26 U.S.C. § 814 — Contiguous country branches of domestic

Page 1911 TITLE 26—INTERNAL REVENUE CODE § 814 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title. EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108–218 applicable to taxable years beginning after Dec. 31, 2004, see section 205(c) of Pub. L. 108–218, set out as a note under section 807 of this title. EFFECTIVE DATE OF 1997 AMENDMENT Amendment by Pub. L. 105–34 applicable to contracts issued after June 8, 1997, in taxable years ending after such date, with special provisions relating to changes in contracts to be treated as new contracts, see section 1084(d) of Pub. L. 105–34, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1996 AMENDMENT Amendment by section 1602(b)(1) of Pub. L. 104–188 ap- plicable to loans made after Aug. 20, 1996, with excep- tion, and provisions relating to certain refinancings, see section 1602(c) of Pub. L. 104–188, set out as an Effec- tive Date of Repeal note under former section 133 of this title. EFFECTIVE DATE OF 1988 AMENDMENT Pub. L. 100–647, title I, § 1018(h)(2), Nov. 10, 1988, 102 Stat. 3583, provided that: ‘‘The amendment made by paragraph (1) [amending this section] shall take effect as if included in the amendments made by section 211 of the Tax Reform Act of 1984 [Pub. L. 98–369].’’ Amendment by section 2004(p)(2) of Pub. L. 100–647 ef- fective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100–647, set out as a note under section 56 of this title. EFFECTIVE DATE OF 1987 AMENDMENT Amendment by Pub. L. 100–203 applicable to contracts issued in taxable years beginning after Dec. 31, 1987, see section 10241(c) of Pub. L. 100–203, set out as a note under section 807 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 effective, except as oth- erwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title. EFFECTIVE DATE Section applicable to taxable years beginning after Dec. 31, 1983, see section 215 of Pub. L. 98–369, set out as a note under section 801 of this title. PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title. [§ 813. Repealed. Pub. L. 100–203, title X, § 10242(c)(1), Dec. 22, 1987, 101 Stat. 1330–423] Section, added Pub. L. 98–369, div. A, title II, § 211(a), July 18, 1984, 98 Stat. 743; amended Pub. L. 99–514, title X, § 1011(b)(9), title XVIII, § 1821(j), Oct. 22, 1986, 100 Stat. 2389, 2841; Pub. L. 100–647, title I, § 1010(a)(1), Nov. 10, 1988, 102 Stat. 3450, related to foreign life insurance companies. A prior section 813, act Aug. 16, 1954, ch. 736, § 813, as added Mar. 13, 1956, ch. 83, § 2, 70 Stat. 46, related to ad- justment for certain reserves, prior to the general revi- sion of this part by Pub. L. 86–69, § 2(a). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal applicable to taxable years beginning after Dec. 31, 1987, see section 10242(d) of Pub. L. 100–203, set out as an Effective Date of 1987 Amendment note under section 816 of this title. § 814. Contiguous country branches of domestic life insurance companies (a) Exclusion of items In the case of a domestic mutual insurance company which— (1) is a life insurance company, (2) has a contiguous country life insurance branch, and (3) makes the election provided by sub- section (g) with respect to such branch, there shall be excluded from each item involved in the determination of life insurance company taxable income the items separately accounted for in accordance with subsection (c). (b) Contiguous country life insurance branch For purposes of this section, the term contig- uous country life insurance branch means a branch which— (1) issues insurance contracts insuring risks in connection with the lives or health of resi- dents of a country which is contiguous to the United States, (2) has its principal place of business in such contiguous country, and (3) would constitute a mutual life insurance company if such branch were a separate do- mestic insurance company. For purposes of this section, the term ‘‘insur- ance contract’’ means any life, health, accident, or annuity contract or reinsurance contract or any contract relating thereto. (c) Separate accounting required Any taxpayer which makes the election pro- vided by subsection (g) shall establish and main- tain a separate account for the various income, exclusion, deduction, asset, reserve, liability, and surplus items properly attributable to the contracts described in subsection (b). Such sepa- rate accounting shall be made— (1) in accordance with the method regularly employed by such company, if such method clearly reflects income derived from, and the other items attributable to, the contracts de- scribed in subsection (b), and (2) in all other cases, in accordance with reg- ulations prescribed by the Secretary. (d) Recognition of gain on assets in branch ac- count If the aggregate fair market value of all the invested assets and tangible property which are separately accounted for by the domestic life in- surance company in the branch account estab- lished pursuant to subsection (c) exceeds the ag- gregate adjusted basis of such assets for pur- poses of determining gain, then the domestic life insurance company shall be treated as having sold all such assets on the first day of the first Page 1912 TITLE 26—INTERNAL REVENUE CODE § 814 taxable year for which the election is in effect at their fair market value on such first day. Notwithstanding any other provision of this chapter, the net gain shall be recognized to the domestic life insurance company on the deemed sale described in the preceding sentence. (e) Transactions between contiguous country branch and domestic life insurance company (1) Reimbursement for home office services, etc. Any payment, transfer, reimbursement, credit, or allowance which is made from a sep- arate account established pursuant to sub- section (c) to one or more other accounts of a domestic life insurance company as reimburse- ment for costs incurred for or with respect to the insurance (or reinsurance) of risks ac- counted for in such separate account shall be taken into account by the domestic life insur- ance company in the same manner as if such payment, transfer, reimbursement, credit, or allowance had been received from a separate person. (2) Repatriation of income (A) In general Except as provided in subparagraph (B), any amount directly or indirectly trans- ferred or credited from a branch account es- tablished pursuant to subsection (c) to one or more other accounts of such company shall, unless such transfer or credit is a re- imbursement to which paragraph (1) applies, be added to the income of the domestic life insurance company. (B) Limitation The addition provided by subparagraph (A) for the taxable year with respect to any con- tiguous country life insurance branch shall not exceed the amount by which— (i) the aggregate decrease in the ten- tative LICTI of the domestic life insurance company for the taxable year and for all prior taxable years resulting solely from the application of subsection (a) of this section with respect to such branch, ex- ceeds (ii) the amount of additions to tentative LICTI pursuant to subparagraph (A) with respect to such contiguous country branch for all prior taxable years. (C) Transitional rule For purposes of this paragraph, in the case of a prior taxable year beginning before Jan- uary 1, 1984, the term ‘‘tentative LICTI’’ means life insurance company taxable in- come determined under this part (as in ef- fect for such year) without regard to this paragraph. (f) Other rules (1) Treatment of foreign taxes No income, war profits, or excess profits taxes paid or accrued to any foreign country or possession of the United States which is at- tributable to income excluded under sub- section (a) shall be taken into account for pur- poses of subpart A of part III of subchapter N (relating to foreign tax credit) or allowable as a deduction. (2) United States source income allocable to contiguous country branch For purposes of sections 881, 882, and 1442, each contiguous country life insurance branch shall be treated as a foreign corporation. Such sections shall be applied to each such branch in the same manner as if such sections con- tained the provisions of any treaty to which the United States and the contiguous country are parties, to the same extent such provisions would apply if such branch were incorporated in such contiguous country. (g) Election A taxpayer may make the election provided by this subsection with respect to any contiguous country for any taxable year. An election made under this subsection for any taxable year shall remain in effect for all subsequent taxable years, except that it may be revoked with the consent of the Secretary. The election provided by this subsection shall be made not later than the time prescribed by law for filing the return for the taxable year (including extensions there- of) with respect to which such election is made, and such election and any approved revocation thereof shall be made in the manner provided by the Secretary. (h) Special rule for domestic stock life insurance companies At the election of a domestic stock life insur- ance company which has a contiguous country life insurance branch described in subsection (b) (without regard to the mutual requirement in subsection (b)(3)), the assets of such branch may be transferred to a foreign corporation organized under the laws of the contiguous country with- out the application of section 367. Subsection (a) shall apply to the stock of such foreign corpora- tion as if such domestic company were a mutual company and as if the stock were an item de- scribed in subsection (c). Subsection (e)(2) shall apply to amounts transferred or credited to such domestic company as if such domestic company and such foreign corporation constituted one do- mestic mutual life insurance company. The in- surance contracts which may be transferred pur- suant to this subsection shall include only those which are similar to the types of insurance con- tracts issued by a mutual life insurance com- pany. Notwithstanding the first sentence of this subsection, if the aggregate fair market value of the invested assets and tangible property which are separately accounted for by the domestic life insurance company in the branch account exceeds the aggregate adjusted basis of such as- sets for purposes of determining gain, the do- mestic life insurance company shall be deemed to have sold all such assets on the first day of the taxable year for which the election under this subsection applies and the net gain shall be recognized to the domestic life insurance com- pany on the deemed sale, but not in excess of the proportion of such net gain which equals the proportion which the aggregate fair market value of such assets which are transferred pursu- ant to this subsection is of the aggregate fair market value of all such assets. (Added Pub. L. 98–369, div. A, title II, § 211(a), July 18, 1984, 98 Stat. 744; amended Pub. L. Page 1913 TITLE 26—INTERNAL REVENUE CODE § 816 105–34, title XI, § 1131(c)(1), Aug. 5, 1997, 111 Stat. 980; Pub. L. 115–97, title I, § 14301(c)(5), Dec. 22, 2017, 131 Stat. 2222.) Editorial Notes AMENDMENTS 2017—Subsec. (f)(1). Pub. L. 115–97 redesignated sub- par. (A) as par. (1), struck out subpar. (A) heading ‘‘In general’’, and struck out subpar. (B). Prior to amend- ment, text of subpar. (B) read as follows: ‘‘For purposes of sections 78 and 902, where any amount is added to the life insurance company taxable income of the domestic life insurance company by reason of subsection (e)(2), the contiguous country life insurance branch shall be treated as a foreign corporation. Any amount so added shall be treated as a dividend paid by a foreign corpora- tion, and the taxes paid to any foreign country or pos- session of the United States with respect to such amount shall be deemed to have been paid by such branch.’’ 1997—Subsec. (h). Pub. L. 105–34 struck out ‘‘or 1491’’ after ‘‘section 367’’. Statutory Notes and Related Subsidiaries NEW SECTION 814 TREATED AS CONTINUATION OF SECTION 819A Pub. L. 98–369, div. A, title II, § 217(a), July 18, 1984, 98 Stat. 762, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘For purposes of section 814 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to contiguous country branches of domestic life insurance companies)— ‘‘(1) any election under section 819A of such Code (as in effect on the day before the date of the enact- ment of this Act [July 18, 1984]) shall be treated as an election under such section 814, and ‘‘(2) any reference to a provision of such section 814 shall be treated as including a reference to the cor- responding provision of such section 819A.’’ EFFECTIVE DATE OF 2017 AMENDMENT Amendment by Pub. L. 115–97 applicable to taxable years of foreign corporations beginning after Dec. 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 14301(d) of Pub. L. 115–97, set out as a note under section 78 of this title. EFFECTIVE DATE Section applicable to taxable years beginning after Dec. 31, 1983, see section 215 of Pub. L. 98–369, set out as a note under section 801 of this title. [§ 815. Repealed. Pub. L. 115–97, title I, § 13514(a), Dec. 22, 2017, 131 Stat. 2143] Section, added Pub. L. 98–369, div. A, title II, § 211(a), July 18, 1984, 98 Stat. 747; amended Pub. L. 99–514, title X, § 1011(b)(10), title XVIII, § 1821(k)(1), (2), Oct. 22, 1986, 100 Stat. 2389, 2841; Pub. L. 100–647, title I, § 1010(j)(1), Nov. 10, 1988, 102 Stat. 3456; Pub. L. 108–357, title VII, § 705(a), Oct. 22, 2004, 118 Stat. 1549; Pub. L. 113–295, div. A, title II, § 221(a)(41)(G), Dec. 19, 2014, 128 Stat. 4044, re- lated to distributions to shareholders from pre-1984 pol- icyholders surplus account. A prior section 815, added Pub. L. 86–69, § 2(a), June 25, 1959, 73 Stat. 129; amended Pub. L. 87–790, § 3(b), Oct. 10, 1962, 76 Stat. 808; Pub. L. 87–858, § 3(b)(4), (e), Oct. 23, 1962, 76 Stat. 1137; Pub. L. 88–571, §§ 2, 3(a), 4(a), Sept. 2, 1964, 78 Stat. 857, 859; Pub. L. 90–225, § 4(a), (b), Dec. 27, 1967, 81 Stat. 733, 734; Pub. L. 91–172, title IX, § 907(b), Dec. 30, 1969, 83 Stat. 715; Pub. L. 94–331, § 1(a), June 30, 1976, 90 Stat. 781; Pub. L. 94–455, title XIX, §§ 1901(b)(1)(O), (24), (33)(H), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1791, 1798, 1801, 1834, contained provisions similar to this section, prior to the general revision of this part by Pub. L. 98–369, § 211(a). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal applicable to taxable years beginning after Dec. 31, 2017, see section 13514(c) of Pub. L. 115–97, set out as an Effective Date of 2017 Amendment note under section 801 of this title. SUBPART E—DEFINITIONS AND SPECIAL RULES Sec. 816. Life insurance company defined. 817. Treatment of variable contracts. 817A. Special rules for modified guaranteed con- tracts. 818. Other definitions and special rules. Editorial Notes AMENDMENTS 1996—Pub. L. 104–188, title I, § 1612(b), Aug. 20, 1996, 110 Stat. 1847, added item 817A. § 816. Life insurance company defined (a) Life insurance company defined For purposes of this subtitle, the term ‘‘life in- surance company’’ means an insurance company which is engaged in the business of issuing life insurance and annuity contracts (either sepa- rately or combined with accident and health in- surance), 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 poli- cies not included in life insurance reserves, comprise more than 50 percent of its total re- serves (as defined in subsection (c)). For pur- poses of the preceding sentence, the term ‘‘in- surance company’’ means any company more than half of the business of which during the taxable year is the issuing of insurance or annu- ity contracts or the reinsuring of risks under- written by insurance companies. (b) Life insurance reserves defined (1) In general For purposes of this part, the term ‘‘life in- surance reserves’’ means amounts— (A) which are computed or estimated on the basis of recognized mortality or mor- bidity tables and assumed rates of interest, and (B) which are set aside to mature or liq- uidate, either by payment or reinsurance, fu- ture unaccrued claims arising from life in- surance, annuity, and noncancellable acci- dent and health insurance contracts (includ- ing life insurance or annuity contracts com- bined with noncancellable accident and health insurance) involving, at the time with respect to which the reserve is com- puted, life, accident, or health contin- gencies. (2) Reserves must be required by law Except— (A) in the case of policies covering life, ac- cident, and health insurance combined in one policy issued on the weekly premium