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26 U.S.C. § 842 — Foreign companies carrying on insurance business
Federal law — U.S. Code and appendices · legal_authorities
**(a) Taxation under this subchapter** If a foreign company carrying on an insurance business within the United States would qualify under part I or II of this subchapter for the taxable year if (without regard to income not effectively connected with the conduct of any trade or business within the United States) it were a domestic corporation, such company shall be taxable under such part on its income effectively connected with its conduct of any trade or business within the United States. With respect to the remainder of its income which is from sources within the United States, such a foreign company shall be taxable as provided in section 881.
**(b) Minimum effectively connected net investment income**
(1) **In general** — In the case of a foreign company taxable under part I or II of this subchapter for the taxable year, its net investment income for such year which is effectively connected with the conduct of an insurance business within the United States shall be not less than the product of—
(A) the required United States assets of such company, and
(B) the domestic investment yield applicable to such company for such year.
(2) **Required U.S. assets**
(A) *In general* — For purposes of paragraph (1), the required United States assets of any foreign company for any taxable year is an amount equal to the product of—
(i) the mean of such foreign company’s total insurance liabilities on United States business, and
(ii) the domestic asset/liability percentage applicable to such foreign company for such year.
(B) *Total insurance liabilities* — For purposes of this paragraph—
(i) *Companies taxable under part I* — In the case of a company taxable under part I, the term “total insurance liabilities” means the sum of the total reserves (a
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Source location: Title 26, Chapter 1, § 842; chapter-001-normal-taxes-and-surtaxes.md
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**(a) Taxation under this subchapter** If a foreign company carrying on an insurance business within the United States would qualify under part I or II of this subchapter for the taxable year if (without regard to income not effectively connected with the conduct of any trade or business within the United States) it were a domestic corporation, such company shall be taxable under such part on its income effectively connected with its conduct of any trade or business within the United States. With respect to the remainder of its income which is from sources within the United States, such a foreign company shall be taxable as provided in section 881.
**(b) Minimum effectively connected net investment income**
(1) **In general** — In the case of a foreign company taxable under part I or II of this subchapter for the taxable year, its net investment income for such year which is effectively connected with the conduct of an insurance business within the United States shall be not less than the product of—
(A) the required United States assets of such company, and
(B) the domestic investment yield applicable to such company for such year.
(2) **Required U.S. assets**
(A) *In general* — For purposes of paragraph (1), the required United States assets of any foreign company for any taxable year is an amount equal to the product of—
(i) the mean of such foreign company’s total insurance liabilities on United States business, and
(ii) the domestic asset/liability percentage applicable to such foreign company for such year.
(B) *Total insurance liabilities* — For purposes of this paragraph—
(i) *Companies taxable under part I* — In the case of a company taxable under part I, the term “total insurance liabilities” means the sum of the total reserves (as defined in section 816(c)) plus (to the extent not included in total reserves) the items referred to in paragraphs (3), (4), (5), and (6) of section 807(c).
(ii) *Companies taxable under part II* — In the case of a company taxable under part II, the term “total insurance liabilities” means the sum of unearned premiums and unpaid losses.
(C) *Domestic asset/liability percentage* — The domestic asset/liability percentage applicable for purposes of subparagraph (A)(ii) to any foreign company for any taxable year is a percentage determined by the Secretary on the basis of a ratio—
(i) the numerator of which is the mean of the assets of domestic insurance companies taxable under the same part of this subchapter as such foreign company, and
(ii) the denominator of which is the mean of the total insurance liabilities of the same companies.
(3) **Domestic investment yield** — The domestic investment yield applicable for purposes of paragraph (1)(B) to any foreign company for any taxable year is the percentage determined by the Secretary on the basis of a ratio—
(A) the numerator of which is the net investment income of domestic insurance companies taxable under the same part of this subchapter as such foreign company, and
(B) the denominator of which is the mean of the assets of the same companies.
(4) **Election to use worldwide yield**
(A) *In general* — If the foreign company makes an election under this paragraph, such company’s worldwide current investment yield shall be taken into account in lieu of the domestic investment yield for purposes of paragraph (1)(B).
(B) *Worldwide current investment yield* — For purposes of subparagraph (A), the term “worldwide current investment yield” means the percentage obtained by dividing—
(i) the net investment income of the company from all sources, by
(ii) the mean of all assets of the company (whether or not held in the United States).
(C) *Election* — An election under this paragraph shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.
(5) **Net investment income** — For purposes of this subsection, the term “net investment income” means—
(A) gross investment income (within the meaning of section 834(b)), reduced by
(B) expenses allocable to such income.
**(c) Special rules for purposes of subsection (b)**
(1) **Reduction in section 881 taxes**
(A) *In general* — The tax under section 881 (determined without regard to this paragraph) shall be reduced (but not below zero) by an amount which bears the same ratio to such tax as—
(i) the amount of the increase in effectively connected income of the company resulting from subsection (b), bears to
(ii) the amount which would be subject to tax under section 881 if the amount taxable under such section were determined without regard to sections 103 and 894.
(B) *Limitation on reduction* — The reduction under subparagraph (A) shall not exceed the increase in taxes under part I or II (as the case may be) by reason of the increase in effectively connected income of the company resulting from subsection (b).
(2) **Data used in determining domestic asset/liability percentages and domestic investment yields** — Each domestic asset/liability percentage, and each domestic investment yield, for any taxable year shall be based on such representative data with respect to domestic insurance companies for the second preceding taxable year as the Secretary considers appropriate.
**(d) Regulations** The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations—
(1) providing for the proper treatment of segregated asset accounts,
(2) providing for proper adjustments in succeeding taxable years where the company’s actual net investment income for any taxable year which is effectively connected with the conduct of an insurance business within the United States exceeds the amount required under subsection (b)(1),
(3) providing for the proper treatment of investments in domestic subsidiaries, and
(4) which may provide that, in the case of companies taxable under part II of this subchapter, determinations under subsection (b) will be made separately for categories of such companies established in such regulations.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Adjustments applicable to all taxpayers** In determining the amount of the alternative minimum taxable income for any taxable year the following treatment shall apply (in lieu of the treatment applicable for purposes of computing the regular tax):
(1) **Depreciation**
(A) *In general*
(i) *Property other than certain personal property* — Except as provided in clause (ii), the depreciation deduction allowable under section 167 with respect to any tangible property placed in service after December 31, 1986, shall be determined under the alternative system of section 168(g). In the case of property placed in service after December 31, 1998, the preceding sentence shall not apply but clause (ii) shall continue to apply.
(ii) *150-percent declining balance method for certain property* — The method of depreciation used shall be—
(I) the 150 percent declining balance method,
(II) switching to the straight line method for the 1st taxable year for which using the straight line method with respect to the adjusted basis as of the beginning of the year will yield a higher allowance.
The preceding sentence shall not apply to any section 1250 property (as defined in section 1250(c)) (and the straight line method shall be used for such section 1250 property) or to any other property if the depreciation deduction determined under section 168 with respect to such other property for purposes of the regular tax is determined by using the straight line method.
(B) *Exception for certain property* — This paragraph shall not apply to property described in paragraph (1), (2), (3), or (4) of section 168(f), or in section 168(e)(3)(C)(iv).
(C) *Coordination with transitional rules*
(i) *In general* — This paragraph shall not apply to property pla
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Life insurance company defined** For purposes of this subtitle, the term “life insurance company” means an insurance company which is engaged in the business of issuing life insurance and annuity contracts (either separately or combined with accident and health insurance), or noncancellable contracts of health and accident insurance, if—
(1) its life insurance reserves (as defined in subsection (b)), plus
(2) unearned premiums, and unpaid losses (whether or not ascertained), on noncancellable life, accident, or health policies not included in life insurance reserves,
comprise more than 50 percent of its total reserves (as defined in subsection (c)). For purposes of the preceding sentence, the term “insurance company” means any company more than half of the business of which during the taxable year is the issuing of insurance or annuity contracts or the reinsuring of risks underwritten by insurance companies.
**(b) Life insurance reserves defined**
(1) **In general** — For purposes of this part, the term “life insurance reserves” means amounts—
(A) which are computed or estimated on the basis of recognized mortality or morbidity tables and assumed rates of interest, and
(B) which are set aside to mature or liquidate, either by payment or reinsurance, future unaccrued claims arising from life insurance, annuity, and noncancellable accident and health insurance contracts (including life insurance or annuity contracts combined with noncancellable accident and health insurance) involving, at the time with respect to which the reserve is computed, life, accident, or health contingencies.
(2) **Reserves must be required by law** — Except—
(A) in the case of policies covering life, accident, and health insurance combined in one policy issued on the weekly pr
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Corporations in general** A tax is hereby imposed for each taxable year on the taxable income of every corporation.
**(b) Amount of tax** The amount of the tax imposed by subsection (a) shall be 21 percent of taxable income.
**(c) Exceptions** Subsection (a) shall not apply to a corporation subject to a tax imposed by—
(1) section 594 (relating to mutual savings banks conducting life insurance business),
(2) subchapter L (sec. 801 and following, relating to insurance companies), or
(3) subchapter M (sec. 851 and following, relating to regulated investment companies and real estate investment trusts).
**(d) Foreign corporations** In the case of a foreign corporation, the taxes imposed by subsection (a) and section 55 shall apply only as provided by section 882.
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Federal law — U.S. Code and appendices · legal_authorities
**(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.
**(b) Alternative tax for certain small companies**
(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—
(i) the net written premiums (or, if greater, direct written premiums) for the taxable year do not exceed $2,200,000,
(ii) such company meets the diversification requirements of subparagraph (B), and
(iii) such company elects the application of this subsection for such taxable year.
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*
(i) *In general* — An insurance company meets the requirements of this subparagraph if—
(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
(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 holde
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Limitation based on amount of tax** The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the sum of—
(1) the taxpayer’s regular tax liability for the taxable year reduced by the foreign tax credit allowable under section 27, and
(2) the tax imposed by section 55(a) for the taxable year.
**(b) Regular tax liability** For purposes of this part—
(1) **In general** — The term “regular tax liability” means the tax imposed by this chapter for the taxable year.
(2) **Exception for certain taxes** — For purposes of paragraph (1), any tax imposed by any of the following provisions shall not be treated as tax imposed by this chapter:
(A) section 55 (relating to minimum tax),
(B) section 59A (relating to base erosion and anti-abuse tax),
(C) subsection (m)(5)(B), (q), (t), or (v) of section 72 (relating to additional taxes on certain distributions),
(D) section 143(m) (relating to recapture of proration of Federal subsidy from use of mortgage bonds and mortgage credit certificates),
(E) section 530(d)(4) (relating to additional tax on certain distributions from Coverdell education savings accounts),
(F) section 531 (relating to accumulated earnings tax),
(G) section 541 (relating to personal holding company tax),
(H) section 1351(d)(1) (relating to recoveries of foreign expropriation losses),
(I) section 1374 (relating to tax on certain built-in gains of S corporations),
(J) section 1375 (relating to tax imposed when passive investment income of corporation having subchapter C earnings and profits exceeds 25 percent of gross receipts),
(K) subparagraph (A) of section 7518(g)(6) (relating to nonqualified withdrawals from capital construction funds taxed at highest marginal rate),
(L) sections 87
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Decrease treated as gross income** If for any taxable year—
(1) the opening balance for the items described in subsection (c), exceeds
(2)
(A) the closing balance for such items, reduced by
(B) the amount of the policyholders’ share of tax-exempt interest and the amount of the policyholder’s share of the increase for the taxable year in policy cash values (within the meaning of section 805(a)(4)(F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies,
such excess shall be included in gross income under section 803(a)(2).
**(b) Increase treated as deduction** If for any taxable year—
(1)
(A) the closing balance for the items described in subsection (c), reduced by
(B) the amount of the policyholders’ share of tax-exempt interest and the amount of the policyholder’s share of the increase for the taxable year in policy cash values (within the meaning of section 805(a)(4)(F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies, exceeds
(2) the opening balance for such items,
such excess shall be taken into account as a deduction under section 805(a)(2).
**(c) Items taken into account** The items referred to in subsections (a) and (b) are as follows:
(1) The life insurance reserves (as defined in section 816(b)).
(2) The unearned premiums and unpaid losses included in total reserves under section 816(c)(2).
(3) The amounts (discounted at the appropriate rate of interest) necessary to satisfy the obligations under insurance and annuity contracts, but only if such obligations do not involve (at the time with respect to which the computation is made under this paragraph) life, accident, or health contingencies.
(4) Dividend accumulations, and other amounts, held at
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** In the case of the acquisition of assets of a corporation by another corporation—
(1) in a distribution to such other corporation to which section 332 (relating to liquidations of subsidiaries) applies; or
(2) in a transfer to which section 361 (relating to nonrecognition of gain or loss to corporations) applies, but only if the transfer is in connection with a reorganization described in subparagraph (A), (C), (D), (F), or (G) of section 368(a)(1),
the acquiring corporation shall succeed to and take into account, as of the close of the day of distribution or transfer, the items described in subsection (c) of the distributor or transferor corporation, subject to the conditions and limitations specified in subsections (b) and (c). For purposes of the preceding sentence, a reorganization shall be treated as meeting the requirements of subparagraph (D) or (G) of section 368(a)(1) only if the requirements of subparagraphs (A) and (B) of section 354(b)(1) are met.
**(b) Operating rules** Except in the case of an acquisition in connection with a reorganization described in subparagraph (F) of section 368(a)(1)—
(1) The taxable year of the distributor or transferor corporation shall end on the date of distribution or transfer.
(2) For purposes of this section, the date of distribution or transfer shall be the day on which the distribution or transfer is completed; except that, under regulations prescribed by the Secretary, the date when substantially all of the property has been distributed or transferred may be used if the distributor or transferor corporation ceases all operations, other than liquidating activities, after such date.
(3) The corporation acquiring property in a distribution or transfer described in subsection (a) shall not be entitle
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** For purposes of this subtitle, the term “dividend” means any distribution of property made by a corporation to its shareholders—
(1) out of its earnings and profits accumulated after February 28, 1913, or
(2) out of its earnings and profits of the taxable year (computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year), without regard to the amount of the earnings and profits at the time the distribution was made.
Except as otherwise provided in this subtitle, every distribution is made out of earnings and profits to the extent thereof, and from the most recently accumulated earnings and profits. To the extent that any distribution is, under any provision of this subchapter, treated as a distribution of property to which section 301 applies, such distribution shall be treated as a distribution of property for purposes of this subsection.
**(b) Special rules**
(1) **Certain insurance company dividends** — The definition in subsection (a) shall not apply to the term “dividend” as used in subchapter L in any case where the reference is to dividends of insurance companies paid to policyholders as such.
(2) **Distributions by personal holding companies**
(A) In the case of a corporation which—
(i) under the law applicable to the taxable year in which the distribution is made, is a personal holding company (as defined in section 542), or
(ii) for the taxable year in respect of which the distribution is made under section 563(b) (relating to dividends paid after the close of the taxable year), or section 547 (relating to deficiency dividends), or the corresponding provisions of prior law, is a personal holding company under the law applicable to such taxable year,
the t
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Federal law — U.S. Code and appendices · legal_authorities
Page 1942
TITLE 26—INTERNAL REVENUE CODE
§ 841
1956—Act Mar. 13, 1956, ch. 83, § 4(b), 70 Stat. 49, added
item 843.
§ 841. Credit for foreign taxes
The taxes imposed by foreign countries or pos-
sessions of the United States shall be allowed as
a credit against the tax of a domestic insurance
company subject to the tax imposed by section
801 or 831, to the extent provided in the case of
a domestic corporation in section 901 (relating
to foreign tax credit). For purposes of the pre-
ceding sentence (and for purposes of applying
section 906 with respect to a foreign corporation
subject to tax under this subchapter), the term
‘‘taxable income’’ as used in section 904 means—
(1) in the case of the tax imposed by section
801, the life insurance company taxable in-
come (as defined in section 801(b)), and
(2) in the case of the tax imposed by section
831, the taxable income (as defined in section
832(a)).
(Aug. 16, 1954, ch. 736, 68A Stat. 267; Mar. 13, 1956,
ch. 83, § 5(4), 70 Stat. 49; Pub. L. 86–69, § 3(b), June
25, 1959, 73 Stat. 139; Pub. L. 87–834, § 8(g)(1), Oct.
16, 1962, 76 Stat. 998; Pub. L. 89–809, title I,
§ 104(i)(8), Nov. 13, 1966, 80 Stat. 1562; Pub. L.
98–369, div. A, title II, § 211(b)(10), July 18, 1984, 98
Stat. 755; Pub. L. 99–514, title X, § 1024(c)(10), Oct.
22, 1986, 100 Stat. 2407.)
Editorial Notes
AMENDMENTS
1986—Pub. L. 99–514 substituted ‘‘section 801 or 831’’
for ‘‘section 801, 821, or 831’’ in introductory provisions,
redesignated par. (3) as (2), and struck out former par.
(2) which read as follows: ‘‘in the case of the tax im-
posed by section 821(a), the mutual insurance company
taxable income (as defined in section 821(b)); and in the
case of the tax imposed by section 821(c), the taxable
investment income (as de
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