
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC835]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                    Subchapter L--Insurance Companies
 
                   PART II--OTHER INSURANCE COMPANIES
 
Sec. 835. 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 831(a) may, under regulations prescribed by the 
Secretary, 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.

(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, 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 tax imposed by section 11;
        (2) consents in such manner as the Secretary 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;
        (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) 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, to the income received by the attorney-in-fact from the 
reciprocal in such taxable year.

(e) Benefits of graduated rates denied

    Any increase in the taxable income of a reciprocal attributable to 
the limits provided in subsection (b) shall be taxed at the highest rate 
of tax specified in section 11(b).

(f) 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 (d), the taxes of such reciprocal 
for such taxable year shall be properly adjusted under regulations 
prescribed by the Secretary.

(g) 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.

(Added Pub. L. 87-834, Sec. 8(c), Oct. 16, 1962, 76 Stat. 996, Sec. 826; 
amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 
Stat. 1834; Pub. L. 95-600, title III, Sec. 301(b)(10), Nov. 6, 1978, 92 
Stat. 2822; renumbered Sec. 835 and amended Pub. L. 99-514, title X, 
Sec. 1024(a)(3), (c)(9), Oct. 22, 1986, 100 Stat. 2405, 2407; Pub. L. 
100-647, title I, Sec. 1010(f)(2), (3), Nov. 10, 1988, 102 Stat. 3454.)


                               Amendments

    1988--Subsec. (a). Pub. L. 100-647, Sec. 1010(f)(2), substituted 
``section 831(a)'' for ``section 821(a)''.
    Subsec. (f). Pub. L. 100-647, Sec. 1010(f)(3), substituted 
``subsection (d)'' for ``subsection (e)''.
    1986--Pub. L. 99-514, Sec. 1024(a)(3), renumbered section 826 of 
this title as this section.
    Subsec. (d). Pub. L. 99-514, Sec. 1024(c)(9)(A), redesignated 
subsec. (e) as (d) and struck out former subsec. (d), special rule, 
which read as follows: ``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).''
    Subsec. (e). Pub. L. 99-514, Sec. 1024(c)(9), redesignated subsec. 
(f) as (e), substituted ``Benefits of graduated rates'' for ``Surtax 
exemption'' in heading, and amended text generally. Prior to amendment, 
text read as follows: ``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).'' 
Former subsec. (e) redesignated (d).
    Subsecs. (f) to (h). Pub. L. 99-514, Sec. 1024(c)(9)(A), 
redesignated subsecs. (f) to (h) as (e) to (g), respectively.
    1978--Subsec. (c)(1). Pub. L. 95-600 substituted ``the tax imposed 
by section 11'' for ``the taxes imposed by section 11(b) and (c)''.
    1976--Subsecs. (a), (b), (c)(2), (e), (g). Pub. L. 94-455 struck out 
``or his delegate'' after ``Secretary''.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-514 applicable to taxable years beginning 
after Dec. 31, 1986, see section 1024(e) of Pub. L. 99-514, set out as a 
note under section 831 of this title.


                    Effective Date of 1978 Amendment

    Amendment by Pub. L. 95-600 applicable to taxable years beginning 
after Dec. 31, 1978, see section 301(c) of Pub. L. 95-600, set out as a 
note under section 11 of this title.


                             Effective Date

    Section applicable with respect to taxable years beginning after 
Dec. 31, 1962, see section 8(h) of Pub. L. 87-834, set out as an 
Effective Date of 1962 Amendment note under section 501 of this title.

                  Section Referred to in Other Sections

    This section is referred to in section 832 of this title.
