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TITLE 26-INTERNAL REVENUE CODE except that the deduction allowable for the taxable year under this paragraph shall not exceed the taxable income for the taxable year computed without regard to this para- graph or to any carry-back of a net operating loss. For purposes of this paragraph, the amount required by State law or regulation to be so set aside in any taxable year shall not exceed bO percent of premiums earned on in- surance contracts (as defined in subsection (b)(4)) with respect to mortgage guaranty in- surance for such year. For purposes of this subsection, all amounts shall be taken into ac- count on a first-in-time basis. The computa- tion and deduction under this section of losses incurred (including losses resulting from adverse economic cycles) shall not be af- fected by the provisions of this subsection. For purposes of this subsection, the terms "preceding taxable years" and "preceding taxable year" shall not include taxable years which began before January 1, 1967. (2) Purchase of bonds The deduction under paragraph (1) shall be allowed only to the extent that tax and loss bonds are purchased in an amount equal to the tax benefit attributable to such deduc- tion, as determined under regulations pre- scribed by the Secretary, on or before the date that any taxes (determined without regard to this subsection) due for the taxable year for which the deduction is allowed are due to be paid, as if no election to make in- stallment payments under section 6152 is made. If a deduction would be allowed but for the fact that tax and loss bonds were not timely purchased, such deduction shall be al- lowed to the extent such purchases are made within a reasonable time, as determined by the Secretary, if all interest and penalties, computed as if this sentence did not apply, are paid. (3) Mortgage guaranty account Each company which writes mortgage guar- anty insurance shall, for purposes of this part, establish and maintain a mortgage guar- anty account. (4) Additions to account There shall be added to the mortgage guar- anty account for each taxable year an amount equal to the amount allowed as a de- duction for the taxable year under paragraph (1). (5) Subtractions from account and Inclusion in gross income After applying paragraph (4), there shall be subtracted for the taxable year from the mortgage guaranty account and included in gross income- (A) the amount (if any) remaining which was added to the account for the tenth pre- ceding taxable year, and (B) the excess (if any) of the aggregate amount in the mortgage guaranty account over the aggregate amount in the reserve referred to in paragraph (1)(A). For pur- poses of determining such excess, the aggre- gate amount in the mortgage guaranty ac- count shall be determined after applying subparagraph (A), and the aggregate amount in the reserve referred to in para- graph (1)(A) shall be determined by disre- garding any amounts remaining in such re- serve added for taxable years beginning before January 1, 1967, (C) an amount (if any) equal to the net operating loss for the taxable year comput- ed without regard to this subparagraph, and (D) any amount improperly subtracted from the account under subparagraph (A), (B), or (C) to the extent that tax and loss bonds were redeemed with respect to such amount. If a company liquidates or otherwise termi- nates its mortgage guaranty insurance busi- ness and does not transfer or distribut., such business in an acquisition of assets referred to in section 381(a), the entire amount remain- ing in such account shall be subtracted. Except in the case where a company transfers or distributes its mortgage guaranty insur- ance in an acquisition of assets referred to in section 381(a), if the company is not subject to the tax tmposed by section 831 for any tax- able year, the entire amount in the account at the close of the preceding taxable year shall be subtracted from the account in such pre- ceding taxable year. (6) Lease guaranty insurance; insurance of state and local obligations In the case of any taxable year beginning after December 31, 1970, the provisions of this subsection shall also apply in all respects to a company which writes lease guaranty in- surance or insurance on obligations the inter- est on which is excludable from gross income under section 103. In applying this subsection to such a company, any reference to mort- gage guaranty insurance contained in this section shall be deemed to be a reference also to lease guaranty insurance and to insurance on obligations the interest on which is exclud- able from gross income under section 103; and in the case of insurance on obligations the in- terest on which is excludable from gross income under section 103, the references in paragraph (1) to "losses resulting from ad- verse economic cycles" include losses from de- clining revenues related to such obligations (as well as losses resulting from adverse eco- nomic cycles), and the time specified in sub- paragraph (A) of paragraph (5) shall be the twentieth preceding taxable year. (Aug. 16, 1954, ch. 736, 68A Stat. 264; Mar. 13, 1956, ch. 83, § 3(b), 70 Stat. 48; Oct. 16, 1962, Pub. L. 87-834, §8(e)(2)-(5), 76 Stat. 997, 998; Feb. 26, 1964, Pub. L. 88-272, title II, § 228(c), 78 Stat. 99; Nov. 13, 1966, Pub. L. 89-809, title I, § 104(i)(7), 80 Stat. 1562; Jan. 2, 1968, Pub. L. 90-240, § 5(a)-(c), 81 Stat. 776, 777; Oct. 26, 1974, Pub. L. 93-483, § 5, 88 Stat. 1458; Oct. 4, 1976, Pub. L. 94-455, title XIX, §§ 1901(a)(108), (b)(1)(T), (U), 1906(b)(13)(A), 90 Stat. 1782, 1792, 1834.) AMENDMENTS 1976-Subsec. (b)(1), (6). Pub. L. 94-455, § 1901(a)(108), substituted "Association" for "Conven- tion", Subsec. (c)(5)(A). Pub. L. 94-455, § 1901(b)(1)(T), struck out "or to the deductions provided in section Page 532 9832