Circuit court rules on qualification ratio

Article Abstract:

'Accrued unpaid losses' are not considered 'unpaid losses' when determining whether a business meets the life-insurance-company-qualification ratio, according to a recent ruling by the 7th US Circuit Court of Appeals. The case involved Harco Holdings, which owns Association Life Insurance Co, and the IRS. The IRS claimed that Association Life's unpaid losses are reserves and that the term 'unpaid losses' is borrowed from property and casualty insurance law. The court ruled against the IRS position and ordered an income-tax refund for Harco.

Cases, Business losses, Harco Holdings, Association Life Insurance Co.

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IRS rules interest changes do not create new contracts

Article Abstract:

The Internal Revenue Service (IRS), in Private Letter Ruling 9150045, held that a new life insurance contract is not created when a contract is endorsed so that the assessment of policy loan interest is changed to due in arrears instead of due in advance. The IRS ruled that such an endorsement is not a material change and that it will not result in the deemed reissuance of a new contract or a constructive policy exchange on the endorsement's effective date.

Laws, regulations and rules, Tax policy, Insurance policies

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Mergers of insurers result in tax-attribute carryovers

Article Abstract:

New tax rules classify statutory mergers of affiliated life insurance companies as corporate reorganizations with insurance tax attributes being carried over to the new entity. As a result, life insurers which could not join in the parent company's consolidated federal tax return are now allowed inclusion. Various conditions and examples are discussed.

Interpretation and construction, Taxation, Tax law, Mergers, acquisitions and divestments, Acquisitions and mergers, Column

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