{"identifier":"/us/usc/t26/s807","title":26,"num":"\u00a7\u202f807.","heading":"Rules for certain reserves","text":"\u00a7\u202f807.\nRules for certain reserves\n(a)\nDecrease treated as gross income\nIf for any taxable year\u2014\n(1) the opening balance for the items described in subsection (c), exceeds\n(2)\n(A) the closing balance for such items, reduced by\n(B) the amount of the policyholders\u2019 share of tax-exempt interest and the amount of the policyholder\u2019s share of the increase for the taxable year in policy cash values (within the meaning of section 805(a)(4)(F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies,\nsuch excess shall be included in gross income under section 803(a)(2).\n(b)\nIncrease treated as deduction\nIf for any taxable year\u2014\n(1)\n(A) the closing balance for the items described in subsection (c), reduced by\n(B) the amount of the policyholders\u2019 share of tax-exempt interest and the amount of the policyholder\u2019s share of the increase for the taxable year in policy cash values (within the meaning of section 805(a)(4)(F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies, exceeds\n(2) the opening balance for such items,\nsuch excess shall be taken into account as a deduction under section 805(a)(2).\n(c)\nItems taken into account\nThe items referred to in subsections (a) and (b) are as follows:\n(1) The life insurance reserves (as defined in section 816(b)).\n(2) The unearned premiums and unpaid losses included in total reserves under section 816(c)(2).\n(3) 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.\n(4) Dividend accumulations, and other amounts, held at interest in connection with insurance and annuity contracts.\n(5) Premiums received in advance, and liabilities for premium deposit funds.\n(6) 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 for a combination thereof.\nFor 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.\n(d)\nMethod of computing reserves for purposes of determining income\n(1)\nDetermination of reserve\n(A)\nIn general\nFor 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\u2014\n(i) the net surrender value of such contract, or\n(ii) 92.81 percent of the reserve determined under paragraph (2).\n(B)\nVariable contracts\nFor 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\u2014\n(i) the greater of\u2014\n(I) the net surrender value of such contract, or\n(II) the portion of the reserve that is separately accounted for under section 817, plus\n(ii) 92.81 percent of the excess (if any) of the reserve determined under paragraph (2) over the amount in clause (i).\n(C)\nStatutory cap\nIn 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)).\n(D)\nNo double counting\nIn no event shall any amount or item be taken into account more than once in determining any reserve under this subchapter.\n(2)\nAmount of reserve\nThe 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.\n(3)\nTax reserve method\nFor purposes of this subsection\u2014\n(A)\nIn general\nThe term \u201ctax reserve method\u201d means\u2014\n(i)\nLife insurance contracts\nThe CRVM in the case of a contract covered by the CRVM.\n(ii)\nAnnuity contracts\nThe CARVM in the case of a contract covered by the CARVM.\n(iii)\nNoncancellable accident and health insurance contracts\nIn the case of any noncancellable accident and health insurance contract, the reserve method prescribed by the National Association of Insurance Commissioners which covers such contract as of the date the reserve is determined.\n(iv)\nOther contracts\nIn the case of any contract not described in clause (i), (ii), or (iii)\u2014\n(I) the reserve method prescribed by the National Association of Insurance Commissioners which covers such contract (as of the date the reserve is determined), or\n(II) if no reserve method has been prescribed by the National Association of Insurance Commissioners which covers such contract, a reserve method which is consistent with the reserve method required under clause (i), (ii), or (iii) or under subclause (I) of this clause as of the date the reserve is determined for such contract (whichever is most appropriate).\n(B)\nDefinition of CRVM and CARVM\nFor purposes of this paragraph\u2014\n(i)\nCRVM\nThe term \u201cCRVM\u201d means the Commissioners\u2019 Reserve Valuation Method prescribed by the National Association of Insurance Commissioners which is applicable to the contract and in effect as of the date the reserve is determined.\n(ii)\nCARVM\nThe term \u201cCARVM\u201d means the Commissioners\u2019 Annuities Reserve Valuation Method prescribed by the National Association of Insurance Commissioners which is applicable to the contract and in effect as of the date the reserve is determined.\n(C)\nNo additional reserve deduction allowed for deficiency reserves\nNothing in any reserve method described under this paragraph shall permit any increase in the reserve because the net premium (computed on the basis of assumptions required under this subsection) exceeds the actual premiums or other consideration charged for the benefit.\n(4)\nStatutory reserves\nThe term \u201cstatutory reserves\u201d means the aggregate amount set forth in the annual statement with respect to items described in section 807(c). Such term shall not include any reserve attributable to a deferred and uncollected premium if the establishment of such reserve is not permitted under section 811(c).\n(e)\nSpecial rules for computing reserves\n(1)\nNet surrender value\nFor purposes of this section\u2014\n(A)\nIn general\nThe net surrender value of any contract shall be determined\u2014\n(i) with regard to any penalty or charge which would be imposed on surrender, but\n(ii) without regard to any market value adjustment on surrender.\n(B)\nSpecial rule for pension plan contracts\nIn the case of a pension plan contract, the balance in the policyholder\u2019s fund shall be treated as the net surrender value of such contract. For purposes of the preceding sentence, such balance shall be determined with regard to any penalty or forfeiture which would be imposed on surrender but without regard to any market value adjustment.\n(2)\nQualified supplemental benefits\n(A)\nQualified supplemental benefits treated separately\nFor 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.\n(B)\nQualified supplemental benefit\nFor purposes of this paragraph, the term \u201cqualified supplemental benefit\u201d means any supplemental benefit described in subparagraph (C) if\u2014\n(i) there is a separately identified premium or charge for such benefit, and\n(ii) any net surrender value under the contract attributable to any other benefit is not available to fund such benefit.\n(C)\nSupplemental benefits\nFor purposes of this paragraph, the supplemental benefits described in this subparagraph are any\u2014\n(i) guaranteed insurability,\n(ii) accidental death or disability benefit,\n(iii) convertibility,\n(iv) disability waiver benefit, or\n(v) other benefit prescribed by regulations,\nwhich is supplemental to a contract for which there is a reserve described in subsection (c).\n(3)\nCertain contracts issued by foreign branches of domestic life insurance companies\n(A)\nIn general\nIn the case of any qualified foreign contract, the amount of the reserve shall be not less than the minimum reserve required by the laws, regulations, or administrative guidance of the regulatory authority of the foreign country referred to in subparagraph (B) (but not to exceed the net level reserves for such contract).\n(B)\nQualified foreign contract\nFor purposes of subparagraph (A), the term \u201cqualified foreign contract\u201d means any contract issued by a foreign life insurance branch (which has its principal place of business in a foreign country) of a domestic life insurance company if\u2014\n(i) such contract is issued on the life or health of a resident of such country,\n(ii) such domestic life insurance company was required by such foreign country (as of the time it began operations in such country) to operate in such country through a branch, and\n(iii) such foreign country is not contiguous to the United States.\n(4)\nSpecial rules for contracts issued before January 1, 1989, under existing plans of insurance, with term insurance or annuity benefits\nFor purposes of this part\u2014\n(A)\nIn general\nIn the case of a life insurance contract issued before\nJanuary 1, 1989\n(B)\nBenefits to which this paragraph applies\nThis paragraph applies to any term insurance or annuity benefit with respect to which the requirements of clauses (i) and (ii) of paragraph (3)(C) are met.\n(C)\nExisting plan of insurance\nFor purposes of this paragraph, the term \u201cexisting plan of insurance\u201d means, with respect to any contract, any plan of insurance which was filed by the company using such contract in one or more States before\nJanuary 1, 1984\n(5)\nSpecial rules for treatment of certain nonlife reserves\n(A)\nIn general\nThe amount taken into account for purposes of subsections (a) and (b) as\u2014\n(i) the opening balance of the items referred to in subparagraph (B), and\n(ii) the closing balance of such items,\nshall be 80 percent of the amount which (without regard to this subparagraph) would have been taken into account as such opening or closing balance, as the case may be.\n(B)\nDescription of items\nFor purposes of this paragraph, the items referred to in this subparagraph are the items described in subsection (c) which consist of unearned premiums and premiums received in advance under insurance contracts not described in section 816(b)(1)(B).\n(6)\nReporting rules\nThe 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.\n(f)\nAdjustment for change in computing reserves\n(1)\nTreatment as change in method of accounting\nIf the basis for determining any item referred to in subsection (c) as of the close of any taxable year differs from the basis for such determination as of the close of the preceding taxable year, then so much of the difference between\u2014\n(A) the amount of the item at the close of the taxable year, computed on the new basis, and\n(B) the amount of the item at the close of the taxable year, computed on the old basis,\nas is attributable to contracts issued before the taxable year shall be taken into account under section 481 as adjustments attributable to a change in method of accounting initiated by the taxpayer and made with the consent of the Secretary.\n(2)\nTermination as life insurance company\nExcept as provided in section 381(c)(22) (relating to carryovers in certain corporate readjustments), if for any taxable year the taxpayer is not a life insurance company, the balance of any adjustments under this subsection shall be taken into account for the preceding taxable year.","url":"https://projectusc.org/usc/t26/s807.html","content":[{"t":"sec","id":"/us/usc/t26/s807","children":[{"t":"num","text":"\u00a7\u202f807."},{"t":"heading","text":"Rules for certain reserves"},{"t":"subsec","id":"/us/usc/t26/s807/a","children":[{"t":"num","text":"(a)"},{"t":"heading","text":"Decrease treated as gross income"},{"t":"chapeau","text":"If for any taxable year\u2014"},{"t":"para","id":"/us/usc/t26/s807/a/1","children":[{"t":"num","text":"(1)"},{"t":"content","text":" the opening balance for the items described in subsection (c), exceeds","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/a/2","children":[{"t":"num","text":"(2)"},{"t":"subpara","id":"/us/usc/t26/s807/a/2/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" the closing balance for such items, reduced by","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/a/2/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" the amount of the policyholders\u2019 share of tax-exempt interest and the amount of the policyholder\u2019s share of the increase for the taxable year in policy cash values (within the meaning of section 805(a)(4)(F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies,","tail":"\n"}],"tail":"\n"}],"tail":"\n\n"},{"t":"continuation","text":"such excess shall be included in gross income under section 803(a)(2).","tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s807/b","children":[{"t":"num","text":"(b)"},{"t":"heading","text":"Increase treated as deduction"},{"t":"chapeau","text":"If for any taxable year\u2014"},{"t":"para","id":"/us/usc/t26/s807/b/1","children":[{"t":"num","text":"(1)"},{"t":"subpara","id":"/us/usc/t26/s807/b/1/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" the closing balance for the items described in subsection (c), reduced by","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/b/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" the amount of the policyholders\u2019 share of tax-exempt interest and the amount of the policyholder\u2019s share of the increase for the taxable year in policy cash values (within the meaning of section 805(a)(4)(F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies, exceeds","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/b/2","children":[{"t":"num","text":"(2)"},{"t":"content","text":" the opening balance for such items,","tail":"\n"}],"tail":"\n\n"},{"t":"continuation","text":"such excess shall be taken into account as a deduction under section 805(a)(2).","tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s807/c","children":[{"t":"num","text":"(c)"},{"t":"heading","text":"Items taken into account"},{"t":"chapeau","text":"The items referred to in subsections (a) and (b) are as follows:"},{"t":"para","id":"/us/usc/t26/s807/c/1","children":[{"t":"num","text":"(1)"},{"t":"content","text":" The life insurance reserves (as defined in section 816(b)).","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/c/2","children":[{"t":"num","text":"(2)"},{"t":"content","text":" The unearned premiums and unpaid losses included in total reserves under section 816(c)(2).","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/c/3","children":[{"t":"num","text":"(3)"},{"t":"content","text":" 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.","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/c/4","children":[{"t":"num","text":"(4)"},{"t":"content","text":" Dividend accumulations, and other amounts, held at interest in connection with insurance and annuity contracts.","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/c/5","children":[{"t":"num","text":"(5)"},{"t":"content","text":" Premiums received in advance, and liabilities for premium deposit funds.","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/c/6","children":[{"t":"num","text":"(6)"},{"t":"content","text":" 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 for a combination thereof.","tail":"\n"}],"tail":"\n\n"},{"t":"continuation","text":"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.","tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s807/d","children":[{"t":"num","text":"(d)"},{"t":"heading","text":"Method of computing reserves for purposes of determining income"},{"t":"para","id":"/us/usc/t26/s807/d/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Determination of reserve"},{"t":"subpara","id":"/us/usc/t26/s807/d/1/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"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\u2014"},{"t":"clause","id":"/us/usc/t26/s807/d/1/A/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" the net surrender value of such contract, or","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/d/1/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" 92.81 percent of the reserve determined under paragraph (2).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/d/1/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Variable contracts"},{"t":"chapeau","text":"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\u2014"},{"t":"clause","id":"/us/usc/t26/s807/d/1/B/i","children":[{"t":"num","text":"(i)"},{"t":"chapeau","text":" the greater of\u2014"},{"t":"subclause","id":"/us/usc/t26/s807/d/1/B/i/I","children":[{"t":"num","text":"(I)"},{"t":"content","text":" the net surrender value of such contract, or","tail":"\n"}],"tail":"\n"},{"t":"subclause","id":"/us/usc/t26/s807/d/1/B/i/II","children":[{"t":"num","text":"(II)"},{"t":"content","text":" the portion of the reserve that is separately accounted for under section 817, plus","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/d/1/B/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" 92.81 percent of the excess (if any) of the reserve determined under paragraph (2) over the amount in clause (i).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/d/1/C","children":[{"t":"num","text":"(C)"},{"t":"heading","text":"Statutory cap"},{"t":"content","children":[{"t":"p","text":"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)).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/d/1/D","children":[{"t":"num","text":"(D)"},{"t":"heading","text":"No double counting"},{"t":"content","children":[{"t":"p","text":"In no event shall any amount or item be taken into account more than once in determining any reserve under this subchapter.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/d/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Amount of reserve"},{"t":"content","children":[{"t":"p","text":"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.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/d/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Tax reserve method"},{"t":"chapeau","text":"For purposes of this subsection\u2014"},{"t":"subpara","id":"/us/usc/t26/s807/d/3/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"The term \u201ctax reserve method\u201d means\u2014"},{"t":"clause","id":"/us/usc/t26/s807/d/3/A/i","children":[{"t":"num","text":"(i)"},{"t":"heading","text":"Life insurance contracts"},{"t":"content","children":[{"t":"p","text":"The CRVM in the case of a contract covered by the CRVM.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/d/3/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"heading","text":"Annuity contracts"},{"t":"content","children":[{"t":"p","text":"The CARVM in the case of a contract covered by the CARVM.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/d/3/A/iii","children":[{"t":"num","text":"(iii)"},{"t":"heading","text":"Noncancellable accident and health insurance contracts"},{"t":"content","children":[{"t":"p","text":"In the case of any noncancellable accident and health insurance contract, the reserve method prescribed by the National Association of Insurance Commissioners which covers such contract as of the date the reserve is determined.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/d/3/A/iv","children":[{"t":"num","text":"(iv)"},{"t":"heading","text":"Other contracts"},{"t":"chapeau","text":"In the case of any contract not described in clause (i), (ii), or (iii)\u2014"},{"t":"subclause","id":"/us/usc/t26/s807/d/3/A/iv/I","children":[{"t":"num","text":"(I)"},{"t":"content","text":" the reserve method prescribed by the National Association of Insurance Commissioners which covers such contract (as of the date the reserve is determined), or","tail":"\n"}],"tail":"\n"},{"t":"subclause","id":"/us/usc/t26/s807/d/3/A/iv/II","children":[{"t":"num","text":"(II)"},{"t":"content","text":" if no reserve method has been prescribed by the National Association of Insurance Commissioners which covers such contract, a reserve method which is consistent with the reserve method required under clause (i), (ii), or (iii) or under subclause (I) of this clause as of the date the reserve is determined for such contract (whichever is most appropriate).","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/d/3/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Definition of CRVM and CARVM"},{"t":"chapeau","text":"For purposes of this paragraph\u2014"},{"t":"clause","id":"/us/usc/t26/s807/d/3/B/i","children":[{"t":"num","text":"(i)"},{"t":"heading","text":"CRVM"},{"t":"content","children":[{"t":"p","text":"The term \u201cCRVM\u201d means the Commissioners\u2019 Reserve Valuation Method prescribed by the National Association of Insurance Commissioners which is applicable to the contract and in effect as of the date the reserve is determined.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/d/3/B/ii","children":[{"t":"num","text":"(ii)"},{"t":"heading","text":"CARVM"},{"t":"content","children":[{"t":"p","text":"The term \u201cCARVM\u201d means the Commissioners\u2019 Annuities Reserve Valuation Method prescribed by the National Association of Insurance Commissioners which is applicable to the contract and in effect as of the date the reserve is determined.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/d/3/C","children":[{"t":"num","text":"(C)"},{"t":"heading","text":"No additional reserve deduction allowed for deficiency reserves"},{"t":"content","children":[{"t":"p","text":"Nothing in any reserve method described under this paragraph shall permit any increase in the reserve because the net premium (computed on the basis of assumptions required under this subsection) exceeds the actual premiums or other consideration charged for the benefit.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/d/4","children":[{"t":"num","text":"(4)"},{"t":"heading","text":"Statutory reserves"},{"t":"content","children":[{"t":"p","text":"The term \u201cstatutory reserves\u201d means the aggregate amount set forth in the annual statement with respect to items described in section 807(c). Such term shall not include any reserve attributable to a deferred and uncollected premium if the establishment of such reserve is not permitted under section 811(c).","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s807/e","children":[{"t":"num","text":"(e)"},{"t":"heading","text":"Special rules for computing reserves"},{"t":"para","id":"/us/usc/t26/s807/e/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Net surrender value"},{"t":"chapeau","text":"For purposes of this section\u2014"},{"t":"subpara","id":"/us/usc/t26/s807/e/1/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"The net surrender value of any contract shall be determined\u2014"},{"t":"clause","id":"/us/usc/t26/s807/e/1/A/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" with regard to any penalty or charge which would be imposed on surrender, but","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/e/1/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" without regard to any market value adjustment on surrender.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/e/1/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Special rule for pension plan contracts"},{"t":"content","children":[{"t":"p","text":"In the case of a pension plan contract, the balance in the policyholder\u2019s fund shall be treated as the net surrender value of such contract. For purposes of the preceding sentence, such balance shall be determined with regard to any penalty or forfeiture which would be imposed on surrender but without regard to any market value adjustment.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/e/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Qualified supplemental benefits"},{"t":"subpara","id":"/us/usc/t26/s807/e/2/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"Qualified supplemental benefits treated separately"},{"t":"content","children":[{"t":"p","text":"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.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/e/2/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Qualified supplemental benefit"},{"t":"chapeau","text":"For purposes of this paragraph, the term \u201cqualified supplemental benefit\u201d means any supplemental benefit described in subparagraph (C) if\u2014"},{"t":"clause","id":"/us/usc/t26/s807/e/2/B/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" there is a separately identified premium or charge for such benefit, and","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/e/2/B/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" any net surrender value under the contract attributable to any other benefit is not available to fund such benefit.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/e/2/C","children":[{"t":"num","text":"(C)"},{"t":"heading","text":"Supplemental benefits"},{"t":"chapeau","text":"For purposes of this paragraph, the supplemental benefits described in this subparagraph are any\u2014"},{"t":"clause","id":"/us/usc/t26/s807/e/2/C/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" guaranteed insurability,","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/e/2/C/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" accidental death or disability benefit,","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/e/2/C/iii","children":[{"t":"num","text":"(iii)"},{"t":"content","text":" convertibility,","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/e/2/C/iv","children":[{"t":"num","text":"(iv)"},{"t":"content","text":" disability waiver benefit, or","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/e/2/C/v","children":[{"t":"num","text":"(v)"},{"t":"content","text":" other benefit prescribed by regulations,","tail":"\n"}],"tail":"\n\n"},{"t":"continuation","text":"which is supplemental to a contract for which there is a reserve described in subsection (c).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/e/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Certain contracts issued by foreign branches of domestic life insurance companies"},{"t":"subpara","id":"/us/usc/t26/s807/e/3/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"In general"},{"t":"content","children":[{"t":"p","text":"In the case of any qualified foreign contract, the amount of the reserve shall be not less than the minimum reserve required by the laws, regulations, or administrative guidance of the regulatory authority of the foreign country referred to in subparagraph (B) (but not to exceed the net level reserves for such contract).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/e/3/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Qualified foreign contract"},{"t":"chapeau","text":"For purposes of subparagraph (A), the term \u201cqualified foreign contract\u201d means any contract issued by a foreign life insurance branch (which has its principal place of business in a foreign country) of a domestic life insurance company if\u2014"},{"t":"clause","id":"/us/usc/t26/s807/e/3/B/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" such contract is issued on the life or health of a resident of such country,","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/e/3/B/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" such domestic life insurance company was required by such foreign country (as of the time it began operations in such country) to operate in such country through a branch, and","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/e/3/B/iii","children":[{"t":"num","text":"(iii)"},{"t":"content","text":" such foreign country is not contiguous to the United States.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/e/4","children":[{"t":"num","text":"(4)"},{"t":"heading","text":"Special rules for contracts issued before January 1, 1989, under existing plans of insurance, with term insurance or annuity benefits"},{"t":"chapeau","text":"For purposes of this part\u2014"},{"t":"subpara","id":"/us/usc/t26/s807/e/4/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"In general"},{"t":"content","children":[{"t":"p","text":"In the case of a life insurance contract issued before ","children":[{"t":"text","text":"January 1, 1989","tail":", under an existing plan of insurance, the life insurance reserve for any benefit to which this paragraph applies shall be computed separately under subsection (d)(1) from any other reserve under the contract."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/e/4/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Benefits to which this paragraph applies"},{"t":"content","children":[{"t":"p","text":"This paragraph applies to any term insurance or annuity benefit with respect to which the requirements of clauses (i) and (ii) of paragraph (3)(C) are met.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/e/4/C","children":[{"t":"num","text":"(C)"},{"t":"heading","text":"Existing plan of insurance"},{"t":"content","children":[{"t":"p","text":"For purposes of this paragraph, the term \u201cexisting plan of insurance\u201d means, with respect to any contract, any plan of insurance which was filed by the company using such contract in one or more States before ","children":[{"t":"text","text":"January 1, 1984","tail":", and is on file in the appropriate State for such contract."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/e/5","children":[{"t":"num","text":"(5)"},{"t":"heading","text":"Special rules for treatment of certain nonlife reserves"},{"t":"subpara","id":"/us/usc/t26/s807/e/5/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"The amount taken into account for purposes of subsections (a) and (b) as\u2014"},{"t":"clause","id":"/us/usc/t26/s807/e/5/A/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" the opening balance of the items referred to in subparagraph (B), and","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s807/e/5/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" the closing balance of such items,","tail":"\n"}],"tail":"\n\n"},{"t":"continuation","text":"shall be 80 percent of the amount which (without regard to this subparagraph) would have been taken into account as such opening or closing balance, as the case may be.","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/e/5/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Description of items"},{"t":"content","children":[{"t":"p","text":"For purposes of this paragraph, the items referred to in this subparagraph are the items described in subsection (c) which consist of unearned premiums and premiums received in advance under insurance contracts not described in section 816(b)(1)(B).","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/e/6","children":[{"t":"num","text":"(6)"},{"t":"heading","text":"Reporting rules"},{"t":"content","children":[{"t":"p","text":"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.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s807/f","children":[{"t":"num","text":"(f)"},{"t":"heading","text":"Adjustment for change in computing reserves"},{"t":"para","id":"/us/usc/t26/s807/f/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Treatment as change in method of accounting"},{"t":"chapeau","text":"If the basis for determining any item referred to in subsection (c) as of the close of any taxable year differs from the basis for such determination as of the close of the preceding taxable year, then so much of the difference between\u2014"},{"t":"subpara","id":"/us/usc/t26/s807/f/1/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" the amount of the item at the close of the taxable year, computed on the new basis, and","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s807/f/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" the amount of the item at the close of the taxable year, computed on the old basis,","tail":"\n"}],"tail":"\n\n"},{"t":"continuation","text":"as is attributable to contracts issued before the taxable year shall be taken into account under section 481 as adjustments attributable to a change in method of accounting initiated by the taxpayer and made with the consent of the Secretary.","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s807/f/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Termination as life insurance company"},{"t":"content","children":[{"t":"p","text":"Except as provided in section 381(c)(22) (relating to carryovers in certain corporate readjustments), if for any taxable year the taxpayer is not a life insurance company, the balance of any adjustments under this subsection shall be taken into account for the preceding taxable year.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"text","text":"\n"},{"t":"text","text":"\n"}]}]}