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TITLE 26-INTERNAL REVENUE CODE ing deposits and assessments) does not equal or exceed $1,100,000, then in determining the statutory underwriting income or loss for the taxable year there shall be allowed an addi- tional deduction of $6,000; except that if such gross amount exceeds $500,000, such addition- al deduction shall be equal to 1 percent of the amount by which $1,100,000 exceeds such gross amount. (2) Limitation The amount of the deduction allowed under paragraph (1) shall not exceed the statutory underwriting income for the taxable year, computed without regard to any deduction under this subsection or section 824(a). (Added Pub. L. 87-834, § 8(c), Oct. 16, 1962, 76 Stat. 992, and amended Pub. L. 91-172, title IX, § 907(c)(2)(B), Dec. 30, 1969, 83 Stat. 717.) PRIOR PROVISIONS A prior section 623, act Aug. 16, 1954, ch. 736, 68A Stat. 263, which defined "net premiums" and "divi- dends to policyholders", was redesignated section 822(f) of this title by section 8(b)(4) of Pub. L. 87-834. AMENDMENTS 1969-Subsec. (b)(1). Pub. L. 91-172 provided that section 844 of this title be excepted from the nonde- duction operating loss provision of section 172 of this title. ErcTIvE DATE oF 1969 AMENDMEN'r Amendment to subsec. (b)(1) by Pub. L. 91-172 appli- cable with respect to losses incurred in taxable year beginning after Dec. 31, 1962, but not affecting any tax liability for any taxable year beginning before Jan. 1. 1967, see section 907(d) of Pub. L. 91-172, set out as an Effective Date of 1969 Amendment note under sec- tion 805 of this title. EFFECTIVE DATE Section applicable with respect to taxable years be- ginning after Dec. 31, 1962, see section 8(h) of Pub. L. 87-834, set out as an Effective Date of 1962 Amend- ment note under section 821 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 821 of this title. § 824. Adjustments to provide protection against losses (a) Allowance of deduction (1) In general In determining the statutory underwriting income or loss for any taxable year there shall be allowed as a deduction the sum of- (A) an amount equal to 1 percent of the losses Incurred during the taxable year (as determined under section 832(b)(5)), plus (B) an amount equal to 25 percent of the underwriting gain for the taxable year, plus (C) if the concentrated windstorm, etc., premium percentage for the taxable year exceeds 40 percent, an amount determined by applying so much of such percentage as exceeds 40 percent to the underwriting gain for the taxable year. For purposes of this paragraph, the term "un- derwriting gain" means statutory underwrit- ing income, computed without any deduction under this subsection. (2) Special rule for companies having concentrated windstorm, etc., risks For purposes of paragraph (1)(C), the term "concentrated windstorth, etc., premium per- centage" means, with respect to any taxable year, the percentage obtained by dividing- (A) the amount of the premiums earned on insurance contracts during the taxable year (as defined in section 832(b)(4)), to the extent attributable to insuring against losses arising, either in any one State or within 200 miles of any fixed point selected by the taxpayer, from windstorm, hall, flood, earthquake, or similar hazards, by (B) the amount of the premiums earned on insurance contracts during the taxable year (as so defined). (b) Protection against loss account Each insurance company subject to the tax imposed by section 821(a) for any taxable year shall, for purposes of this part, establish and maintain a protection against loss account. (c) Additions to account There shall be added to the protection against loss account for each taxable year an amount equal to the amount allowable as a de- duction for the taxable year under subsection (a)(1). (d) Subtractions (1) Annual substractions After applying subscction (c), there shall be subtracted for the taxable year from the pro- tection against loss account- (A) first, an amount equal to the excess (if any) of the deduction allowed under sub- section (a) for the taxable year over the un- derwriting gain (within the meaning of sub- section (a)(1)) for the taxable year, (B) then, the amount (if any) by which- (i) the sum of the investment loss for such year and the statutory underwriting loss (reduced by the amount referred to in subparagraph (A)) for such year, exceeds (ii) the sum of the statutory underwrit- ing income for such taxable year and the taxable investment income for such tax- able year, (C) next (in the order in which the losses occurred), amounts equal to the unused loss carryovers to such year, (D) next, any amount remaining which was added to the account for the fifth pre- ceding taxable year, minus one-half of the amount remaining in the account for such taxable year which was added by reason of subsection (a)(1)(B), and (E) finally, the amount by which the total amount in the account exceeds which ever of the following Is the greater: (1) 10 percent of premiums earned on in- surance contracts during the taxable year (as defined in section 832(b)(4)) less divi- dends to policyholders (as defined in sec- tion 832(c)(11)), or (ii) the total amount in the account at the close of the preceding taxable year. (2) Rules for ceiling on protection against loss ac- count For purposes of paragraph (1)(E), the total amount in the account shall be determined- § 824 Page 526