CCA 200036005: Insurers withdraw advance premium accounting applications

Plain-English summary

Two affiliated insurance taxpayers had applied to change how they accounted for premiums billed before policy inception. They withdrew those applications after final section 832 regulations provided an automatic change procedure for advance premiums. This Chief Counsel memorandum notified the district director of the withdrawals. It also stated that, on the taxpayers' representation about their accounting methods, the IRS generally would not require an earlier year change if they later used the regulatory procedure, subject to the listed exceptions. The memorandum made no ruling approving their withdrawn applications.

Ruling snapshot

• Question: What happened to the taxpayers' applications to change advance premium accounting?
• Outcome: Withdrawn applications; the memorandum records a conditional statement about earlier year changes.
• Key authorities: IRC § 832; Treas. Reg. § 1.832-4(a)(11)(ii); Rev. Proc. 99-49.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
I N T E R N AL R E V E N U E S E R V I C E WASHINGTON, D.C. 20224

March 27, 2000
Number: 200036005
Release Date: 9/8/2000
UIL No. 832.05-00
CAM-102770-97

MEMORANDUM FOR DISTRICT DIRECTOR, MICHIGAN DISTRICT Attn: Chief, Examination Division

FROM: Senior Technician Reviewer, CC:DOM:FI&P:4

SUBJECT: Withdrawal of Form 3115, Application for Change in
Accounting Method
CAM-102770-97, 102772-97

LEGEND:

Taxpayer 1 =

Taxpayer 2 =

Parent =

This is to notify you, in accordance with § 8.07(2)(a) of Rev. Proc. 2000-1, 2000-1 I.R.B. 4, 33, that Taxpayer 1 and Taxpayer 2 (referred to collectively as “Taxpayers”) have withdrawn their applications for a change in accounting method. Any legal analysis and conclusions contained herein are not binding upon Examination or Appeals. This document is not to be cited as precedent.

Taxpayers are members of an affiliated group that files a consolidated return.
Parent is the parent corporation of the affiliated group.

Taxpayers requested, effective for the taxable year ended December 31, 1997, to change their method of accounting for premiums billed in advance of policy inception (“advance premiums”) on business written by Taxpayer 1 and reinsured by Taxpayer 2. Taxpayers have informed us that, as a result of TD 8857, 2000-4 I.R.B. 365, promulgating final regulations under § 832 of the Internal Revenue Code, they have decided to withdraw their applications for a change in accounting method. TD 8857 provides an automatic change procedure for advance premiums for the taxable year ending December 31, 2000.

2
CAM-111607-98

Taxpayers have represented that their methods of accounting for determining premiums were not “issue[s] under consideration within the meaning of section 3.09 of Rev. Proc. 99-49 as of January 5, 2000.” Under this representation, if Taxpayers change their accounting method for advance premiums, as provided in § 1.832- 4(a)(11)(ii) of the Income Tax Regulations, the Service will not, except as provided in § 7.02 of Rev. Proc. 99-49, 1999-52 I.R.B. 725, 735, or in the APPENDIX of Rev. Proc. 99-49, require Taxpayers to change their method of accounting for this item for a taxable year prior to the year of change.

Please direct your questions concerning this matter to Branch 4, (202) 622- 3970.

/S/
Donald J. Drees, Jr.

cc: