{"identifier":"/us/usc/t26/s808","title":26,"num":"\u00a7\u202f808.","heading":"Policyholder dividends deduction","text":"\u00a7\u202f808.\nPolicyholder dividends deduction\n(a)\nPolicyholder dividend defined\nFor purposes of this part, the term \u201cpolicyholder dividend\u201d means any dividend or similar distribution to policyholders in their capacity as such.\n(b)\nCertain amounts included\nFor purposes of this part, the term \u201cpolicyholder dividend\u201d includes\u2014\n(1) any amount paid or credited (including as an increase in benefits) where the amount is not fixed in the contract but depends on the experience of the company or the discretion of the management,\n(2) excess interest,\n(3) premium adjustments, and\n(4) experience-rated refunds.\n(c)\nAmount of deduction\nThe deduction for policyholder dividends for any taxable year shall be an amount equal to the policyholder dividends paid or accrued during the taxable year.\n(d)\nDefinitions\nFor purposes of this section\u2014\n(1)\nExcess interest\nThe term \u201cexcess interest\u201d means any amount in the nature of interest\u2014\n(A) paid or credited to a policyholder in his capacity as such, and\n(B) in excess of interest determined at the prevailing State assumed rate for such contract.\n(2)\nPremium adjustment\nThe term \u201cpremium adjustment\u201d means any reduction in the premium under an insurance or annuity contract which (but for the reduction) would have been required to be paid under the contract.\n(3)\nExperience-rated refund\nThe term \u201cexperience-rated refund\u201d means any refund or credit based on the experience of the contract or group involved.\n(e)\nTreatment of policyholder dividends\nFor purposes of this part, any policyholder dividend which\u2014\n(1) increases the cash surrender value of the contract or other benefits payable under the contract, or\n(2) reduces the premium otherwise required to be paid,\nshall be treated as paid to the policyholder and returned by the policyholder to the company as a premium.\n(f)\nCoordination of 1984 fresh-start adjustment with acceleration of policyholder dividends deduction through change in business practice\n(1)\nIn general\nThe amount determined under paragraph (1) of subsection (c) for the year of change shall (before any reduction under paragraph (2) of subsection (c)) be reduced by so much of the accelerated policyholder dividends deduction for such year as does not exceed the 1984 fresh-start adjustment for policyholder dividends (to the extent such adjustment was not previously taken into account under this subsection).\n(2)\nYear of change\nFor purposes of this subsection, the term \u201cyear of change\u201d means the taxable year in which the change in business practices which results in the accelerated policyholder dividends deduction takes effect.\n(3)\nAccelerated policyholder dividends deduction defined\nFor purposes of this subsection, the term \u201caccelerated policyholder dividends deduction\u201d means the amount which (but for this subsection) would be determined for the taxable year under paragraph (1) of subsection (c) but which would have been determined (under such paragraph) for a later taxable year under the business practices of the taxpayer as in effect at the close of the preceding taxable year.\n(4)\n1984 fresh-start adjustment for policyholder dividends\nFor purposes of this subsection, the term \u201c1984 fresh-start adjustment for policyholder dividends\u201d means the amounts held as of\nDecember 31, 1983\nJanuary 1, 1984\n(5)\nSeparate application with respect to lines of business\nThis subsection shall be applied separately with respect to each line of business of the taxpayer.\n(6)\nSubsection not to apply to mere change in dividend amount\nThis subsection shall not apply to a mere change in the amount of policyholder dividends.\n(7)\nSubsection not to apply to policies issued after December 31, 1983\n(A)\nIn general\nThis subsection shall not apply to any policyholder dividend paid or accrued with respect to a policy issued after\nDecember 31, 1983\n(B)\nExchanges of substantially similar policies\nFor purposes of subparagraph (A), any policy issued after\nDecember 31, 1983\nJanuary 1, 1984\n(8)\nSubsection to apply to policies provided under employee benefit plans\nThis subsection shall not apply to any policyholder dividend paid or accrued with respect to a group policy issued in connection with a plan to provide welfare benefits to employees (within the meaning of section 419(e)(2)).\n(g)\nPrevailing State assumed interest rate\nFor purposes of this subchapter\u2014\n(1)\nIn general\nThe term \u201cprevailing State assumed interest rate\u201d 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.\n(2)\nWhen rate determined\nThe 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.","url":"https://projectusc.org/usc/t26/s808.html","content":[{"t":"sec","id":"/us/usc/t26/s808","children":[{"t":"num","text":"\u00a7\u202f808."},{"t":"heading","text":"Policyholder dividends deduction"},{"t":"subsec","id":"/us/usc/t26/s808/a","children":[{"t":"num","text":"(a)"},{"t":"heading","text":"Policyholder dividend defined"},{"t":"content","children":[{"t":"p","text":"For purposes of this part, the term \u201cpolicyholder dividend\u201d means any dividend or similar distribution to policyholders in their capacity as such.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s808/b","children":[{"t":"num","text":"(b)"},{"t":"heading","text":"Certain amounts included"},{"t":"chapeau","text":"For purposes of this part, the term \u201cpolicyholder dividend\u201d includes\u2014"},{"t":"para","id":"/us/usc/t26/s808/b/1","children":[{"t":"num","text":"(1)"},{"t":"content","text":" any amount paid or credited (including as an increase in benefits) where the amount is not fixed in the contract but depends on the experience of the company or the discretion of the management,","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/b/2","children":[{"t":"num","text":"(2)"},{"t":"content","text":" excess interest,","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/b/3","children":[{"t":"num","text":"(3)"},{"t":"content","text":" premium adjustments, and","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/b/4","children":[{"t":"num","text":"(4)"},{"t":"content","text":" experience-rated refunds.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s808/c","children":[{"t":"num","text":"(c)"},{"t":"heading","text":"Amount of deduction"},{"t":"content","children":[{"t":"p","text":"The deduction for policyholder dividends for any taxable year shall be an amount equal to the policyholder dividends paid or accrued during the taxable year.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s808/d","children":[{"t":"num","text":"(d)"},{"t":"heading","text":"Definitions"},{"t":"chapeau","text":"For purposes of this section\u2014"},{"t":"para","id":"/us/usc/t26/s808/d/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Excess interest"},{"t":"chapeau","text":"The term \u201cexcess interest\u201d means any amount in the nature of interest\u2014"},{"t":"subpara","id":"/us/usc/t26/s808/d/1/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" paid or credited to a policyholder in his capacity as such, and","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s808/d/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" in excess of interest determined at the prevailing State assumed rate for such contract.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/d/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Premium adjustment"},{"t":"content","children":[{"t":"p","text":"The term \u201cpremium adjustment\u201d means any reduction in the premium under an insurance or annuity contract which (but for the reduction) would have been required to be paid under the contract.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/d/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Experience-rated refund"},{"t":"content","children":[{"t":"p","text":"The term \u201cexperience-rated refund\u201d means any refund or credit based on the experience of the contract or group involved.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s808/e","children":[{"t":"num","text":"(e)"},{"t":"heading","text":"Treatment of policyholder dividends"},{"t":"chapeau","text":"For purposes of this part, any policyholder dividend which\u2014"},{"t":"para","id":"/us/usc/t26/s808/e/1","children":[{"t":"num","text":"(1)"},{"t":"content","text":" increases the cash surrender value of the contract or other benefits payable under the contract, or","tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/e/2","children":[{"t":"num","text":"(2)"},{"t":"content","text":" reduces the premium otherwise required to be paid,","tail":"\n"}],"tail":"\n\n"},{"t":"continuation","text":"shall be treated as paid to the policyholder and returned by the policyholder to the company as a premium.","tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s808/f","children":[{"t":"num","text":"(f)"},{"t":"heading","text":"Coordination of 1984 fresh-start adjustment with acceleration of policyholder dividends deduction through change in business practice"},{"t":"para","id":"/us/usc/t26/s808/f/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"In general"},{"t":"content","children":[{"t":"p","text":"The amount determined under paragraph (1) of subsection (c) for the year of change shall (before any reduction under paragraph (2) of subsection (c)) be reduced by so much of the accelerated policyholder dividends deduction for such year as does not exceed the 1984 fresh-start adjustment for policyholder dividends (to the extent such adjustment was not previously taken into account under this subsection).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/f/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Year of change"},{"t":"content","children":[{"t":"p","text":"For purposes of this subsection, the term \u201cyear of change\u201d means the taxable year in which the change in business practices which results in the accelerated policyholder dividends deduction takes effect.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/f/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Accelerated policyholder dividends deduction defined"},{"t":"content","children":[{"t":"p","text":"For purposes of this subsection, the term \u201caccelerated policyholder dividends deduction\u201d means the amount which (but for this subsection) would be determined for the taxable year under paragraph (1) of subsection (c) but which would have been determined (under such paragraph) for a later taxable year under the business practices of the taxpayer as in effect at the close of the preceding taxable year.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/f/4","children":[{"t":"num","text":"(4)"},{"t":"heading","text":"1984 fresh-start adjustment for policyholder dividends"},{"t":"content","children":[{"t":"p","text":"For purposes of this subsection, the term \u201c1984 fresh-start adjustment for policyholder dividends\u201d means the amounts held as of ","children":[{"t":"text","text":"December 31, 1983","tail":", by the taxpayer as reserves for dividends to policyholders under section 811(b) (as in effect on the day before the date of the enactment of the Tax Reform Act of 1984) other than for dividends which accrued before "},{"t":"text","text":"January 1, 1984","tail":". Such amounts shall be properly reduced to reflect the amount of previously nondeductible policyholder dividends (as determined under section 809(f) as in effect on the day before the date of the enactment of the Tax Reform Act of 1984)."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/f/5","children":[{"t":"num","text":"(5)"},{"t":"heading","text":"Separate application with respect to lines of business"},{"t":"content","children":[{"t":"p","text":"This subsection shall be applied separately with respect to each line of business of the taxpayer.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/f/6","children":[{"t":"num","text":"(6)"},{"t":"heading","text":"Subsection not to apply to mere change in dividend amount"},{"t":"content","children":[{"t":"p","text":"This subsection shall not apply to a mere change in the amount of policyholder dividends.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/f/7","children":[{"t":"num","text":"(7)"},{"t":"heading","text":"Subsection not to apply to policies issued after December 31, 1983"},{"t":"subpara","id":"/us/usc/t26/s808/f/7/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"In general"},{"t":"content","children":[{"t":"p","text":"This subsection shall not apply to any policyholder dividend paid or accrued with respect to a policy issued after ","children":[{"t":"text","text":"December 31, 1983","tail":"."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s808/f/7/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Exchanges of substantially similar policies"},{"t":"content","children":[{"t":"p","text":"For purposes of subparagraph (A), any policy issued after ","children":[{"t":"text","text":"December 31, 1983","tail":", in exchange for a substantially similar policy issued on or before such date shall be treated as issued before "},{"t":"text","text":"January 1, 1984","tail":". A similar rule shall apply in the case of a series of exchanges."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/f/8","children":[{"t":"num","text":"(8)"},{"t":"heading","text":"Subsection to apply to policies provided under employee benefit plans"},{"t":"content","children":[{"t":"p","text":"This subsection shall not apply to any policyholder dividend paid or accrued with respect to a group policy issued in connection with a plan to provide welfare benefits to employees (within the meaning of section 419(e)(2)).","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s808/g","children":[{"t":"num","text":"(g)"},{"t":"heading","text":"Prevailing State assumed interest rate"},{"t":"chapeau","text":"For purposes of this subchapter\u2014"},{"t":"para","id":"/us/usc/t26/s808/g/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"In general"},{"t":"content","children":[{"t":"p","text":"The term \u201cprevailing State assumed interest rate\u201d 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.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s808/g/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"When rate determined"},{"t":"content","children":[{"t":"p","text":"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.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"text","text":"\n"},{"t":"text","text":"\n"}]}]}