Accountant/Tax Attorney Dialogue on Internal Revenue Code Deference to the NAIC: Part IV: Insurance Tax Accounting Issues

Note from the Editors: Welcome to the fourth and final part of a significant journey. At the outset, it was anticipated to be our most ambitious dialogue yet. Our goal was to explore the important and evolving topic of the extent to which the tax law defers to the NAIC in taxing life insurance companies.

Originally anticipated to be a three-part series, it was expanded to four parts due to the breadth of the topics to be covered under “Part III: Insurance Classification Tax Issues” and “Part IV: Insurance Tax Accounting Issues.” “Part I: Tax Reserves” appeared in our June 2015 issue and “Part II: Policyholder Tax Issues” appeared in our October 2015 Issue and “Part III: Insurance Classification Tax Issues” appeared in our March 2016 issue. 

Peter Winslow [MODERATOR]: This is the fourth, and final, installment of our extended dialogue on the issue of federal tax law’s deference to insurance regulatory rules. We have covered in some depth the deference issues as they relate to tax reserves, policyholder tax issues, and insurance classification tax issues. Now we will consider this question: to what extent does NAIC annual statement accounting govern for tax purposes for items other than insurance reserves? In this last dialogue we plan to talk about accounting for income items (premiums, investment income and hedging), as well as other expenses not included in insurance reserves. As in the prior dialogues, I will start with John Adney and Susan Hotine to give us an historical perspective on these issues. John, could you begin this discussion by describing how the 1959 Act and its interpretation dealt with the tax accounting for premiums?


Taxing Times, Vol. 12, Issue 2 (June 2016)