Distributions to shareholders from pre-1984 policyholders surplus account
General rule
In the case of a stock life insurance company which has an existing policyholders surplus account, the tax imposed by section 801 for any taxable year shall be the amount which would be imposed by such section for such year on the sum of—
life insurance company taxable income for such year (but not less than zero), plus
the amount of direct and indirect distributions during such year to shareholders from such account.
For purposes of the preceding sentence, the term “indirect distribution” shall not include any bona fide loan with arms-length terms and conditions.
Ordering rule
For purposes of this section, any distribution to shareholders shall be treated as made—
first out of the shareholders surplus account, to the extent thereof,
then out of the policyholders surplus account, to the extent thereof, and
finally, out of other accounts.
Shareholders surplus account
In general
Additions to account
The amount added to the shareholders surplus account for any taxable year beginning after
the sum of—
the life insurance company’s taxable income (but not below zero),
the small life insurance company deduction provided by section 806, and
the deductions for dividends received provided by sections 243 and 245 (as modified by section 805(a)(4)) and the amount of interest excluded from gross income under section 103, over
the taxes imposed for the taxable year by section 801 (determined without regard to this section).
If for any taxable year a tax is imposed by section 55, under regulations proper adjustments shall be made for such year and all subsequent taxable years in the amounts taken into account under subparagraphs (A) and (B) of this paragraph and subparagraph (B) of subsection (d)(3).
Subtractions from account
Policyholders surplus account
In general
No additions to account
Subtractions from account
There shall be subtracted from the policyholders surplus account for any taxable year an amount equal to the sum of—
the amount which (without regard to subparagraph (B)) is treated under this section as distributed out of the policyholders surplus account, and
the amount by which the tax imposed for the taxable year by section 801 is increased by reason of this section.
Existing policyholders surplus account
Other rules applicable to policyholders surplus account continued
Special rules applicable during 2005 and 2006
In the case of any taxable year of a stock life insurance company beginning after
the amount under subsection (a)(2) for such taxable year shall be treated as zero, and
notwithstanding subsection (b), in determining any subtractions from an account under subsections (c)(3) and (d)(3), any distribution to shareholders during such taxable year shall be treated as made first out of the policyholders surplus account, then out of the shareholders surplus account, and finally out of other accounts.
Source
(Added Pub. L. 98–369, div. A, title II, § 211(a),Notes
References in Text
Prior Provisions
Amendments
Effective Date of 2014 Amendment
Effective Date of 2004 Amendment
Effective Date of 1988 Amendment
Effective Date of 1986 Amendment
Effective Date
Operations Loss Deduction of Insolvent Companies May Offset Distributions From Policyholders Surplus Account
In General.—
If—
on
pursuant to the order of any court of competent jurisdiction in a title 11 or similar case (as defined in section 368(a)(3) of the Internal Revenue Code of 1954 [now 1986]), such company is liquidated, and
as a result of such liquidation, the tax imposed by section 801 of such Code for any taxable year (hereinafter in this subsection referred to as the ‘liquidation year’) would (but for this subsection) be increased under section 815(a) of such Code,
then the amount described in section 815(a)(2) of such Code shall be reduced by the loss from operations (if any) for the liquidation year, and by the unused operations loss carryovers (if any) to the liquidation year (determined after the application of section 810 of such Code for such year). No carryover of any loss from operations of such company arising during the liquidation year (or any prior taxable year) shall be allowable for any taxable year succeeding the liquidation year.
Definitions.—
For purposes of subsection (a)—
Insolvent.—
The term ‘insolvent’ means the excess of liabilities over the fair market value of assets.
Loss from operations.—
The term ‘loss from operations’ has the meaning given such term by section 810(c) of such Code.
Effective Date.—
This section shall apply to liquidations on or after