SEC. 824 (added 1962)—Continued "(A) an amount equal to 1 percent of the losses incurred during the taxable year (as determined under section 832(b) (5)), plus "(B) an amount equal to 25 percent of the underwriting gain for the taxable year, plus "(C) if the concentrated windstorm, etc., premium percentage for the taxable year exceeds 40 percent, an amount determined by applying so much of such percentage as exceeds 40 percent to the underwriting gain for the taxable year. For purposes of this paragraph, the term 'underwriting gain' means statutory underwriting income, computed without any deduction under this subsection. "(2) SPECIAL RULE FOR COMPANIES HAVING CONCENTRATED WINDSTORM, ETC., RISKS.-For purposes of paragraph (1)(C), the term 'concentrated windstorm, etc., premium percentage' means, with respect to any taxable year, the percentage obtained by dividing "(A) the amount of the premiums earned on insurance contracts during the taxable year (as defined in section 832 (b)(4)), to the extent attributable to insuring against losses arising, either in any one State or within 200 miles of any fixed point selected by the taxpayer, from windstorm, hail, flood, earthquake, or similar hazards, by "(B) the amount of the premiums earned on insurance contracts during the taxable year (as so defined). "(b) PROTECTION AGAINST Loss ACCOUNT.-Each insurance company subject to the tax imposed by section 821 (a) for any taxable year shall, for purposes of this part, establish and maintain a protection against loss account. "(c) ADDITIONS TO ACCOUNT.-There shall be added to the protection against loss account for each taxable year an amount equal to the amount allowable as a deduction for the taxable year under subsection (a)(1). "(d) SUBTRACTIONS. "(1) ANNUAL SUBTRACTIONS.-After applying subsection (c), there shall be subtracted for the taxable year from the protection against loss account "(A) first, an amount equal to the excess (if any) of the deduction allowed under subsection (a) for the taxable year over the underwriting gain (within the meaning of subsection (a)(1)) for the taxable year. "(B) then, the amount (if any) by which "(i) the sum of the investment loss for such year and the statutory underwriting loss (reduced by the amount referred to in subparagraph (A)) for such year, exceeds "(ii) the sum of the statutory underwriting income for such taxable year and the taxable investment income for such taxable year, "(C) next (in the order in which the losses occurred) amounts equal to the unused loss carryovers to such year, "(D) next, any amount remaining which was added to the account for the fifth preceding taxable year, minus one-half of the amount remaining in the account for such taxable year which was added by reason of subsection (a) (1) (B), and SEC. 824 (added 1962)—Continued "(E) finally, the amount by which the total amount in the account exceeds whichever of the following is the greater: "(i) 10 percent of premiums earned on insurance contracts during the taxable year (as defined in section 832 (b)(4)) less dividends to policyholders (as defined in section 832(c) (11)), or "(ii) the total amount in the account at the close of the preceding taxable year. "(2) RULES FOR CEILING ON PROTECTION AGAINST LOSS ACCOUNT. For purposes of paragraph (1)(E), the total amount in the account shall be determined "(A) after the application of this section without regard to paragraph (1)(E), and "(B) without taking into consideration amounts remaining in the account which were added, with respect to all taxable years, by reason of subsection (a)(1)(C). "(3) PRIORITIES.-The amounts required to be subtracted from the protection against loss account "(A) under subparagraphs (A), (B), and (C) of paragraph (1) shall be subtracted "(i) first (on a first-in, first-out, basis) from amounts in the account with respect to the five preceding taxable years and the taxable year, and "(ii) then from amounts in the account with respect to earlier years, "(B) under subparagraph (E) of paragraph (1) shall be subtracted only from amounts in the account with respect to the taxable year, and "(C) under paragraphs (A), (B), (C), and (E) of paragraph (1) shall, if the amount to be subtracted from the total amounts in the account with respect to any taxable year is less than such total, be subtracted from each of the amounts (referred to in subsection (a)(1)) in the account with respect to such year in the proportion which each bears to such total. "(4) TERMINATION OF TAXABILITY UNDER SECTION 821. If the taxpayer is not subject to tax under section 821 for any taxable year, the entire amount in the account at the close of the preceding taxable year shall be subtracted from the account in such preceding taxable year. "(5) ELECTION TO SUBTRACT AMOUNT FROM ACCOUNT. "(A) A taxpayer may elect for any taxable year for which it is subject to tax under section 821(a) to subtract from its protection against loss account any amount which, but for the application of this subparagraph, would be in such account as of the close of such taxable year. "(B) The election provided by subparagraph (A) for any taxable year shall be made (in such manner and in such form as the Secretary or his delegate may by regulations prescribe) after the close of such taxable year and not later than the time prescribed by law for filing the return (including extensions thereof) for the taxable year following such taxable year. Such an election, once made, may not be revoked." Applicability: Taxable years beginning after December 31, 1962. SEC. 825. UNUSED LOSS DEDUCTION (Added 1962-76 Stat. 995 996): Added Oct. 16, 1962, P.L. 10650, P.L. 87-834, § 8(c), 76 Stat. 995-996: Amended Part II of Subchapter L of Chapter 1 (as part of the revision described on p. 360 above) by adding after section 824 (added as above) the following new section 825: "SEC. 825. UNUSED LOSS DEDUCTION. "(a) AMOUNT OF DEDUCTION.-For purposes of this part, the unused loss deduction for the taxable year shall be an amount equal to the unused loss carryovers or carrybacks to the taxable year. "(b) UNUSED LOSS DEFINED. For purposes of this part, the term 'unused loss' means, with respect to any taxable year, the amount (if any) by which (1) the sum of the statutory underwriting loss and the investment loss, exceeds "(2) the sum of "(A) the taxable investment income, "(B) the statutory underwriting income, and "(C) the amounts required by section 824(d) to be subtracted from the protection against loss account. "(c) Loss YEAR DEFINED.-For purposes of this part, the term 'loss year' means, with respect to any company subject to the tax imposed by section 821 (a), any taxable year in which the unused loss (as defined in subsection (b)) of such taxpayer is more than zero. "(d) YEARS TO WHICH CARRIED.-The unused loss for any loss year shall be "(1) an unused loss carryback to each of the 3 taxable years preceding the loss year, and "(2) an unused loss carryover to each of the 5 taxable years following the loss year. "(e) AMOUNT OF CARRYBACKS AND CARRYOVERS.-The entire amount of the unused loss for any loss year shall be carried to the earliest of the taxable years to which such loss may be carried. The portion of such loss which shall be carried to each of the other taxable years shall be the excess (if any) of the amount of such loss over the sum of the offsets (as defined in subsection (f)) for each of the prior taxable years to which such loss may be carried. "(f) OFFSET DEFINED. For purposes of subsection (e), the term 'offset' means with respect to any taxable year (hereinafter referred to as the 'offset year') "(1) in the case of an unused loss carryback from the loss year to the offset year, the mutual insurance company taxable income for the offset year; or "(2) in the case of an unused loss carryover from the loss year to the offset year, an amount equal to the sum of "(A) the amount required to be subtracted from the protection against loss account under section 824 (d) (1) (C) for the offset year, plus "(B) the mutual insurance company taxable income for the offset year. For purposes of paragraphs (1) and (2) (B), the mutual insurance company taxable income for the offset year shall be determined without regard to any unused loss carryback or carryover from the loss year or any taxable year thereafter. "(g) LIMITATIONS. For purposes of this part, an unused loss shall not be carried "(1) to or from any taxable year beginning before January 1, SEC. 825 (added 1962)-Continued "(2) to or from any taxable year for which the insurance company is not subject to the tax imposed by section 821(a), nor "(3) to any taxable year if, between the loss year and such taxable year, there is an intervening taxable year for which the insurance company was not subject to the tax imposed by section 821(a)." SEC. 826. ELECTION BY RECIPROCAL (Added 1962-76 Stat. 996997): Added Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 8(c), 76 Stat. 996–997: Amended Part II of Subchapter L of Chapter 1 (as part of the revision described on p. 360 above) by adding after section 825 (added as above) the following new section 826: "SEC. 826. ELECTION BY RECIPROCAL. "(a) IN GENERAL.-Except as otherwise provided in this section, any mutual insurance company which is an interinsurer or reciprocal underwriter (hereinafter in this section referred to as a 'reciprocal') subject to the taxes imposed by section 821 (a) may, under regulations prescribed by the Secretary or his delegate, elect to be subject to the limitation provided in subsection (b). Such election shall be effective for the taxable year for which made and for all succeeding taxable years, and shall not be revoked except with the consent of the Secretary or his delegate. "(b) LIMITATION.-The deduction for amounts paid or incurred in the taxable year to the attorney-in-fact by a reciprocal making the election provided in subsection (a) shall be limited to, but in no case increased by, the deductions of the attorney-in-fact allocable, in accordance with regulations prescribed by the Secretary or his delegate, to the income received by the attorney-in-fact from the reciprocal. "(c) EXCEPTION.-An election may not be made by a reciprocal under subsection (a) unless the attorney-in-fact of such reciprocal "(1) is subject to the taxes imposed by section 11 (b) and (c); "(2) consents in such manner as the Secretary or his delegate shall prescribe by regulations to make available such information as may be required during the period in which the election provided in subsection (a) is in effect, under regulations prescribed by the Secretary or his delegate; "(3) reports the income received from the reciprocal and the deductions allocable thereto under the same method of accounting under which the reciprocal reports deductions for amounts paid to the attorney-in-fact; and "(4) files its return on the calendar year basis. "(d) SPECIAL RULE.-In applying section 824 (d) (1) (D), any amount which was added to the protection against loss account by reason of an election under this section shall be treated as having been added by reason of section 824(a)(1)(A). "(e) CREDIT.-Any reciprocal electing to be subject to the limitation provided in subsection (b) shall be credited with so much. of the tax paid by the attorney-in-fact as is attributable, under regulations prescribed by the Secretary or his delegate, to the income SEC. 826 (added 1962)—Continued received by the attorney-in-fact from the reciprocal in such taxable year. "(f) SURTAX EXEMPTION DENIED.-Any increase in taxable income of a reciprocal attributable to the limitation provided in subsection (b) shall be taxed without regard to the surtax exemption provided in section 821 (a) (2). "(g) ADJUSTMENT FOR REFUND.-If for any taxable year an attorney-in-fact is allowed a credit or refund for taxes paid with respect to which credit or refund to the reciprocal resulted under subsection (e), the taxes of such reciprocal for such taxable year shall be properly adjusted under regulations prescribed by the Secretary or his delegate. "(h) TAXES OF ATTORNEY-IN-FACT UNAFFECTED.-Nothing in this section shall increase or decrease the taxes imposed by this chapter on the income of the attorney-in-fact." CH. 1, SUBCH. L, PART III-OTHER INSURANCE COMPANIES (68A Stat. 264–267): Table- - - - (item amended) Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 8(g) (4) (C), 76 Stat. 999: "Sec. 831. Tax on insurance companies (other than life or mutual), "Sec. 832. Insurance company taxable income.", by striking out the portion referring to section 831 and inserting in lieu thereof the following: "Sec. 831. Tax on insurance companies (other than life or mutual), mutual_marine insurance companies, and certain mutual fire or flood insurance companies." Applicability: Taxable years beginning after December 31, 1962. (Id. § 8(h), 76 Stat. 999.) SEC. 831. TAX ON INSURANCE COMPANIES (OTHER THAN LIFE Heading... Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 8(g) (4) (B), 76 Stat. 999: Applicability: Taxable years beginning after December 31, 1962. (Id., § 8(h), 76 Stat. 999.) |