described in subparagraphs (1), (2), or (3) of this paragraph.
(5) Reserves held under deposit administration contracts. Generally, the reserves held by a life insurance company on both the active and retired lives under deposit administration contracts will meet the requirements of section 801(b) and paragraph (a) of this section.
However, reserves held by the company with respect to the net value of risks reinsured in other solvent companies (whether or not authorized) shall be deducted from the company's life insurance reserves. See paragraph (a) of this section.
(e) Reserves and liabilities which do not qualify as life insurance reserves. The following are illustrative of reserves and liabilities which do not meet the requirements of section 801(b) and paragraph (a) of this section and, accordingly, shall not be included as life insurance reserves:
(1) Liability for supplementary contracts not involving at the time with respect to which the liability is computed, life, health, or accident contingencies.
(2) In the case of cancellable health and accident policies and similar cancellable contracts, the unearned premiums and unpaid losses (whether or not ascertained).
(3) The unearned premiums, and unpaid losses (whether or not ascertained), on noncancellable life, health, or accident policies (and guaranteed renewable life, health, and accident policies) not included in life insurance reserves. (However, such amounts shall be taken into account under section 801(a)(2) for purposes of determining whether an insurance company is a life insurance company.)
(4) The deficiency reserve (as defined in section 801(b)(4)) for each individual contract, that is, that portion of the reserve for such contract equal to the amount (if any) by which:
(i) The present value of the future net premiums required for such contract, exceeds
(ii) The present value of the future actual premiums and consideration charged for such contract.
(5) Reserves required to be maintained to provide for the ordinary operating expenses of a business which must be currently paid by every company from its income if its business is to continue, such as taxes, salaries, and unpaid brokerage.
(6) Liability for premiums received in advance.
(7) Liability for premium deposit funds.
(8) Liability for annual and deferred dividends declared or apportioned.
(9) Liability for dividends left on deposit at interest.
(10) Liability for accrued but unsettled policy claims whether known or unreported.
(11) A mandatory securities valuation reserve.
(f) Adjustments to life insurance reserves. In the event it is determined on the basis of the facts of a particular case that premiums deferred and uncollected and premiums due and unpaid are not properly accruable for the taxable year under section 809 and, accordingly, are not properly includible under assets (as defined in section 805(b)(4)) for the taxable year, appropriate reduction shall be made in the life insurance reserves. This reduction shall be made when the insurance company has calculated life insurance reserves on the assumption that the premiums on all policies are paid annually or that all premiums due on or prior to the date of the annual statement have been paid.
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Treas. Reg. §1.801-4(a)Life insurance reserves defined.
Life insurance reserves defined. For purposes of part I, subchapter L, chapter 1 of the Code, the term life insurance reserves (as defined in section 801(b)) means those amounts:
(1) Which are computed or estimated on the basis of recognized mortality or morbidity tables and assumed rates of interest;
(2) Which are set aside to mature or liquidate, either by payment or reinsurance, future unaccrued claims arising from life insurance, annuity, and noncancellable health and accident insurance contracts (including life insurance or annuity contracts combined with noncancellable health and accident insurance) involving, at the time with respect to which the reserve is computed, life, health, or accident contingencies; and
(3) Which, except as otherwise provided by section 801(b)(2) and paragraphs (b) and (c) of this section, are required by law. For the meaning of the term “reserves required by law”, see paragraph (b) of § 1.801-5.
For purposes of determining life insurance reserves, only those amounts shall be taken into account which must be reserved either by express statutory provisions or by rules and regulations of the insurance department of a State, Territory, or the District of Columbia when promulgated in the exercise of a power conferred by statute. Moreover, such amounts must actually be held by the company during the taxable year for which the reserve is claimed. However, reserves held by the company with respect to the net value of risks reinsured in other solvent companies (whether or not authorized) shall be deducted from the company's life insurance reserves. For example, if an ordinary life policy with a reserve of $100 is reinsured in another solvent company on a yearly renewable term basis, and the reserve on such yearly renewable term policy is $10, the reinsured company shall include $90 ($100 minus $10) in determining its life insurance reserves. Generally, life insurance reserves, as in the case of level premium life insurance, are held to supplement the future premium receipts when the latter, alone, are insufficient to cover the increased risk in the later years. For examples of reserves which qualify as life insurance reserves, see paragraph (d) of this section. For examples of reserves which do not qualify as life insurance reserves, see paragraph (e) of this section.
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Treas. Reg. §1.801-4(b)Certain reserves which need not be required by law.
Certain reserves which need not be required by law. Section 801(b)(2) sets forth certain reserves which, though not required by law, may still qualify as life insurance reserves, provided, however, that they first satisfy the requirements of section 801(b)(1) (A) and (B) and paragraph (a) (1) and (2) of this section. Thus, reserves need not be required by law:
(1) In the case of policies covering life, health, and accident insurance combined in one policy issued on the weekly premium payment plan, continuing for life and not subject to cancellation, and
(2) For taxable years beginning before January 1, 1970, in the case of policies issued by an organization which met the requirements of section 501(c)(9) (as it existed prior to amendment by the Tax Reform Act of 1969) other than the requirement of subparagraph (B) thereof.
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Treas. Reg. §1.801-4(c)Assessment companies.
Assessment companies. Section 801(b)(3) provides that in the case of an assessment life insurance company or association, the term life insurance reserves includes:
(1) Sums actually deposited by such company or association with officers of a State or Territory pursuant to law as guaranty or reserve funds, and
(2) Any funds maintained, under the charter or articles of incorporation or association of such company or association (or bylaws approved by the State insurance commissioner) of such company or association, exclusively for the payment of claims arising under certificates of membership or policies issued upon the assessment plan and not subject to any other use.
For purposes of part I, subchapter L, chapter 1 of the Code, the reserves described in this paragraph shall be included as life insurance reserves even though such reserves do not meet the requirements of section 801(b) and paragraph (a) of this section. However, for such reserves to be included as life insurance reserves, they must be deposited or maintained to liquidate future unaccrued claims arising from life insurance, annuity, or noncancellable health and accident insurance contracts (including life insurance or annuity contracts combined with noncancellable health and accident insurance) involving, at the time with respect to which the reserve is deposited or maintained, life, health, or accident contingencies. The rate of interest assumed in calculating the reserves described in this paragraph shall be 3 percent, regardless of the rate of interest (if any) specified in the contract in respect of such reserves.
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Treas. Reg. §1.801-4(d)Reserves which qualify as life insurance reserves.
Reserves which qualify as life insurance reserves. The following reserves, provided they meet the requirements of section 801(b) and paragraph (a) of this section, are illustrative of reserves which shall be included as life insurance reserves:
(1) Reserves held under life insurance contracts.
(2) Reserves held under annuity contracts (including reserves held under variable annuity contracts as described in section 801(g)(1)).
(3) Reserves held under noncancellable health and accident insurance contracts (as defined in paragraph (c) of § 1.801-3) and reserves held under guaranteed renewable health and accident insurance contracts (as defined in paragraph (d) of § 1.801-3).
(4) Reserves held either separately or combined under contracts described in subparagraphs (1), (2), or (3) of this paragraph.
(5) Reserves held under deposit administration contracts. Generally, the reserves held by a life insurance company on both the active and retired lives under deposit administration contracts will meet the requirements of section 801(b) and paragraph (a) of this section.
However, reserves held by the company with respect to the net value of risks reinsured in other solvent companies (whether or not authorized) shall be deducted from the company's life insurance reserves. See paragraph (a) of this section.
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Treas. Reg. §1.801-4(e)Reserves and liabilities which do not qualify as life insurance reserves.
Reserves and liabilities which do not qualify as life insurance reserves. The following are illustrative of reserves and liabilities which do not meet the requirements of section 801(b) and paragraph (a) of this section and, accordingly, shall not be included as life insurance reserves:
(1) Liability for supplementary contracts not involving at the time with respect to which the liability is computed, life, health, or accident contingencies.
(2) In the case of cancellable health and accident policies and similar cancellable contracts, the unearned premiums and unpaid losses (whether or not ascertained).
(3) The unearned premiums, and unpaid losses (whether or not ascertained), on noncancellable life, health, or accident policies (and guaranteed renewable life, health, and accident policies) not included in life insurance reserves. (However, such amounts shall be taken into account under section 801(a)(2) for purposes of determining whether an insurance company is a life insurance company.)
(4) The deficiency reserve (as defined in section 801(b)(4)) for each individual contract, that is, that portion of the reserve for such contract equal to the amount (if any) by which:
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Treas. Reg. §1.801-4(f)Adjustments to life insurance reserves.
Adjustments to life insurance reserves. In the event it is determined on the basis of the facts of a particular case that premiums deferred and uncollected and premiums due and unpaid are not properly accruable for the taxable year under section 809 and, accordingly, are not properly includible under assets (as defined in section 805(b)(4)) for the taxable year, appropriate reduction shall be made in the life insurance reserves. This reduction shall be made when the insurance company has calculated life insurance reserves on the assumption that the premiums on all policies are paid annually or that all premiums due on or prior to the date of the annual statement have been paid.
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Treas. Reg. §1.801-4(i)§1.801-4(i)
The present value of the future net premiums required for such contract, exceeds
(ii) The present value of the future actual premiums and consideration charged for such contract.
(5) Reserves required to be maintained to provide for the ordinary operating expenses of a business which must be currently paid by every company from its income if its business is to continue, such as taxes, salaries, and unpaid brokerage.
(6) Liability for premiums received in advance.
(7) Liability for premium deposit funds.
(8) Liability for annual and deferred dividends declared or apportioned.
(9) Liability for dividends left on deposit at interest.
(10) Liability for accrued but unsettled policy claims whether known or unreported.
(11) A mandatory securities valuation reserve.
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Treas. Reg. §1.801-5Total reserves
(a) Total reserves defined. For purposes of section 801(a) and § 1.801-3, the term “total reserves” is defined in section 801(c) as the sum of:
(1) Life insurance reserves (as defined in section 801(b) and § 1.801-4),
(2) Unearned premiums (as defined in paragraph (e) of § 1.801-3), and unpaid losses (whether or not ascertained) (as defined in paragraph (g) of § 1.801-3), not included in life insurance reserves, and
(3) All other insurance reserves required by law.
The term “total reserves” does not, however, include deficiency reserves (within the meaning of section 801(b)(4), and paragraph (e)(4) of § 1.801-4), even though such deficiency reserves are required by State law. In determining total reserves, a company is permitted to make use of the highest aggregate reserve required by any State or Territory or the District of Columbia in which it transacts business, but the reserve must have been actually held during the taxable year for which the reserve is claimed. For example, during the taxable year 1958 a life insurance company sells life insurance and annuity contracts in States A and B. State A requires reserves of 10 against the life and 5 against the annuity business. State B requires reserves of 9 against the life and 7 against the annuity business. Assuming the company actually holds these reserves during the taxable year 1958, its highest aggregate reserve for such taxable year is the 16 required by State B. Thus, the company is not permitted to compute its highest aggregate reserve by taking State A's requirement of 10 against its life insurance business and adding it to State B's requirement of 7 against its annuity business.
(b) Reserves required by law defined. For purposes of part I, subchapter L, chapter 1 of the Code, the term reserves required by law means reserves which are required either by express statutory provisions or by rules and regulations of the insurance department of a State, Territory, or the District of Columbia when promulgated in the exercise of a power conferred by statute, and which are reported in the annual statement of the company and accepted by state regulatory authorities as held for the fulfillment of the claims of policyholders or beneficiaries.
(c) [Reserved]
(d) Illustration of principles. The provisions of section 801 relating to the percentage requirements for qualification as a life insurance company may be illustrated by the following example:
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Treas. Reg. §1.801-5(a)Total reserves defined.
Total reserves defined. For purposes of section 801(a) and § 1.801-3, the term “total reserves” is defined in section 801(c) as the sum of:
(1) Life insurance reserves (as defined in section 801(b) and § 1.801-4),
(2) Unearned premiums (as defined in paragraph (e) of § 1.801-3), and unpaid losses (whether or not ascertained) (as defined in paragraph (g) of § 1.801-3), not included in life insurance reserves, and
(3) All other insurance reserves required by law.
The term “total reserves” does not, however, include deficiency reserves (within the meaning of section 801(b)(4), and paragraph (e)(4) of § 1.801-4), even though such deficiency reserves are required by State law. In determining total reserves, a company is permitted to make use of the highest aggregate reserve required by any State or Territory or the District of Columbia in which it transacts business, but the reserve must have been actually held during the taxable year for which the reserve is claimed. For example, during the taxable year 1958 a life insurance company sells life insurance and annuity contracts in States A and B. State A requires reserves of 10 against the life and 5 against the annuity business. State B requires reserves of 9 against the life and 7 against the annuity business. Assuming the company actually holds these reserves during the taxable year 1958, its highest aggregate reserve for such taxable year is the 16 required by State B. Thus, the company is not permitted to compute its highest aggregate reserve by taking State A's requirement of 10 against its life insurance business and adding it to State B's requirement of 7 against its annuity business.
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Treas. Reg. §1.801-5(b)Reserves required by law defined.
Reserves required by law defined. For purposes of part I, subchapter L, chapter 1 of the Code, the term reserves required by law means reserves which are required either by express statutory provisions or by rules and regulations of the insurance department of a State, Territory, or the District of Columbia when promulgated in the exercise of a power conferred by statute, and which are reported in the annual statement of the company and accepted by state regulatory authorities as held for the fulfillment of the claims of policyholders or beneficiaries.
81 Citing Cases
801(2), describe it as "[t]he illegal importation, manufacture, distribution, and possession and improper use ofcontrolled substances". Further, the Federal statute criminalizing - 22 - trafficking in counterfeit goods or services provides that "the term 'traffic' means to transport, transfer, or otherwise dispose of, to another, for purposes
801(2), describe it as "[t]he illegal importation, manufacture, distribution, and possession and improper use ofcontrolled substances". Further, the Federal statute criminalizing - 22 - trafficking in counterfeit goods or services provides that "the term 'traffic' means to transport, transfer, or otherwise dispose of, to another, for purposes
801(2), describe it as "[t]he illegal importation, manufacture, distribution, and possession and improper use ofcontrolled substances". Further, the Federal statute criminalizing - 22 - trafficking in counterfeit goods or services provides that "the term 'traffic' means to transport, transfer, or otherwise dispose of, to another, for purposes
801(2), describe it as "[t]he illegal importation, manufacture, distribution, and possession and improper use ofcontrolled substances". Further, the Federal statute criminalizing - 22 - trafficking in counterfeit goods or services provides that "the term 'traffic' means to transport, transfer, or otherwise dispose of, to another, for purposes
801(2), describe it as "[t]he illegal importation, manufacture, distribution, and possession and improper use ofcontrolled substances". Further, the Federal statute criminalizing - 22 - trafficking in counterfeit goods or services provides that "the term 'traffic' means to transport, transfer, or otherwise dispose of, to another, for purposes
801(2), describe it as "[t]he illegal importation, manufacture, distribution, and possession and improper use ofcontrolled substances". Further, the Federal statute criminalizing - 22 - trafficking in counterfeit goods or services provides that "the term 'traffic' means to transport, transfer, or otherwise dispose of, to another, for purposes
at 264; see also Alli v.
cise investment control over the account, but he could no longer surrender the policy. The policy in Revenue Ruling 77-85 was meant to qualify as a “variable contract” based on a “segregated asset account” within the meaning of section 817(d) (then section 801(g)). But for this treatment to be available, the IRS noted, “the insurance company must be the owner of the assets in the segregated accounts.” Id., 1977-1 C.B. at 14. The IRS concluded that the taxpayer possessed such significant incident
ation oftrusts and generally coordinates the passive-activity-lossrules ofsec. 469 with the rules on taxation oftrusts in subch. J. See, e.g., 1 Byrle K. Abbin, David K. Carlson, and Mark L. Vorsatz, Income Taxation ofFiduciaries and Beneficiaries, sec. 801, at 8003 to 8004 (2012 ed.) ("Section 469 does not easily comport with subchapter J. To date no regulatory explanation has been forthcoming * * * [on questions including] where and how material participation is measured[.]"); M. Carr Ferguson
n of trusts and generally coordinates the passive-activity-loss rules of sec. 469 with the rules on taxation of trusts in subch. J. See, e.g., 1 Byrle K. Abbin, David K. Carlson, and Mark L. Vorsatz, Income Taxation of Fiduciaries and Beneficiaries, sec. 801, at 8003 to 8004 (2012 ed.) (“Section 469 does not easily comport with subchapter J. To date no regulatory explanation has been forthcoming * * * [on questions including] where and how material participation is measuredL]”); M. Carr Ferguson
During the years 1996 through 2002 petitioner was the common parent of an affiliated group of corporations that included two domestic life insurance companies taxable under section 801 (life subgroup) and a varying number of domestic nonlife insurance companies and other domestic corporations (nonlife subgroup, and together with the life subgroup, consolidated group) .
During the years 1996 through 2002 petitioner was the common parent of an affiliated group of corporations that included two domestic life insurance companies taxable under section 801 (life subgroup) and a varying number of domestic nonlife insurance companies and other domestic corporations (nonlife subgroup, and together with the life subgroup, consolidated group).
State Farm is also the common parent of an affiliated group including domestic life insurance companies taxed under section 801, domestic nonlife insurance companies, and other domestic corporations.
State Farm is also the common parent of an affiliated group including domestic life insurance companies taxed under section 801, domestic nonlife insurance companies, and other domestic corporations.
494, 985, in order to comply with the General Agreement on Tariffs and Trade, see S. Prt. 98-169 (Vol. I), at 635 (Comm. Print 1984). Under the FSC provisions, a taxpayer may permanently exclude - 19 - from Federal income tax a portion of its profits from qualifying export sales.3 Both the DISC and the FSC provisions reallocate
In that case, the parties stipulated that unpaid losses in section 801 (now section 816) - 12 - had the same meaning as unpaid losses in former section 806.
The parties in that case had stipulated that the term had the same meaning in former sections 801 and 806(c), and the court construed section 816's predecessor (former section 801) merely as support for its ultimate conclusion.
The parties in that case had stipulated that the term had the same meaning in former sections 801 and 806(c), and the court construed section 816’s predecessor (former section 801) merely as support for its ultimate conclusion.
Section 864(c)3 and the 2Sec. 842(a) provides in pertinent part: (a) Taxation under this subchapter.--If a foreign company carrying on an insurance business within the United States would qualify under part I * * * of this subchapter for the taxable year if (without regard to income not effectively connected with the conduct of any
ns. For the consolidated return filed for the year ended 1987, pursuant to section 448,3 petitioners not employing an overall accrual method for computing taxable income for the years ended 3 Sec. 448, which was added to the Internal Revenue Code by sec. 801 of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2345, provides generally that, with certain exceptions not applicable in the instant case, a C corporation, a partnership that has a C corporation as a partner, or a tax shelter may no
x reporting purposes. HCA's Tax Department retained the results of the computations made in arriving at cash method taxable income as shown on petitioners' Federal income tax returns and made those results 11 Sec. 448, which was added to the Code by sec. 801 of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2345, wherein Congress required certain corporations, including hospitals, to change prospectively beginning in 1987 to an overall accrual method, does not apply to the accounting issu
x reporting purposes. HCA's Tax Department retained the results of the computations made in arriving at cash method taxable income as shown on petitioners' Federal income tax returns and made those results 11 Sec. 448, which was added to the Code by sec. 801 of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2345, wherein Congress required certain corporations, including hospitals, to change prospectively beginning in 1987 to an overall accrual method, does not apply to the accounting issu
mbia Healthcare Corp. of Louisville, Ky., and the subsidiary changed its name to HCA-Hospital Corp. of America. On that same date, the parent changed its name to Columbia/HCA Healthcare Corp. Sec. 448, which was added to the Internal Revenue Code by sec. 801 of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2345, provides generally that, with certain exceptions not applicable in the instant case, a C corporation, a partnership that has a C corporation as a partner, or a tax shelter may no
Rept. 98-861, at 1043-1044 (1984), 1984-3 C.B. (Vol. 2) 1, 297-298. This change necessitated treating the product of the deficiency and the foreign insurance company’s actual yield as additional effectively connected income instead of as a reduction of certain deductions which was done under the previous section 819. Subsequently,
801 of the DRA created a similar vehicle; i.e., the Foreign Sales Corp. (FSC), in secs. 921 through 927 to carry forward the Congress' intent to stimulate United States exports. Many of the FSC provisions, including the definition of export property in sec. 927, mirror (or are substantially similar to) the corresponding DISC provision. - 11 -