Amended 1962, 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514 amended section generally, substituting provisions imposing taxes on insurance companies other than life insurance companies, with an alternative tax on certain small companies, for provisions imposing taxes on insurance companies (other than life or mutual), mutual marine insurance companies, and certain mutual fire or flood insurance companies, with an election for multiple line companies to be taxed on total income.
- 1962 Pub. L. 87-834 Pub. L. 87–834, § 8(g)(4)(B), substituted “and certain mutual fire or flood insurance companies” for “and mutual fire insurance companies issuing perpetual policies” in section catchline.
Cases: Allied Fidelity Corp. v. Commissioner, 572 F.2d 1190 (7th Cir. 1978); Cuesta Title Guaranty Co. v. Commissioner, 71 T.C. 278 (1978); Sears, Roebuck & Co. v. Commissioner, 96 T.C. 61 (1991)
Forms: Form 1120
Final rules 1
(a) General rule Taxes computed as provided in section 11 shall be imposed for each taxable year on the taxable income of every insurance company other than a life insurance company.
Amended 1962, 1976
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(a)(107), substituted “on the taxable income” for “or the taxable income”.
- 1962 Pub. L. 87-834 Pub. L. 87–834, § 8(e)(1), included flood insurance companies, and substituted provisions authorizing imposition of the tax on those companies whose principal business is the issuance of policies for which the premium deposits are the same, regardless of the length of the term for which the policies are written, if the unabsorbed portion of such premium deposits not required for losses, expenses, or establishment of reserves is returned or credited to the policyholder on cancellation or expiration of the policy for provisions which authorized imposition of tax on those companies which issued policies for which the sole premium charged is a single deposit which (except for such deduction of underwriting costs as may be provided) is refundable on cancellation or expiration of the policy.
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(b) Alternative tax for certain small companies
Amended 1966, 1976
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary” wherever appearing.
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 104(i)(6)(A), redesignated subsec. (c) as (b). Former subsec. (b), which excepted foreign insurance companies other than life or mutual insurance companies, foreign mutual marine insurance companies, and foreign mutual fire insurance companies not carrying on an insurance business within the United States and provided that they would be taxable as other foreign corporations, was struck out.
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(1) In general In lieu of the tax otherwise applicable under subsection (a), there is hereby imposed for each taxable year on the income of every insurance company to which this subsection applies a tax computed by multiplying the taxable investment income of such company for such taxable year by the rates provided in section 11(b).
(2) Companies to which this subsection applies
(A) In general This subsection shall apply to every insurance company other than life if—
Amended 1988, 2015
- 2015 Pub. L. 114-113 Pub. L. 114–113, § 333(a)(1)(A), (C), (b)(1), struck out “(including interinsurers and reciprocal underwriters)” after “other than life” in introductory provisions, substituted “$2,200,000” for “$1,200,000” in cl. (i), added cl. (ii), redesignated former cl. (ii) as (iii), and, in concluding provisions, substituted “clause (iii)” for “clause (ii)” and “clauses (i) and (ii)” for “clause (i)”.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1010(f)(1), inserted at end “The election under clause (ii) shall apply to the taxable year for which made and for all subsequent taxable years for which the requirements of clause (i) are met. Such an election, once made, may be revoked only with the consent of the Secretary.”
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(i) the net written premiums (or, if greater, direct written premiums) for the taxable year do not exceed $2,200,000,
Amended 2004
- 2004 Pub. L. 108-218 Pub. L. 108–218, § 206(d), struck out “exceed $350,000 but” after “taxable year”.
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(ii) such company meets the diversification requirements of subparagraph (B), and
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(iii) such company elects the application of this subsection for such taxable year.
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The election under clause (iii) shall apply to the taxable year for which made and for all subsequent taxable years for which the requirements of clauses (i) and (ii) are met. Such an election, once made, may be revoked only with the consent of the Secretary.
(B) Diversification requirements
Amended 2015
- 2015 Pub. L. 114-113 Pub. L. 114–113, § 333(a)(1)(B), added subpar. (B) and redesignated former subpar. (B) as (C).
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(i) In general An insurance company meets the requirements of this subparagraph if—
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(I) no more than 20 percent of the net written premiums (or, if greater, direct written premiums) of such company for the taxable year is attributable to any one policyholder, or
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(II) such insurance company does not meet the requirement of subclause (I) and no person who holds (directly or indirectly) an interest in such insurance company is a specified holder who holds (directly or indirectly) aggregate interests in such insurance company which constitute a percentage of the entire interests in such insurance company which is more than a de minimis percentage higher than the percentage of interests in the relevant specified assets with respect to such insurance company held (directly or indirectly) by such specified holder.
Amended 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141, § 101(r)(1), substituted “relevant specified assets” for “specified assets”.
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(ii) Aggregation of certain spousal interests For purposes of clause (i)(II), any interest in the insurance company referred to in such clause which is held (directly or indirectly) by an individual who is a spouse of the specified holder, and who is a citizen of the United States, shall be treated as held by the specified holder.
Amended 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141, § 101(r)(2), added cls. (ii) and (iii). Former cl. (ii) redesignated (iv).
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(iii) Specified holder For purposes of this subparagraph, the term “specified holder” means, with respect to any insurance company, any individual who holds (directly or indirectly) an interest in such insurance company and who—
(I) is a lineal descendent (including by adoption) of an individual who holds an interest (directly or indirectly) in the specified assets with respect to such insurance company or of such individual’s spouse,
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(II) is a spouse of any lineal descendent described in subclause (I), or
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(III) is not a citizen of the United States and is a spouse of an individual who holds an interest (directly or indirectly) in the specified assets with respect to such insurance company.
Amended 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141, § 101(r)(2), added cls. (ii) and (iii). Former cl. (ii) redesignated (iv).
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(iv) Definitions For purposes of this subparagraph—
Amended 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141, § 101(r)(2), (3)(A), redesignated cl. (ii) as (iv) and substituted “this subparagraph” for “clause (i)(II)” in introductory provisions.
(I) Relevant specified assets The term “relevant specified assets” means, with respect to any specified holder with respect to any insurance company, the aggregate amount of the specified assets, with respect to such insurance company, any interest in which is held (directly or indirectly) by any spouse or specified relation of such specified holder. Such term shall not include any specified asset solely by reason of an interest in such asset which was acquired by such spouse or specified relation by bequest, devise, or inheritance from a decedent during the taxable year of the insurance company or the preceding taxable year. For purposes of this subclause, the term “specified relation” means any individual with respect to whom the specified holder bears a relationship described in subclause (I) or (II) of clause (iii).
Amended 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141, § 101(r)(3)(B), amended subcl. (I) generally. Prior to amendment, text read as follows: “The term ‘specified holder’ means, with respect to any insurance company, any individual who holds (directly or indirectly) an interest in such insurance company and who is a spouse or lineal descendant (including by adoption) of an individual who holds an interest (directly or indirectly) in the specified assets with respect to such insurance company.”
(II) Specified assets The term “specified assets” means, with respect to any insurance company, the trades or businesses, rights, or assets with respect to which the net written premiums (or direct written premiums) of such insurance company are paid.
(III) Indirect interest An indirect interest includes any interest held through a trust, estate, partnership, or corporation.
(IV) De minimis Except as otherwise provided by the Secretary in regulations or other guidance, 2 percentage points or less shall be treated as de minimis.
(C) Controlled group rules
Amended 2015
- 2015 Pub. L. 114-113 Pub. L. 114–113, § 333(a)(1)(B), added subpar. (B) and redesignated former subpar. (B) as (C).
(i) In general For purposes of this paragraph—
Amended 2015
- 2015 Pub. L. 114-113 Pub. L. 114–113, § 333(a)(2), substituted “For purposes of this paragraph—” for “For purposes of subparagraph (A),”, inserted subcl. (I) designation before “in determining”, and added subcl. (II).
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(I) in determining whether any company is described in clause (i) of subparagraph (A), such company shall be treated as receiving during the taxable year amounts described in such clause (i) which are received during such year by all other companies which are members of the same controlled group as the insurance company for which the determination is being made, and
(II) in determining the attribution of premiums to any policyholder under subparagraph (B)(i), all policyholders which are related (within the meaning of section 267(b) or 707(b)) or are members of the same controlled group shall be treated as one policyholder.
(ii) Controlled group For purposes of clause (i), the term “controlled group” means any controlled group of corporations (as defined in section 1563(a)); except that—
(I) “more than 50 percent” shall be substituted for “at least 80 percent” each place it appears in section 1563(a), and
(II) subsections (a)(4) and (b)(2)(D) of section 1563 shall not apply.
(D) Look-through of reinsurance and fronting arrangements In the case of reinsurance or any fronting, intermediary, or similar arrangement, the term “policyholder” means each policyholder of the underlying direct written insurance with respect to such reinsurance or arrangement.
Amended 2015, 2017, 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141, § 101(r)(4), added subpar. (D) and redesignated former subpar. (D) as (E).
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 11002(d)(1)(AA), substituted “for ‘calendar year 2016’ in subparagraph (A)(ii)” for “for ‘calendar year 1992’ in subparagraph (B)”.
- 2015 Pub. L. 114-113 Pub. L. 114–113, § 333(b)(2), added subpar. (D).
(E) Inflation adjustment In the case of any taxable year beginning in a calendar year after 2015, the dollar amount set forth in subparagraph (A)(i) shall be increased by an amount equal to—
Amended 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141, § 101(r)(4), added subpar. (D) and redesignated former subpar. (D) as (E).
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting “calendar year 2013” for “calendar year 2016” in subparagraph (A)(ii) thereof.
If the amount as adjusted under the preceding sentence is not a multiple of $50,000, such amount shall be rounded to the next lowest multiple of $50,000.
(3) Limitation on use of net operating losses For purposes of this part, a net operating loss (as defined in section 172) shall not be carried—
(A) to or from any taxable year for which the insurance company is not subject to the tax imposed by subsection (a), or
(B) to any taxable year if, between the taxable year from which such loss is being carried and such taxable year, there is an intervening taxable year for which the insurance company was not subject to the tax imposed by subsection (a).
Amended 1988, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13511(b)(2)(B), struck out “except as provided in section 844,” after “part,” in introductory provisions.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1010(f)(9), added par. (3).
(c) Insurance company defined For purposes of this section, the term “insurance company” has the meaning given to such term by section 816(a).
Amended 1962, 1966, 2004, 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(142), substituted “section 816(a).” for “section 816(a)).”
- 2004 Pub. L. 108-218 Pub. L. 108–218, § 206(c), added subsec. (c) and redesignated former subsec. (c) as (d).
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 104(i)(6)(B), redesignated subsec. (d) as (c) and added item (2). Former subsec. (c) redesignated (b).
- 1962 Pub. L. 87-834 Pub. L. 87–834, § 8(f), added subsec. (c) and redesignated former subsec. (c) as (d).
(d) Reporting Every insurance company for which an election is in effect under subsection (b) for any taxable year shall furnish to the Secretary at such time and in such manner as the Secretary shall prescribe such information for such taxable year as the Secretary shall require with respect to the requirements of subsection (b)(2)(A)(ii).
Amended 1962, 1966, 2004, 2015
- 2015 Pub. L. 114-113 Pub. L. 114–113, § 333(a)(3), added subsec. (d) and redesignated former subsec. (d) as (e).
- 2004 Pub. L. 108-218 Pub. L. 108–218, § 206(c), added subsec. (c) and redesignated former subsec. (c) as (d).
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 104(i)(6)(B), redesignated subsec. (d) as (c) and added item (2). Former subsec. (c) redesignated (b).
- 1962 Pub. L. 87-834 Pub. L. 87–834, § 8(f), added subsec. (c) and redesignated former subsec. (c) as (d).
(e) Cross references
Amended 2015, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13001(b)(2)(H), redesignated pars. (2) and (3) as (1) and (2), respectively, and struck out former par. (1) which read as follows: “For alternative tax in case of capital gains, see section 1201(a).”
- 2015 Pub. L. 114-113 Pub. L. 114–113, § 333(a)(3), added subsec. (d) and redesignated former subsec. (d) as (e).
(1) For taxation of foreign corporations carrying on an insurance business within the United States, see section 842.
(2) For exemption from tax for certain insurance companies other than life, see section 501(c)(15).