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.
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—
(B)original issue discount (as defined in section
(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 greater of the prevailing State assumed interest rate or applicable Federal interest rate in effect under section
807 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.
Another prior section
811, act Aug. 16, 1954, ch. 736, § 811, as added Mar. 13, 1956, ch. 83, § 2,70 Stat. 44; amended July 24, 1956, ch. 696, § 2(c),70 Stat. 633; Mar. 17, 1958, Pub. L. 85–345, § 2(c),
72 Stat. 37, imposed a tax on the life insurance company taxable income of all life insurance companies for taxable years beginning after Dec. 31, 1957, prior to the general revision of this part by Pub. L. 86–69, § 2(a).
1988—Subsec. (d)(1). Pub. L. 100–647substituted “the greater of the prevailing State assumed interest rate or applicable Federal interest rate in effect under section
807 for the contract” for “the prevailing State assumed interest rate for the contract”.
Amendment by Pub. L. 100–647effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) ofPub. L. 100–647, set out as a note under section
56 of this title.
Effective Date of 1984 Amendment
Amendment by section 42(a)(8) ofPub. L. 98–369applicable to taxable years ending after July 18, 1984, see section 44 ofPub. L. 98–369, set out as an Effective Date note under section
1271 of this title.
Section applicable to taxable years beginning after Dec. 31, 1983, see section 215 ofPub. L. 98–369, set out as a note under section
801 of this title.
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
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Description of Change
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