Panel Discussion Tax Considerations for the Life Insurance Actuary

59 Pages·2017·0.46 MB·English

Session 06PD: Tax Considerations for the Life Insurance Actuary

Moderator:
Brian Prast FSA,MAAA

Presenters:
Graham Green
Brian McBride FSA,MAAA
Brian Prast FSA,MAAA

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2017 Valuation Actuary
Symposium
Moderator:
Brian Prast, FSA, MAAA
Presenters:
Graham R. Green,JD, LLM
Brian McBride,FSA, MAAA
Brian Prast, FSA, MAAA
Tax Considerations for the Life Actuary
August 28, 2017
Disclaimer
• This presentation is provided solely for the purpose of enhancing knowledge on
tax matters. It does not provide tax advice to any taxpayer because it does not
take into account any specific taxpayer’s facts and circumstances.
• These slides are for educational purposes only and are not intended, and should
not be relied upon, as accounting advice.
• Presentations are intended for educational purposes only and do not replace
independent professional judgment. Statements of fact and opinions expressed
are those of the participants individually and, unless expressly stated to the
contrary, are not the opinion or position of the Society of Actuaries, its
cosponsors, or its committees. The Society of Actuaries does not endorse or
approve, and assumes no responsibility for, the content, accuracy or completeness
of the information presented. Attendees should note that sessions are audio-
recorded and may be published in various media, including print, audio and video
formats without further notice.
• The views expressed by the presenters are not necessarily those of KPMG, Kansas
City Life Insurance Company, MassMutual Financial Group, or of Eversheds
Sutherland (US) LLP.
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Agenda
• Tax policy and the regime for taxing life insurance companies
• Basic Tax Reserve Topics
• Additional Reserve Topics
• Principle-Based Reserves and 2017 CSO:
Tax Reserve Issues
• IRS Examination Process
• Other Topics
• Tax Authorities & Resources
• Tax Reform
• Summary
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Tax policy and the regime
for taxing life insurance
companies
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Principles of Tax Policy
• Equity
• Horizontal Equity
• Vertical Equity
• Efficiency
• Administrability
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Regime of Taxing Life Insurers
• Life Insurance Company Taxable Income (LICTI) subject to
tax under § 801 at corporate rates
• LICTI
• Life Insurance Gross Income minus
• Life Insurance Deductions
• Life Insurance Gross Income
• Premiums plus
• Decreases in reserves (§ 803(a)(2))
• Life Insurance Deductions
• Death benefits plus
• Increases in reserves (§ 805(a)(2))
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Regime for Taxing Life Insurers –
Methods of Accounting
• Taxpayers generally
• General Rule § 446(a): Start with book (e.g., GAAP)
• Tax Override § 446(b): Clear reflection of income
• Insurers specifically § 811(a)
• Start with book/statutory accounting consistent with NAIC
Annual Statement
• Modify for tax purposes
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Basic Tax Reserve Topics
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Statutory vs. Tax Reserves
• Statutory Reserves
• Solvency
• Minimum Standards
• Movement towards Principle-Based Reserves (PBR)
- AG43/VM-21 reserves for Variable Annuities
- VM-20 for Life
• Tax Reserves
• Start with statutory reserve assumptions
• Adjust as required by Internal Revenue Code (IRC)
• Final tax reserve is less than or equal to statutory reserve
• This “inefficiency” results in higher taxable income
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