26 USC 815 - Distributions to shareholders from pre-1984 policyholders surplus account

(a) General rule 
In the case of a stock life insurance company which has an existing policyholders surplus account, the tax imposed by section 801 for any taxable year shall be the amount which would be imposed by such section for such year on the sum of
(1) life insurance company taxable income for such year (but not less than zero), plus
(2) the amount of direct and indirect distributions during such year to shareholders from such account.

For purposes of the preceding sentence, the term indirect distribution shall not include any bona fide loan with arms-length terms and conditions.

(b) Ordering rule 
For purposes of this section, any distribution to shareholders shall be treated as made

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(1) first out of the shareholders surplus account, to the extent thereof,
(2) then out of the policyholders surplus account, to the extent thereof, and
(3) finally, out of other accounts.
(c) Shareholders surplus account 

(1) In general 
Each stock life insurance company which has an existing policyholders surplus account shall continue its shareholders surplus account for purposes of this part.
(2) Additions to account 
The amount added to the shareholders surplus account for any taxable year beginning after December 31, 1983, shall be the excess of
(A) the sum of
(i) the life insurance companys taxable income (but not below zero),
(ii) the small life insurance company deduction provided by section 806, and
(iii) the deductions for dividends received provided by sections 243, 244, and 245 (as modified by section 805 (a)(4)) and the amount of interest excluded from gross income under section 103, over

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(B) the taxes imposed for the taxable year by section 801 (determined without regard to this section).

If for any taxable year a tax is imposed by section 55, under regulations proper adjustments shall be made for such year and all subsequent taxable years in the amounts taken into account under subparagraphs (A) and (B) of this paragraph and subparagraph (B) of subsection (d)(3).

(3) Subtractions from account 
There shall be subtracted from the shareholders surplus account for any taxable year the amount which is treated under this section as distributed out of such account.
(d) Policyholders surplus account 

(1) In general 
Each stock life insurance company which has an existing policyholders surplus account shall continue such account.
(2) No additions to account 
No amount shall be added to the policyholders surplus account for any taxable year beginning after December 31, 1983.
(3) Subtractions from account 
There shall be subtracted from the policyholders surplus account for any taxable year an amount equal to the sum of
(A) the amount which (without regard to subparagraph (B)) is treated under this section as distributed out of the policyholders surplus account, and
(B) the amount by which the tax imposed for the taxable year by section 801 is increased by reason of this section.
(e) Existing policyholders surplus account 
For purposes of this section, the term existing policyholders surplus account means any policyholders surplus account which has a balance as of the close of December 31, 1983.
(f) Other rules applicable to policyholders surplus account continued 
Except to the extent inconsistent with the provisions of this part, the provisions of subsections (d), (e), (f), and (g) of section 815 (and of sections 819 (b), 6501 (c)(6), 6501 (k), 6511 (d)(6), 6601 (d)(3), and 6611 (f)(4)) as in effect before the enactment of the Tax Reform Act of 1984 are hereby made applicable in respect of any policyholders surplus account for which there was a balance as of December 31, 1983.
(g) Special rules applicable during 2005 and 2006 
In the case of any taxable year of a stock life insurance company beginning after December 31, 2004, and before January 1, 2007
(1) the amount under subsection (a)(2) for such taxable year shall be treated as zero, and
(2) notwithstanding subsection (b), in determining any subtractions from an account under subsections (c)(3) and (d)(3), any distribution to shareholders during such taxable year shall be treated as made first out of the policyholders surplus account, then out of the shareholders surplus account, and finally out of other accounts.