Subpart D—Accounting, Allocation, and Foreign Provisions
Editorial Notes
Amendments
2017—
1987—
1 Section catchline amended by
§811. Accounting provisions
(a) Method of accounting
All computations entering into the determination of the taxes imposed by this part shall be made—
(1) under an accrual method of accounting, or
(2) to the extent permitted under regulations prescribed by the Secretary, under a combination of an accrual method of accounting with any other method permitted by this chapter (other than the cash receipts and disbursements method).
To the extent not inconsistent with the preceding sentence or any other provision of this part, all such computations shall be made in a manner consistent with the manner required for purposes of the annual statement approved by the National Association of Insurance Commissioners.
(b) Amortization of premium and accrual of discount
(1) In general
The appropriate items of income, deductions, and adjustments under this part shall be adjusted to reflect the appropriate amortization of premium and the appropriate accrual of discount attributable to the taxable year on bonds, notes, debentures, or other evidences of indebtedness held by a life insurance company. Such amortization and accrual shall be determined—
(A) in accordance with the method regularly employed by such company, if such method is reasonable, and
(B) in all other cases, in accordance with regulations prescribed by the Secretary.
(2) Special rules
(A) Amortization of bond premium
In the case of any bond (as defined in section 171(d)), the amount of bond premium, and the amortizable bond premium for the taxable year, shall be determined under section 171(b) as if the election set forth in section 171(c) had been made.
(B) Convertible evidence of indebtedness
In no case shall the amount of premium on a convertible evidence of indebtedness include any amount attributable to the conversion features of the evidence of indebtedness.
(3) Exception
No accrual of discount shall be required under paragraph (1) on any bond (as defined in section 171(d)), except in the case of discount which is—
(A) interest to which section 103 applies, or
(B) original issue discount (as defined in section 1273).
(c) No double counting
Nothing in this part shall permit—
(1) a reserve to be established for any item unless the gross amount of premiums and other consideration attributable to such item are required to be included in life insurance gross income,
(2) the same item to be counted more than once for reserve purposes, or
(3) any item to be deducted (either directly or as an increase in reserves) more than once.
(d) Method of computing reserves on contract where interest is guaranteed beyond end of taxable year
For purposes of this part (other than section 816), amounts in the nature of interest to be paid or credited under any contract for any period which is computed at a rate which—
(1) exceeds the interest rate in effect under section 808(g) for the contract for such period, and
(2) is guaranteed beyond the end of the taxable year on which the reserves are being computed,
shall be taken into account in computing the reserves with respect to such contract as if such interest were guaranteed only up to the end of the taxable year.
(e) Short taxable years
If any return of a corporation made under this part is for a period of less than the entire calendar year (referred to in this subsection as "short period"), then section 443 shall not apply in respect to such period, but life insurance company taxable income shall be determined, under regulations prescribed by the Secretary, on an annual basis by a ratable daily projection of the appropriate figures for the short period.
(Added and amended
Editorial Notes
Prior Provisions
A prior section 811, added
Another prior section 811, act Aug. 16, 1954, ch. 736, §811, as added Mar. 13, 1956, ch. 83, §2,
Amendments
2017—Subsec. (d)(1).
1988—Subsec. (d)(1).
1984—Subsec. (b)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by section 42(a)(8) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1983, see section 215 of
§812. Definition of company's share and policyholder's share
(a) Company's share
For purposes of section 805(a)(4), the term "company's share" means, with respect to any taxable year beginning after December 31, 2017, 70 percent.
(b) Policyholder's share
For purposes of section 807, the term "policyholder's share" means, with respect to any taxable year beginning after December 31, 2017, 30 percent.
(Added
Editorial Notes
Codification
Another section 1084(b) of
Prior Provisions
A prior section 812, added
Another prior section 812, act Aug. 16, 1954, ch. 736, §812, as added Mar. 13, 1956, ch. 83, §2,
Amendments
2017—
2014—Subsec. (e)(2)(A).
2004—Subsec. (b)(3)(A).
1997—Subsec. (d)(1)(D).
1996—Subsec. (g).
1988—Subsec. (b)(2).
Subsec. (e).
1987—Subsec. (b)(2).
1986—Subsec. (b)(2).
Subsec. (b)(3)(B).
Subsec. (c).
Subsec. (g).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Effective Date of 2014 Amendment
Amendment by
Except as otherwise provided in section 221(a) of
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by section 1602(b)(1) of
Effective Date of 1988 Amendment
Amendment by section 2004(p)(2) of
Effective Date of 1987 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1983, see section 215 of
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 [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
[§813. Repealed. Pub. L. 100–203, title X, §10242(c)(1), Dec. 22, 1987, 101 Stat. 1330–423 ]
Section, added
A prior section 813, act Aug. 16, 1954, ch. 736, §813, as added Mar. 13, 1956, ch. 83, §2,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 1987, see section 10242(d) of
§814. Contiguous country branches of domestic life insurance companies
(a) Exclusion of items
In the case of a domestic mutual insurance company which—
(1) is a life insurance company,
(2) has a contiguous country life insurance branch, and
(3) makes the election provided by subsection (g) with respect to such branch,
there shall be excluded from each item involved in the determination of life insurance company taxable income the items separately accounted for in accordance with subsection (c).
(b) Contiguous country life insurance branch
For purposes of this section, the term contiguous country life insurance branch means a branch which—
(1) issues insurance contracts insuring risks in connection with the lives or health of residents of a country which is contiguous to the United States,
(2) has its principal place of business in such contiguous country, and
(3) would constitute a mutual life insurance company if such branch were a separate domestic insurance company.
For purposes of this section, the term "insurance contract" means any life, health, accident, or annuity contract or reinsurance contract or any contract relating thereto.
(c) Separate accounting required
Any taxpayer which makes the election provided by subsection (g) shall establish and maintain a separate account for the various income, exclusion, deduction, asset, reserve, liability, and surplus items properly attributable to the contracts described in subsection (b). Such separate accounting shall be made—
(1) in accordance with the method regularly employed by such company, if such method clearly reflects income derived from, and the other items attributable to, the contracts described in subsection (b), and
(2) in all other cases, in accordance with regulations prescribed by the Secretary.
(d) Recognition of gain on assets in branch account
If the aggregate fair market value of all the invested assets and tangible property which are separately accounted for by the domestic life insurance company in the branch account established pursuant to subsection (c) exceeds the aggregate adjusted basis of such assets for purposes of determining gain, then the domestic life insurance company shall be treated as having sold all such assets on the first day of the first taxable year for which the election is in effect at their fair market value on such first day. Notwithstanding any other provision of this chapter, the net gain shall be recognized to the domestic life insurance company on the deemed sale described in the preceding sentence.
(e) Transactions between contiguous country branch and domestic life insurance company
(1) Reimbursement for home office services, etc.
Any payment, transfer, reimbursement, credit, or allowance which is made from a separate account established pursuant to subsection (c) to one or more other accounts of a domestic life insurance company as reimbursement for costs incurred for or with respect to the insurance (or reinsurance) of risks accounted for in such separate account shall be taken into account by the domestic life insurance company in the same manner as if such payment, transfer, reimbursement, credit, or allowance had been received from a separate person.
(2) Repatriation of income
(A) In general
Except as provided in subparagraph (B), any amount directly or indirectly transferred or credited from a branch account established pursuant to subsection (c) to one or more other accounts of such company shall, unless such transfer or credit is a reimbursement to which paragraph (1) applies, be added to the income of the domestic life insurance company.
(B) Limitation
The addition provided by subparagraph (A) for the taxable year with respect to any contiguous country life insurance branch shall not exceed the amount by which—
(i) the aggregate decrease in the tentative LICTI of the domestic life insurance company for the taxable year and for all prior taxable years resulting solely from the application of subsection (a) of this section with respect to such branch, exceeds
(ii) the amount of additions to tentative LICTI pursuant to subparagraph (A) with respect to such contiguous country branch for all prior taxable years.
(C) Transitional rule
For purposes of this paragraph, in the case of a prior taxable year beginning before January 1, 1984, the term "tentative LICTI" means life insurance company taxable income determined under this part (as in effect for such year) without regard to this paragraph.
(f) Other rules
(1) Treatment of foreign taxes
No income, war profits, or excess profits taxes paid or accrued to any foreign country or possession of the United States which is attributable to income excluded under subsection (a) shall be taken into account for purposes of subpart A of part III of subchapter N (relating to foreign tax credit) or allowable as a deduction.
(2) United States source income allocable to contiguous country branch
For purposes of sections 881, 882, and 1442, each contiguous country life insurance branch shall be treated as a foreign corporation. Such sections shall be applied to each such branch in the same manner as if such sections contained the provisions of any treaty to which the United States and the contiguous country are parties, to the same extent such provisions would apply if such branch were incorporated in such contiguous country.
(g) Election
A taxpayer may make the election provided by this subsection with respect to any contiguous country for any taxable year. An election made under this subsection for any taxable year shall remain in effect for all subsequent taxable years, except that it may be revoked with the consent of the Secretary. The election provided by this subsection shall be made not later than the time prescribed by law for filing the return for the taxable year (including extensions thereof) with respect to which such election is made, and such election and any approved revocation thereof shall be made in the manner provided by the Secretary.
(h) Special rule for domestic stock life insurance companies
At the election of a domestic stock life insurance company which has a contiguous country life insurance branch described in subsection (b) (without regard to the mutual requirement in subsection (b)(3)), the assets of such branch may be transferred to a foreign corporation organized under the laws of the contiguous country without the application of section 367. Subsection (a) shall apply to the stock of such foreign corporation as if such domestic company were a mutual company and as if the stock were an item described in subsection (c). Subsection (e)(2) shall apply to amounts transferred or credited to such domestic company as if such domestic company and such foreign corporation constituted one domestic mutual life insurance company. The insurance contracts which may be transferred pursuant to this subsection shall include only those which are similar to the types of insurance contracts issued by a mutual life insurance company. Notwithstanding the first sentence of this subsection, if the aggregate fair market value of the invested assets and tangible property which are separately accounted for by the domestic life insurance company in the branch account exceeds the aggregate adjusted basis of such assets for purposes of determining gain, the domestic life insurance company shall be deemed to have sold all such assets on the first day of the taxable year for which the election under this subsection applies and the net gain shall be recognized to the domestic life insurance company on the deemed sale, but not in excess of the proportion of such net gain which equals the proportion which the aggregate fair market value of such assets which are transferred pursuant to this subsection is of the aggregate fair market value of all such assets.
(Added
Editorial Notes
Amendments
2017—Subsec. (f)(1).
1997—Subsec. (h).
Statutory Notes and Related Subsidiaries
New Section 814 Treated as Continuation of Section 819A
"(1) any election under section 819A of such Code (as in effect on the day before the date of the enactment of this Act [July 18, 1984]) shall be treated as an election under such section 814, and
"(2) any reference to a provision of such section 814 shall be treated as including a reference to the corresponding provision of such section 819A."
Effective Date of 2017 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1983, see section 215 of
[§815. Repealed. Pub. L. 115–97, title I, §13514(a), Dec. 22, 2017, 131 Stat. 2143 ]
Section, added
A prior section 815, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 2017, see section 13514(c) of