§816 — Life insurance company defined
16 cases·2 followed·2 distinguished·1 limited·1 overruled·10 cited—12% support
Statute Text — 26 U.S.C. §816
For purposes of this subtitle, the term “life insurance company” means an insurance company which is engaged in the business of issuing life insurance and annuity contracts (either separately or combined with accident and health insurance), or noncancellable contracts of health and accident insurance, if—
its life insurance reserves (as defined in subsection (b)), plus
unearned premiums, and unpaid losses (whether or not ascertained), on noncancellable life, accident, or health policies not included in life insurance reserves,
comprise more than 50 percent of its total reserves (as defined in subsection (c)). For purposes of the preceding sentence, the term “insurance company” means any company more than half of the business of which during the taxable year is the issuing of insurance or annuity contracts or the reinsuring of risks underwritten by insurance companies.
For purposes of this part, the term “life insurance reserves” means amounts—
which are computed or estimated on the basis of recognized mortality or morbidity tables and assumed rates of interest, and
which are set aside to mature or liquidate, either by payment or reinsurance, future unaccrued claims arising from life insurance, annuity, and noncancellable accident and health insurance contracts (including life insurance or annuity contracts combined with noncancellable accident and health insurance) involving, at the time with respect to which the reserve is computed, life, accident, or health contingencies.
Except—
in the case of policies covering life, accident, and health insurance combined in one policy issued on the weekly premium payment plan, continuing for life and not subject to cancellation, and
as provided in paragraph (3),
in addition to the requirements set forth in paragraph (1), life insurance reserves must be required by law.
In the case of an assessment life insurance company or association, the term “life insurance reserves” includes—
sums actually deposited by such company or association with State officers pursuant to law as guaranty or reserve funds, and
any funds maintained, under the charter or articles of incorporation or association (or bylaws approved by a State insurance commissioner) of such company or association, exclusively for the payment of claims arising under certificates of membership or policies issued on the assessment plan and not subject to any other use.
For purposes of this subsection, subsection (a), and subsection (c), 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.
For purposes of subsection (a), the term “total reserves” means—
life insurance reserves,
unearned premiums, and unpaid losses (whether or not ascertained), not included in life insurance reserves, and
all other insurance reserves required by law.
For purposes only of determining under subsection (a) whether or not an insurance company is a life insurance company, the life insurance reserves, and the total reserves, shall each be reduced by an amount equal to the mean of the aggregates, at the beginning and end of the taxable year, of the policy loans outstanding with respect to contracts for which life insurance reserves are maintained.
For purposes of this part, guaranteed renewable life, accident, and health insurance shall be treated in the same manner as noncancellable life, accident, and health insurance.
For purposes only of determining under subsection (a) whether or not an insurance company is a life insurance company, amounts set aside and held at interest to satisfy obligations under contracts which do not contain permanent guarantees with respect to life, accident, or health contingencies shall not be included in reserves described in paragraph (1) or (3) of subsection (c).
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 this part but shall be taxable under section 831.
For purposes of this section and section 842(b)(2)(B)(i), the terms “life insurance reserves” and “total reserves” shall not include deficiency reserves.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.816-1 Life insurance reserves
- Treas. Reg. §Treas. Reg. §1.816-1(a) Definition of life insurance reserves.
- Treas. Reg. §Treas. Reg. §1.816-1(b) Applicability date.
16 Citing Cases
Petitioner argues that the industry of life and A&H insurance, unlike the P&C insurance industry, makes a meaningful distinction between an unpaid loss that has accrued and an unpaid loss that has not accrued, and petitioner asserts that the industry of life and A&H insurance considers a reserve to be different from a 4(...continued) 1959, Pub. L. 86-69, 73 Stat. 112, added the parenthetical phrase “whether or not ascertained” now found in sec. 816(a)(2).
816 provides in part: SEC.
Section 816, in pertinent part below, provides the following description of the elements of the life insurance company qualifying 50- percent fraction and of life insurance total reserves. SEC. 816(a). Life Insurance Company Defined.-- For purposes of this subtitle, the term "life insurance company" means an insurance company which is engaged in th
the rules which apply to nonlife insurance companies. See United States v. Consumer Life Ins. Co., 430 U.S. 725, 727-728 (1977). An insurance company is a life insurance company for Federal income tax purposes if it meets the definition set forth in section 816. Section 816 provides in part: SEC. 816. LIFE INSURANCE COMPANY DEFINED. (a) Life Insurance Company Defined. — For purposes of this subtitle, the term “life insurance company” means an insurance company which is engaged in the business of
By eliminating the avoidance effect of this agreement you do not meet the requirements of a life insurance company as specified in Internal Revenue Code section 816 because the reserves necessary to meet the definition of a life insurance company do not comprise more than 50 percent of your total reserves.
The adverse determination was made for the following reason(s): Applicant does not qualify for exemption under section 501(c)(15) because Applicant has not established that it is an insurance company described in section 816 (other than life) within the meaning of section 501(c)(15), and it does not meet the requirements of section 501(c)(15) that its gross receipts not exceed $600,000 and that more 4 There is some confusion whether the proper figure for 2013 is $150,000 or $154,392, but this do
at 1583–84. Consequently, the plain text of the statute demonstrates Congress’ intent to amend pre-AJCA section 6707 for returns due after October 22, 2004—the AJCA’s effective date. Because Congress knows how to repeal a statute in such a way as “to erase it from the books,” it could have done so here. See Helvering v. Newport Co.
231, 237 (1999) (it is appropriate to construe the meaning of section 816 of subchapter L of the Code, involving insurance companies, in light of its usage in the insurance industry, to the extent it has an established meaning in that industry).
231, 237 (1999) (it is appropriate to construe the meaning of section 816 of subchapter L of the Code, involving insurance companies, in light of its usage in the insurance industry, to the extent it has an established meaning in that industry).
397,397 1989 2,941,341 1990 4,591,998 1991 5,658,976 The notice of deficiency includes an explanation of adjustments which states in pertinent part: It is determined that Hibiscus Life Insurance Company does not qualify as an insurance company under I.R.C. sec. 816 because not more than half of its business during the years in question was the issuing of insurance or annuity contracts or the reinsuring of - 6 - risks underwritten by insurance companies. Accordingly, Lone Star Life Insurance Comp