CCA 201048032: IRS notes that section 831(c) addresses the test for non-life insurers

Number

201048032

Outcome

Advice

Document type

Chief Counsel Advice

IRS subject

Life Insurance Company Defined

Topics

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2010, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.

About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.

View official IRS release (PDF)

Plain-English summary

Chief Counsel Advice addresses the test for determining whether a non-life insurance company qualifies as an insurance company for federal tax purposes. The memorandum quotes language stating that the stricter “greater than half” test in IRC § 816 applies to life insurance companies, while the “primary and predominant business activity” test in Treasury Regulation § 1.801-3(a)(1) applies to non-life insurers. It then points out that the 2004 Pension Funding Equity Act added IRC § 831(c) to address that issue. The memorandum asks that this information be circulated as necessary.

Ruling snapshot

Question: Which tax-law test applies when determining whether a non-life insurance company qualifies as an insurance company?
Outcome: advice given
Key authorities: IRC §§ 801, 816, and 831(c); Treas. Reg. § 1.801-3(a)(1); Rev. Rul. 68-27.

Full text (IRS public release)

ID: CCA-420131-10 Number: 201048032
Release Date: 12/3/2010
Office: --------------
UILC: 816.00-00

From: ------------------
Sent: April 20, 2010
To: --------------------
Cc: --------------------------------------
Subject: 501(c)(15)(------)

The attached determination letter was in Tax Notes yesterday. The letter contained the following language:

The Internal Revenue Service has not ruled on whether the more stringent "greater than half" test set forth in I.R.C. 816 applies to an insurance company other than a life insurance company. Instead, to determine whether a non-life insurance company qualifies as an insurance company for tax purposes, the "primary and predominant business activity" test set forth in Treas. Reg. 1.801-3(a)(1) applies. See Rev. Rul. 68- 27, 1968-1 C.B. 315.

In fact, the 2004 Pension Funding Equity Act added section 831(c) to the Code to address exactly this point. Please disseminate this information as necessary.

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