Page 530

TITLE 26-INTERNAL REVENUE CODE deposits not required for losses, expenses, (or establish- ment of reserves is returned or credited to the policy- holder on cancellation or expiration of the policy for provisions which authorized imposition of tax on those companies which issued policies for which the sole premium charged is a single deposit which (except for such deduction of underwriting costs as may be provided) is refundable on cancellation or expiration of the policy. Subsec. (c). Pub. L. 87-834, § 8(f), added subsec. (c) and redesignated former subsec. (c) as (d). Subsec. d). Pub. L. 87-834, § 8(f), redesignated former subsec. (c) as (d). EFFECTIVE DATE OF 1976 AMENDMENT Amendment of subsec. (a) by section 1901(a)(107) of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94- 455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. EFFECTIVE DATE OF 1966 AMENDMENT Amendment by Pub. L. 89-809 applicable with re- spect to taxable years beginning after Dec. 31, 1966, see section 104(n) of Pub. L. 89-809, set out as an Ef- fective Date of 1966 Amendment note under section 11 of this title. EFFECTIVE DATE OF 1962 AMENDMENT Amendment of subsec. (a) by Pub. L. 87-834 applica- ble with respect to taxable years beginning after Dec. 31, 1962, see section 8(h) of Pub. L. 87-834, set out as an Effective Date of 1962 Amendment note under sec- tion 821 of this title. CROSS REFERENCES Alternative tax, see section 1201 of this title. Burial or funeral benefit insurance company as tax- able under this section or section 821, see section 801 of this title. Consolidated returns, see section 1503 of this title. Doubling of tax rates on citizens and corporations of certain foreign countries, see section 891 of this title. Tax on mutual insurarce companies to which part II applies, see section 821 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 801, 815, 821, 823, 832, 841, 891, 1201 of this title. § 832. Insurance company taxable income (a) Definition of taxable income In the case of an insurance company subject to the tax imposed by section 831, the term "taxable income" means the gross income as de- fined in subsection (b)(1) less the deductions al- lowed by subsection (c). (b) Definitions In the case of an insurance company subject to the tax imposed by section 831- (1) Gross income The term "gross income" means the sum of- (A) the combined gross amount earned during the taxable year, from investment income and from underwriting income as provided in this subsection, computed on the basis of the underwriting and Invest- ment exhibit of the annual statement ap- proved by the National Association of In- surance Commissioners, (B) gain during the taxable year from the sale or other disposition of property, and (C) all other items constituting gross income under subchapter B, except that, in the case of a mutual fire insurance compa- ny described in section 831(a)(3)(A), the amount of single deposit premiums paid to such company shall not be included in gross income, (D) in the case of a mutual fire or flood insurance company described in section 831(a)(3)(B), an amount equal to 2 percent of the premiums earned on insurance con- tracts during the taxable year with respect to policies described in section 831(a)(3)(B) after deduction of premium deposits re- turned or credited during the same taxable year; and CE) in the case of a company which writes mortgage guaranty insurance, the amount required by subsection (e)(5) to be subtract- ed from the mortgage guaranty account. (2) Investment income The term "investment income" means the .gross amount of income earned during the taxable year from interest, dividends, and rents, computed as follows: To all interest, dividends, and rents received during the tax- able year, add interest, dividends, and rents due and accrued at the end of the taxable year, and deduct all interest, dividends, and rents due and accrued at the end of the pre- ceding taxable year. (3) Underwriting income The term "underwriting income" means the premiums earned on insurance contracts during the taxable year less losses incurred and expenses incurred. (4) Premiums earned The term "premiums earned on insurance contracts during the taxable year" means an amount computed as follows: (A) From the amount of gross premiums written on insurance contracts during the taxable year, deduct return premiums and premiums paid for reinsurance. (B) To the result so obtained, add un- earned premiums on outstanding business at the end of the preceding taxable year and deduct unearned premiums on out- standing business at the end of the taxable year. For purposes of this subsection, unearned premiums shall include life insurance re- serves, as defined in section 801(b), pertaining to the life, burial, or funeral insurance, or an- nuity business of an insurance company sub- ject to the tax imposed by section 831 and not qualifying as a life insurance company under section 801. For purposes of this subsection, unearned premiums of mutual fire or flood insurance companies described in section 831(a)(3)(B) means (with respect to the poli- cies described in section 831(a)(3)(B)) the amount of unabsorbed premium deposits which the company would be obligated to return to its policyholders at the close of the taxable year if all of its policies were termi- nated at such time; and the determination of such amount shall be based on the schedule of unabsorbed premium deposit returns for each such company then in effect. Premiums paid by the subscriber of a mutual flood in- surance company referred to in paragraph (3) of section 831(a) shall be treated, for pur- § 832 Page 530