26 U.S. Code § 848 - Capitalization of certain policy acquisition expenses
Paragraph (2) of subsection (a) shall be applied with respect to so much of the specified policy acquisition expenses of an insurance company for any taxable year as does not exceed $5,000,000 by substituting “60-month” for “120-month”.
If the specified policy acquisition expenses of an insurance company exceed $10,000,000 for any taxable year, the $5,000,000 amount under paragraph (1) shall be reduced (but not below zero) by the amount of such excess.
In the case of an insurance company subject to tax under part II of this subchapter, all computations entering into determinations of net premiums for any taxable year shall be made in the manner required under section 811(a) for life insurance companies.
Net premiums shall be determined without regard to section 808(e) and without regard to other similar amounts treated as paid to, and returned by, the policyholder.
Except as otherwise provided in this paragraph, the term “specified insurance contract” means any life insurance, annuity, or noncancellable accident and health insurance contract (or any combination thereof).
Any annuity contract combined with noncancellable accident and health insurance shall be treated as a noncancellable accident and health insurance contract and not as an annuity contract.
The rules of section 816(e) shall apply for purposes of this section.
A contract which reinsures another contract shall be treated in the same manner as the reinsured contract.
An annuity or life insurance contract which includes a qualified long-term care insurance contract as a part of or a rider on such annuity or life insurance contract shall be treated as a specified insurance contract not described in subparagraph (A) or (B) of subsection (c)(1).
Nothing in any provision of law (other than this section or section 197) shall require the capitalization of any ceding commission incurred on or after September 30, 1990, under any contract which reinsures a specified insurance contract.
Except as provided in paragraph (2), the Secretary may provide that a type of insurance contract will be treated as a separate category for purposes of this section (and prescribe a percentage applicable to such category) if the Secretary determines that the deferral of acquisition expenses for such type of contract which would otherwise result under this section is substantially greater than the deferral of acquisition expenses which would have resulted if actual acquisition expenses (including indirect expenses) and the actual useful life for such type of contract had been used.
If the Secretary exercises his authority with respect to any type of contract under paragraph (1), the Secretary shall adjust the percentage which would otherwise have applied under subsection (c)(1) to the category which includes such type of contract so that the exercise of such authority does not result in a decrease in the amount of revenue received under this chapter by reason of this section for any fiscal year.
For purposes of determining adjusted current earnings under section 56(g), acquisition expenses with respect to contracts described in clause (iii) of subsection (e)(1)(B) shall be capitalized and amortized in accordance with the treatment generally required under generally accepted accounting principles as if this subsection applied to such contracts for all taxable years.
2014—Subsec. (j). Pub. L. 113–295 struck out subsec. (j). Text read as follows: “In the case of any taxable year which includes September 30, 1990, the amount taken into account as the net premiums (or negative capitalization amount) with respect to any category of specified insurance contracts shall be the amount which bears the same ratio to the amount which (but for this subsection) would be so taken into account as the number of days in such taxable year on or after September 30, 1990, bears to the total number of days in such taxable year.”
2006—Subsec. (e)(6). Pub. L. 109–280 added par. (6).
2003—Subsec. (e)(1)(B)(v). Pub. L. 108–173 added cl. (v).
2000—Subsec. (e)(1)(B)(iv). Pub. L. 106–554, § 1(a)(7) [title II, § 202(b)(10)], substituted “an Archer MSA” for “a Archer MSA”.
Pub. L. 106–554, § 1(a)(7) [title II, § 202(a)(5)], substituted “Archer MSA” for “medical savings account”.
1996—Subsec. (e)(1)(B)(iv). Pub. L. 104–191 added cl. (iv).
1993—Subsec. (g). Pub. L. 103–66 substituted “this section or section 197” for “this section”.
Amendment by Pub. L. 109–280 applicable to contracts issued after Dec. 31, 1996, but only with respect to taxable years beginning after Dec. 31, 2009, and to specified policy acquisition expenses determined for taxable years beginning after Dec. 31, 2009, see section 844(g)(1), (4) of Pub. L. 109–280, set out as a note under section 72 of this title.
Amendment by Pub. L. 103–66 applicable, except as otherwise provided, with respect to property acquired after Aug. 10, 1993, see section 13261(g) of Pub. L. 103–66, set out as an Effective Date note under section 197 of this title.
Written determinations for this section
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- Special Rules for Reinsurance : 2015-01-02
- Amortization of Goodwill & Certain Other Intangibles : 2015-01-02
- Treatment of Reinsurance Contract : 2015-01-02
- Investment in Contract : 2008-04-04
- Capitalization of Policy Acquisition Expenses : 2008-04-04
- Capital Expenditures (Deductible v. Not Deductible) : 2003-08-22
- Specified Policy Acquisition Expenses : 2003-08-22
- Life Insurance Deductions : 2003-08-22
- General Deduction : 2003-08-22
- Rules for Certain Reserves : 2001-06-22
- Continuity of Interest Rule : 2001-06-22
- Capitalization of Policy Acquisition Expenses : 2001-06-22
- Capitalization of Policy Acquisition Expenses : 1999-03-12
- Capitalization of Policy Acquisition Expenses : 1999-02-05
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