Sec. 13517. Computation of life insurance tax reserves
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Section 807(c) is amended to read as follows: The items referred to in subsections
(a)and
(b)are as follows— The life insurance reserves (as defined in section 816(b)). The unearned premiums and unpaid losses included in total reserves under section 816(c)(2). 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. Dividend accumulations, and other amounts, held at interest in connection with insurance and annuity contracts. Premiums received in advance, and liabilities for premium deposit funds. 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 a combination thereof. For purposes of paragraph (3), the appropriate rate of interest is the highest rate or rates permitted to be used to discount the obligations by the National Association of Insurance Commissioners as of the date the reserve is determined. 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. . Section 807(d) is amended— by striking paragraphs (1), (2), (4), and (5), by redesignating paragraph
(6)as paragraph (4), by inserting before paragraph
(3)the following new paragraphs: For purposes of this part (other than section 816), the amount of the life insurance reserves for any contract (other than a contract to which subparagraph
(B)applies) shall be the greater of— the net surrender value of such contract, or 92.87 percent of the reserve determined under paragraph (2). For purposes of this part (other than section 816), the amount of the life insurance reserves for a variable contract shall be equal to the sum of— the greater of— the net surrender value of such contract, or the portion of the reserve that is separately accounted for under section 817, plus 92.87 percent of the excess (if any) of the reserve determined under paragraph
(2)over the amount in clause (i). In no event shall the reserves determined under subparagraphs
(A)or
(B)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 (4)). The amount of the reserve determined under this paragraph with respect to any contract shall be determined by using the tax reserve method applicable to such contract. , by striking (as of the date of issuance) in paragraph (3)(A)(iv)(I) and inserting (as of the date the reserve is determined) , by striking as of the date of the issuance of in paragraph (3)(A)(iv)(II) and inserting as of the date the reserve is determined for , by striking in effect on the date of the issuance of the contract in paragraph (3)(B)(i) and inserting applicable to the contract and in effect as of the date the reserve is determined , and by striking in effect on the date of the issuance of the contract in paragraph (3)(B)(ii) and inserting applicable to the contract and in effect as of the date the reserve is determined . Section 807(e) is amended— by striking paragraphs
(2)and (5), by redesignating paragraphs (3), (4), (6), and
(7)as paragraphs (2), (3), (4), and (5), respectively, by amending paragraph
(2)(as so redesignated) to read as follows: For purposes of this part, the amount of the life insurance reserve for any qualified supplemental benefit shall be computed separately as though such benefit were under a separate contract. For purposes of this paragraph, the term qualified supplemental benefit means any supplemental benefit described in subparagraph
(C)if— there is a separately identified premium or charge for such benefit, and any net surrender value under the contract attributable to any other benefit is not available to fund such benefit. For purposes of this paragraph, the supplemental benefits described in this subparagraph are any— guaranteed insurability, accidental death or disability benefit, convertibility, disability waiver benefit, or other benefit prescribed by regulations, which is supplemental to a contract for which there is a reserve described in subsection (c). , and by adding at the end the following new paragraph: The Secretary shall require reporting (at such time and in such manner as the Secretary shall prescribe) with respect to the opening balance and closing balance of reserves and with respect to the method of computing reserves for purposes of determining income. . Section 7702 is amended— by striking clause
(i)of subsection (c)(3)(B) and inserting the following: reasonable mortality charges which meet the requirements prescribed in regulations to be promulgated by the Secretary or that do not exceed the mortality charges specified in the prevailing commissioners’ standard tables as defined in subsection (f)(10), and by adding at the end of subsection
(f)the following new paragraph: For purposes of subsection (c)(3)(B)(i), the term prevailing commissioners' standard tables means 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. If the prevailing commissioners’ standard tables as of the beginning of any calendar year (hereinafter in this paragraph referred to as the year of change ) are 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. . Section 808 is amended by adding at the end the following new subsection: For purposes of this subchapter— 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. 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. . Paragraph
(1)of section 811(d) is amended by striking the greater of the prevailing State assumed interest rate or applicable Federal interest rate in effect under section 807 and inserting the interest rate in effect under section 808(g) . Subparagraph
(A)of section 846(f)(6) is amended by striking except that and all that follows and inserting except that the limitation of subsection (a)(3) shall apply, and . Subparagraph
(B)of section 954(i)(5) is amended by striking shall apply, and . The amendments made by this section shall apply to taxable years beginning after December 31, 2017. For the first taxable year beginning after December 31, 2017, the reserve with respect to any contract (as determined under section 807(d)(2) of the Internal Revenue Code of 1986) at the end of the preceding taxable year shall be determined as if the amendments made by this section had applied to such reserve in such preceding taxable year. If— the reserve determined under section 807(d)(2) of the Internal Revenue Code of 1986 (determined without regard to the amendments made by this section) with respect to any contract as of the close of the year preceding the first taxable year beginning after December 31, 2017, differs from the reserve which would have been determined with respect to such contract as of the close of such taxable year under such section determined without regard to paragraph (2), then the difference between the amount of the reserve described in clause
(i)and the amount of the reserve described in clause
(ii)shall be taken into account under the method provided in subparagraph (B). The method provided in this subparagraph is as follows: If the amount determined under subparagraph (A)(i) exceeds the amount determined under subparagraph (A)(ii), 1/8 of such excess shall be taken into account, for each of the 8 succeeding taxable years, as a deduction under section 805(a)(2) or 832(c)(4) of such Code, as applicable. If the amount determined under subparagraph (A)(ii) exceeds the amount determined under subparagraph (A)(i), 1/8 of such excess shall be included in gross income, for each of the 8 succeeding taxable years, under section 803(a)(2) or 832(b)(1)(C) of such Code, as applicable.