Sec. 3703. Computation of life insurance tax reserves
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/bill/115/hr/1/ih/section-3703A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Section 807 is amended by striking subsections (c), (d), and
(e)and inserting the following new subsections: The items described in this subsection are the reserves for future unaccrued claims defined in subsection
(e)as determined by applying the method of computing the reserves in subsection (d). For purposes of this part (other than section 816), the amount of the reserves for future unaccrued claims shall be 76.5 percent of the amount of such reserves as defined in subsection (e). For purposes of this section— The term reserves for future unaccrued claims means— life insurance reserves (as defined in section 816(b)) determined in accordance with the method prescribed by the National Association of Insurance Commissioners and reported by the taxpayer on its annual statement for the calendar year that is the taxable year, unpaid losses included in total reserves under section 816(c)(2), and the amount (not included in subparagraph
(A)or (B)) of reserves solely for claims with respect to insurance risks which are determined in accordance with the method prescribed by the National Association of Insurance Commissioners and reported by the taxpayer on its annual statement for the calendar year that is the taxable year, but not including any amount of asset adequacy reserves, contingency reserves, unearned premium reserves, or any other amount not constituting reserves for future unaccrued claims as provided in guidance by the Secretary. For purposes of subparagraph
(B)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. 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 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) of such Code, or 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) of such Code.