
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: 26USC847]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                    Subchapter L--Insurance Companies
 
               PART III--PROVISIONS OF GENERAL APPLICATION
 
Sec. 847. Special estimated tax payments

    In the case of taxable years beginning after December 31, 1987, of 
an insurance company required to discount unpaid losses (as defined in 
section 846)--

                      (1) Additional deduction

        There shall be allowed as a deduction for the taxable year, if 
    special estimated tax payments are made as required by paragraph 
    (2), an amount not to exceed the excess of--
            (A) the amount of the undiscounted, unpaid losses (as 
        defined in section 846(b)) attributable to losses incurred in 
        taxable years beginning after December 31, 1986, over
            (B) the amount of the related discounted, unpaid losses 
        determined under section 846,

    to the extent such amount was not deducted under this paragraph in a 
    preceding taxable year. Section 6655 shall be applied to any taxable 
    year without regard to the deduction allowed under the preceding 
    sentence.

                 (2) Special estimated tax payments

        The deduction under paragraph (1) shall be allowed only to the 
    extent that such deduction would result in a tax benefit for the 
    taxable year for which such deduction is allowed or any carryback 
    year and only to the extent that special estimated tax payments are 
    made in an amount equal to the tax benefit attributable to such 
    deduction on or before the due date (determined without regard to 
    extensions) for filing the return for the taxable year for which the 
    deduction is allowed. If a deduction would be allowed but for the 
    fact that special estimated tax payments were not timely made, such 
    deduction shall be allowed to the extent such payments are made 
    within a reasonable time, as determined by the Secretary, if all 
    interest and penalties, computed as if this sentence did not apply, 
    are paid. If amounts are included in gross income under paragraph 
    (5) or (6) for any taxable year and an additional tax is due for 
    such year (or any other year) as a result of such inclusion, an 
    amount of special estimated tax payments equal to such additional 
    tax shall be applied against such additional tax. If, after any such 
    payment is so applied, there is an adjustment reducing the amount of 
    such additional tax, in lieu of any credit or refund for such 
    reduction, a special estimated tax payment shall be treated as made 
    in an amount equal to the amount otherwise allowable as a credit or 
    refund. To the extent that a special estimated tax payment is not 
    used to offset additional tax due for any of the first 15 taxable 
    years beginning after the year for which the payment was made, such 
    special estimated tax payment shall be treated as an estimated tax 
    payment made under section 6655 for the 16th year after the year for 
    which the payment was made.

                  (3) Special loss discount account

        Each company which is allowed a deduction under paragraph (1) 
    shall, for purposes of this part, establish and maintain a special 
    loss discount account.

           (4) Additions to special loss discount account

        There shall be added to the special loss discount account for 
    each taxable year an amount equal to the amount allowed as a 
    deduction for the taxable year under paragraph (1).

      (5) Subtractions from special loss discount account and 
                          inclusion in gross income

        After applying paragraph (4), there shall be subtracted for the 
    taxable year from the special loss discount account and included in 
    gross income:
            (A) The excess (if any) of the amount in the special loss 
        discount account with respect to losses incurred in each taxable 
        year over the amount of the excess referred to in paragraph (1) 
        with respect to losses incurred in that year, and
            (B) Any amount improperly subtracted from the special loss 
        discount account under subparagraph (A) to the extent special 
        estimated tax payments were used with respect to such amount.

    To the extent that any amount added to the special loss discount 
    account is not subtracted from such account before the 15th year 
    after the year for which the amount was so added, such amount shall 
    be subtracted from such account for such 15th year and included in 
    gross income for such 15th year.

       (6) Rules in the case of liquidation or termination of 
                        taxpayer's insurance business

        (A) In general

            If a company liquidates or otherwise terminates its 
        insurance business and does not transfer or distribute such 
        business in an acquisition of assets referred to in section 
        381(a), the entire amount remaining in such special loss 
        discount account shall be subtracted and included in gross 
        income. Except in the case where a company transfers or 
        distributes its insurance business in an acquisition of assets, 
        referred to in section 381(a), if the company is not subject to 
        the tax imposed by section 801 or section 831 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 and included in gross income.

        (B) Elimination of balance of payments

            In any case to which subparagraph (A) applies, any special 
        estimated tax payment remaining after the credit attributable to 
        the inclusion under subparagraph (A) shall be voided.

      (7) Modification of the amount of special estimated tax 
             payments in the event of subsequent marginal rate 
                            reduction or increase

        In the event of a reduction in any tax rate provided under 
    section 11 for any tax year after the enactment of this section, the 
    Secretary shall prescribe regulations providing for a reduction in 
    the amount of any special estimated tax payments made for years 
    before the effective date of such section 11 rate reductions. Such 
    reduction in the amount of such payments shall reduce the amount of 
    such payments to the amount that they would have been if the special 
    deduction permitted under paragraph (1) had occurred during a year 
    that the lower marginal rate under section 11 applied. Similar rules 
    shall be applied in the event of a marginal rate increase.

                    (8) Tax benefit determination

        The tax benefit attributable to the deduction under paragraph 
    (1) shall be determined under regulations prescribed by the 
    Secretary, by taking into account tax benefits that would arise from 
    the carryback of any net operating loss for the year, as well as 
    current year tax benefits. Tax benefits for the current year and 
    carryback years shall include those that would arise from the filing 
    of a consolidated return with another insurance company required to 
    determine discounted, unpaid losses under section 846 without regard 
    to the limitations on consolidation contained in section 1503(c). 
    The limitations on consolidation contained in section 1503(c) shall 
    not apply to the deduction allowed under paragraph (1).

                 (9) Effect on earnings and profits

        In determining the earnings and profits--
            (A) any special estimated tax payment made for any taxable 
        year shall be treated as a payment of income tax imposed by this 
        title for such taxable year, and
            (B) any deduction or inclusion under this section shall not 
        be taken into account.

    Nothing in the preceding sentence shall be construed to affect the 
    application of section 56(g) (relating to adjustments based on 
    adjusted current earnings).

                          (10) Regulations

        The Secretary shall prescribe such regulations as may be 
    necessary or appropriate to carry out the purposes of this section, 
    including regulations--
            (A) providing for the separate application of this section 
        with respect to each accident year,
            (B) such adjustments in the application of this section as 
        may be necessary to take into account the tax imposed by section 
        55, and
            (C) providing for the application of this section in cases 
        where the deduction allowed under paragraph (1) for any taxable 
        year is less than the excess referred to in paragraph (1) for 
        such year.

(Added Pub. L. 100-647, title VI, Sec. 6077(a), Nov. 10, 1988, 102 Stat. 
3707; amended Pub. L. 101-239, title VII, Sec. 7816(n), Dec. 19, 1989, 
103 Stat. 2422.)

                       References in Text

    Enactment of this section, referred to in par. (7), means enactment 
of Pub. L. 100-647, which enacted this section and was approved Nov. 10, 
1988.


                               Amendments

    1989--Par. (1). Pub. L. 101-239, Sec. 7816(n)(1), substituted 
``special estimated tax'' for ``separate estimated tax'' in introductory 
provisions and inserted ``in taxable years beginning'' after 
``attributable to losses incurred'' in subpar. (A).
    Par. (2). Pub. L. 101-239, Sec. 7816(n)(2), amended first sentence 
generally. Prior to amendment, first sentence read as follows: ``The 
deduction under paragraph (1) shall be allowed only to the extent that 
special estimated tax payments are made in an amount equal to the tax 
benefit attributable to such deduction, on or before the date that any 
taxes (determined without regard to this section) for the taxable year 
for which the deduction is allowed are due to be paid.''
    Par. (5). Pub. L. 101-239, Sec. 7816(n)(3), inserted at end ``To the 
extent that any amount added to the special loss discount account is not 
subtracted from such account before the 15th year after the year for 
which the amount was so added, such amount shall be subtracted from such 
account for such 15th year and included in gross income for such 15th 
year.''
    Par. (8). Pub. L. 101-239, Sec. 7816(n)(6), inserted at end ``The 
limitations on consolidation contained in section 1503(c) shall not 
apply to the deduction allowed under paragraph (1).''
    Par. (9). Pub. L. 101-239, Sec. 7816(n)(5), added par. (9). Former 
par. (9) redesignated (10).
    Pub. L. 101-239, Sec. 7816(n)(4), added subpar. (C).
    Par. (10). Pub. L. 101-239, Sec. 7816(n)(5), redesignated par. (9) 
as (10).


                    Effective Date of 1989 Amendment

    Amendment by Pub. L. 101-239 effective, except as otherwise 
provided, as if included in the provision of the Technical and 
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such 
amendment relates, see section 7817 of Pub. L. 101-239, set out as a 
note under section 1 of this title.


                             Effective Date

    Section 6077(c) of Pub. L. 100-647 provided that: ``The amendments 
made by this section [enacting this section] shall apply to taxable 
years beginning after December 31, 1987.''
