Ezel / IRS Rulings / 1312031
Chief Counsel Advice 1312031 Released March 22, 2013 Advice

CCA 1312031: deficiency reserves count toward the statutory reserve cap

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This page covers one taxpayer's ruling from 2013, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2013
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, 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 advised that deficiency reserves included in an insurance contract's statutory reserve should be included when applying the maximum financial statement reserve limitation. The advice followed the Internal Revenue Manual while a notice was pending. The IRS instructed the agent not to make adjustments for deficiency reserves under the stated comparison to the statutory reserve.

Ruling snapshot

  • Question: Should deficiency reserves be included when applying the maximum reserve limitation?
  • Outcome: Advice given, the deficiency reserves count toward the statutory reserve cap.
  • Key authorities: IRC § 807; Internal Revenue Manual § 4.42.4.6.3

Full text (IRS public release)

ID: CCA-1213130-12 Number: 201312031
Release Date: 3/22/2013
Office: -----------------
UILC: 807.00-00, 807.03-00

From: ------------------
Sent: Friday, July 13, 2012 12:18 PM
To: -------------------------
Cc:
Subject: RE: Guidance Question ---------

A Notice is pending (but not necessarily "imminent"). In the meantime, please follow the IRM
which, buried in 4.42.4.6.3, states:

  However, in the comparison to the statutory reserve, any deficiency reserve included in the
  contract’s statutory reserve is allowed to be included for purposes of the maximum FPR
  limitation.

In other words, according to the IRM the stat cap includes deficiency reserves. Please tell the
Agent not to make any adjustments for deficiency reserves. Also, you may want to contact ------
-------------------- of the Insurance IPG.

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