r/title-26-INTERNAL-REVENUE-CODE wiki — defined terms

“undistributed personal holding company income” applies throughout its part

the term “undistributed personal holding company income” means the taxable income of a personal holding company adjusted in the manner provided in subsections (b), (c), and (d), minus the dividends paid deduction as defined in section 561. In the case of a personal holding company which is a foreign corporation, not more than 10 percent in value of the outstanding stock of which is owned (within the meaning of section 958(a)) during the last half of the taxable year by United States persons,

“deficiency dividends” applies in that section

the term “deficiency dividends” means the amount of the dividends paid by the corporation on or after the date of the determination and before filing claim under subsection (e), which would have been includible in the computation of the deduction for dividends paid under section 561 for the taxable year with respect to which the liability for personal holding company tax exists, if distributed during such taxable year. No dividends shall be considered as deficiency dividends for purposes of subsection (a) unless distributed within 90 days after the determination.

“determination” applies in that section

the term “determination” means— (1) a decision by the Tax Court or a judgment, decree, or other order by any court of competent jurisdiction, which has become final; (2) a closing agreement made under section 7121; or (3) under regulations prescribed by the Secretary, an agreement signed by the Secretary and by, or on behalf of, the taxpayer relating to the liability of such taxpayer for personal holding company tax. (d) Deficiency dividends (1) Definition For purposes of this section,

“publicly offered REIT” applies in that section

the term “publicly offered REIT” means a real estate investment trust which is required to file annual and periodic reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

“bank” applies in that section

the term “bank” means a bank or trust company incorporated and doing business under the laws of the United States (including laws relating to the District of Columbia) or of any State, a substantial part of the business of which consists of receiving deposits and making loans and discounts, or of exercising fiduciary powers similar to those permitted to national banks under authority of the Comptroller of the Currency, and which is subject by law to supervision and examination by State or Federal authority having supervision over banking institutions. Such term also means a domestic building and loan association.

“business development corporation” applies in that section

the term “business development corporation” means a corporation which was created by or pursuant to an act of a State legislature for purposes of promoting, maintaining, and assisting the economy and industry within such State on a regional or statewide basis by making loans to be used in trades and businesses which would generally not be made by banks within such region or State in the ordinary course of their business (except on the basis of a partial participation), and which is operated primarily for such purposes.

“assumed liabilities” applies throughout its chapter

the term “assumed liabilities” means any liability of the common trust fund assumed by any regulated investment company in connection with the transfer referred to in paragraph (1)(A). (C) Assumption For purposes of this paragraph, in determining the amount of any liability assumed, the rules of section 357(d) shall apply. (4) Common trust fund must meet diversification rules This subsection shall not apply to any common trust fund which would not meet the requirements of section 368(a)(2)(F)(ii) if it were a corporation.

“common trust fund” applies in that section

the term “common trust fund” means a fund maintained by a bank— (1) exclusively for the collective investment and reinvestment of moneys contributed thereto by the bank in its capacity— (A) as a trustee, executor, administrator, or guardian, or (B) as a custodian of accounts— (i) which the Secretary determines are established pursuant to a State law which is substantially similar to the Uniform Gifts to Minors Act as published by the American Law Institute, and (ii) with respect to which the bank establishes, to the satisfaction of the Secretary, that it has duties and responsibilities similar to duties and responsibilities of a trustee or guardian; and (2) in conformity with the rules and …

“bank” applies in that section

The term “bank” means any bank (as defined in section 581). (B) Banking business of United States branch of foreign corporation The term “bank” also includes any corporation to which subparagraph (A) would apply except for the fact that it is a foreign corporation. In the case of any such foreign corporation, this section shall apply only with respect to loans outstanding the interest on which is effectively connected with the conduct of a banking business within the United States.

“disqualification year” applies in that section

The term “disqualification year” means, with respect to any bank, the 1st taxable year beginning after December 31, 1986 , for which such bank was a large bank if such bank maintained a reserve for bad debts for the preceding taxable year. (C) Election made by each member In the case of a parent-subsidiary controlled group, any election under this section shall be made separately by each member of such group.

“equity” applies in that section

The term “equity” means the equity of the bank as determined for Federal regulatory purposes. (C) Coordination with estimated tax payments For purposes of applying section 6655(e)(2)(A)(i) with respect to any installment, the determination under subparagraph (B) of whether an adjustment is required to be taken into account under subparagraph (A) shall be made as of the last day prescribed for payment of such installment.

“financially troubled bank” applies in that section

the term “financially troubled bank” means any bank if, for the taxable year, the nonperforming loan percentage of such bank exceeds 75 percent. (iv) Nonperforming loan percentage For purposes of clause (iii),

“nonperforming loan” applies in that section

The term “nonperforming loan” means any loan which is considered to be nonperforming by the primary Federal regulatory agency with respect to the bank. (II) Equity

“nonperforming loan percentage” applies in that section

the term “nonperforming loan percentage” means the percentage determined by dividing— (I) the sum of the outstanding balances of nonperforming loans of the bank as of the close of each quarter of the taxable year, by (II) the sum of the amounts of equity of the bank as of the close of each such quarter. In the case of a bank which is a member of a parent-subsidiary controlled group for the taxable year, the preceding sentence shall be applied with respect to such group. (v) Other definitions For purposes of this subparagraph— (I) Nonperforming loans

“parent-subsidiary controlled group” applies in that section

The term “parent-subsidiary controlled group” means any controlled group of corporations described in section 1563(a)(1). In determining the average adjusted bases of assets held by such a group, interests held by one member of such group in another member of such group shall be disregarded. (B) Disqualification year

“mutual savings bank” applies throughout its part

the term “mutual savings bank” includes any bank— (1) which has capital stock represented by shares, and (2) which is subject to, and operates under, Federal or State laws relating to mutual savings bank.

“affiliated group” applies in that section

the term “affiliated group” has the meaning assigned to such term by section 1504(a); except that (i) the phrase “more than 50 percent” shall be substituted for the phrase “at least 80 percent” each place it appears in section 1504(a), and (ii) all corporations shall be treated as includible corporations (without any exclusion under section 1504(b)). (2) Nonqualifying loans

“applicable excess reserves” applies throughout its chapter

the term “applicable excess reserves” means the excess (if any) of— (i) the balance of the reserves described in subsection (c)(1) (other than the supplemental reserve) as of the close of the taxpayer’s last taxable year beginning before January 1, 1996 , over (ii) the lesser of— (I) the balance of such reserves as of the close of the taxpayer’s last taxable year beginning before January 1, 1988 , or (II) the balance of the reserves described in subclause (I), reduced in the same manner as under section 585(b)(2)(B)(ii) on the basis of the taxable years described in clause (i) and this clause.

“loan” applies in that section

The term “loan” means debt, as the term “debt” is used in section 166. (4) Treatment of interests in REMIC’s A regular or residual interest in a REMIC shall be treated as a qualifying real property loan; except that, if less than 95 percent of the assets of such REMIC are qualifying real property loans (determined as if the taxpayer held the assets of the REMIC), such interest shall be so treated only in the proportion which the assets of such REMIC consist of such loans.

“nonqualifying loan” applies in that section

The term “nonqualifying loan” means any loan which is not a qualifying real property loan. (3) Loan

“qualifying real property loan” applies in that section

The term “qualifying real property loan” means any loan secured by an interest in improved real property or secured by an interest in real property which is to be improved out of the proceeds of the loan, but such term does not include— (A) any loan evidenced by a security (as defined in section 165(g)(2)(C)); (B) any loan, whether or not evidenced by a security (as defined in section 165(g)(2)(C)), the primary obligor on which is— (i) a government or political subdivision or instrumentality thereof; (ii) a bank (as defined in section 581); or (iii) another member of the same affiliated group; (C) any loan, to the extent secured by a deposit in or share of the taxpayer; or (D) any loan …

“residential loan” applies in that section

the term “residential loan” means any loan described in clause (v) of section 7701(a)(19)(C) but only if such loan is incurred in acquiring, constructing, or improving the property described in such clause. (D) Base amount For purposes of subparagraph (B), the base amount is the average of the principal amounts of the residential loans made by the taxpayer during the 6 most recent taxable years beginning on or before December 31, 1995 .

“domestic building and loan association” applies in that section

the term “domestic building and loan association” has the meaning given such term by section 7701(a)(19) without regard to subparagraph (C) thereof.

“Federal financial assistance” applies in that section

the term “Federal financial assistance” means— (1) any money or other property provided with respect to a domestic building and loan association by the Federal Savings and Loan Insurance Corporation or the Resolution Trust Corporation pursuant to section 406(f) of the National Housing Act (or under any other similar provision of law), and (2) any money or other property provided with respect to a bank or domestic building and loan association by the Federal Deposit Insurance Corporation pursuant to section 11(f) or 13(c) of the Federal Deposit Insurance Act (or under any other similar provision of law), regardless of whether any note or other instrument is issued in exchange therefor.

“mines” applies throughout its part

the term “mines” includes deposits of waste or residue, the extraction of ores or minerals from which is treated as mining under section 613(c). In any case in which it is ascertained as a result of operations or of development work that the recoverable units are greater or less than the prior estimate thereof, then such prior estimate (but not the basis for depletion) shall be revised and the allowance under this section for subsequent taxable years shall be based on such revised estimate. (b) Special rules (1) Leases In the case of a lease, the deduction under this section shall be equitably apportioned between the lessor and lessee.

“extraction of the ores or minerals from the ground” applies in that section

The term “extraction of the ores or minerals from the ground” includes the extraction by mine owners or operators of ores or minerals from the waste or residue of prior mining. The preceding sentence shall not apply to any such extraction of the mineral or ore by a purchaser of such waste or residue or of the rights to extract ores or minerals therefrom.

“geothermal deposit” applies in that section

the term “geothermal deposit” means a geothermal reservoir consisting of natural heat which is stored in rocks or in an aqueous liquid or vapor (whether or not under pressure). Such a deposit shall in no case be treated as a gas well for purposes of this section or section 613A, and this section shall not apply to a geothermal deposit which is located outside the United States or its possessions. (3) Percentage depletion not to include lease bonuses, etc. In the case of any geothermal deposit, the term “gross income from the property” shall, for purposes of this section, not include any amount described in section 613A(d)(5).

“gross income from the property” applies in that section

The term “gross income from the property” means, in the case of a property other than an oil or gas well and other than a geothermal deposit, the gross income from mining. (2) Mining

“mining” applies in that section

The term “mining” includes not merely the extraction of the ores or minerals from the ground but also the treatment processes considered as mining described in paragraph (4) (and the treatment processes necessary or incidental thereto), and so much of the transportation of ores or minerals (whether or not by common carrier) from the point of extraction from the ground to the plants or mills in which such treatment processes are applied thereto as is not in excess of 50 miles unless the Secretary finds that the physical and other requirements are such that the ore or mineral must be transported a greater distance to such plants or mills. (3) Extraction of the ores or minerals from the ground

“applicable percentage” applies in that section

the term “applicable percentage” means the percentage (not greater than 25 percent) equal to the sum of— (i) 15 percent, plus (ii) 1 percentage point for each whole dollar by which $20 exceeds the reference price for crude oil for the calendar year preceding the calendar year in which the taxable year begins. For purposes of this paragraph,

“barrel” applies in that section

The term “barrel” means 42 United States gallons.

“controlled group of corporations” applies in that section

the term “controlled group of corporations” has the meaning given to such term by section 1563(a), except that section 1563(b)(2) shall not apply and except that “more than 50 percent” shall be substituted for “at least 80 percent” each place it appears in section 1563(a), (ii) a person is a related person to another person if such persons are members of the same controlled group of corporations or if the relationship between such persons would result in a disallowance of losses under section 267 or 707(b), except that for this purpose the family of an individual includes only his spouse and minor children.

“crude oil” applies in that section

The term “crude oil” includes a natural gas liquid recovered from a gas well in lease separators or field facilities. (2) Natural gas

“heavy oil” applies in that section

the term “heavy oil” means domestic crude oil produced from any property if such crude oil had a weighted average gravity of 20 degrees API or less (corrected to 60 degrees Fahrenheit). (G) Average daily marginal production For purposes of this subsection— (i) the taxpayer’s average daily marginal production of domestic crude oil or natural gas for any taxable year shall be determined by dividing the taxpayer’s aggregate marginal production of domestic crude oil or natural gas, as the case may be, during the taxable year by the number of days in such taxable year, and (ii) in the case of a taxpayer holding a partial interest in the production from any property (including any interest held …

“marginal production” applies in that section

The term “marginal production” means domestic crude oil or domestic natural gas which is produced during any taxable year from a property which— (i) is a stripper well property for the calendar year in which the taxable year begins, or (ii) is a property substantially all of the production of which during such calendar year is heavy oil. (E) Stripper well property For purposes of this paragraph,

“natural gas” applies in that section

The term “natural gas” means any product (other than crude oil) of an oil or gas well if a deduction for depletion is allowable under section 611 with respect to such product. (3) Domestic The term “domestic” refers to production from an oil or gas well located in the United States or in a possession of the United States. (4) Barrel

“natural gas sold under a fixed contract” applies in that section

The term “natural gas sold under a fixed contract” means domestic natural gas sold by the producer under a contract, in effect on February 1, 1975 , and at all times thereafter before such sale, under which the price for such gas cannot be adjusted to reflect to any extent the increase in liabilities of the seller for tax under this chapter by reason of the repeal of percentage depletion for gas. Price increases after February 1, 1975 , shall be presumed to take increases in tax liabilities into account unless the taxpayer demonstrates to the contrary by clear and convincing evidence. (B) Regulated natural gas

“qualified natural gas from geopressured brine” applies in that section

The term “qualified natural gas from geopressured brine” means any natural gas— (i) which is determined in accordance with section 503 of the Natural Gas Policy Act of 1978 to be produced from geopressured brine, and (ii) which is produced from any well the drilling of which began after September 30, 1978 , and before January 1, 1984 .

“reference price” applies in that section

the term “reference price” means, with respect to any calendar year, the reference price determined for such calendar year under section 45K(d)(2)(C). (D) Marginal production

“regulated natural gas” applies in that section

The term “regulated natural gas” means domestic natural gas produced and sold by the producer, before July 1, 1976 , subject to the jurisdiction of the Federal Power Commission, the price for which has not been adjusted to reflect to any extent the increase in liability of the seller for tax under this chapter by reason of the repeal of percentage depletion for gas. Price increases after February 1, 1975 , shall be presumed to take increases in tax liabilities into account unless the taxpayer demonstrates the contrary by clear and convincing evidence. (C) Qualified natural gas from geopressured brine

“significant ownership interest” applies in that section

the term “significant ownership interest” means— (A) with respect to any corporation, 5 percent or more in value of the outstanding stock of such corporation, (B) with respect to a partnership, 5 percent or more interest in the profits or capital of such partnership, and (C) with respect to an estate or trust, 5 percent or more of the beneficial interests in such estate or trust. For purposes of determining a significant ownership interest, an interest owned by or for a corporation, partnership, trust, or estate shall be considered as owned directly both by itself and proportionately by its shareholders, partners, or beneficiaries, as the case may be.

“stripper well property” applies in that section

the term “stripper well property” means, with respect to any calendar year, any property with respect to which the amount determined by dividing— (i) the average daily production of domestic crude oil and domestic natural gas from producing wells on such property for such calendar year, by (ii) the number of such wells, is 15 barrel equivalents or less. (F) Heavy oil For purposes of this paragraph,

“nonoperating mineral interests” applies in that section

the term “nonoperating mineral interests” includes only interests which are not operating mineral interests.

“operating mineral interest” applies in that section

the term “operating mineral interest” includes only an interest in respect of which the costs of production of the mineral are required to be taken into account by the taxpayer for purposes of computing the taxable income limitation provided for in section 613, or would be so required if the mine, well, or other natural deposit were in the production stage.

“property” applies in that section

the term “property” means each separate interest owned by the taxpayer in each mineral deposit in each separate tract or parcel of land. (b) Special rules as to operating mineral interests in oil and gas wells or geothermal deposits In the case of oil and gas wells or geothermal deposits— (1) In general Except as otherwise provided in this subsection— (A) all of the taxpayer’s operating mineral interests in a separate tract or parcel of land shall be combined and treated as one property, and (B) the taxpayer may not combine an operating mineral interest in one tract or parcel of land with an operating mineral interest in another tract or parcel of land.

“adjusted exploration expenditures” applies in that section

The term “adjusted exploration expenditures” means, with respect to any property or mine— (A) the amount of the expenditures allowed for the taxable year and all preceding taxable years as deductions under subsection (a) to the taxpayer or any other person which are properly chargeable to such property or mine and which (but for the election under subsection (a)) would be reflected in the adjusted basis of such property or mine, reduced by (B) for the taxable year and for each preceding taxable year, the amount (if any) by which (i) the amount which would have been allowable for percentage depletion under section 613 but for the deduction of such expenditures, exceeds (ii) the amount …

“mining property” applies in that section

The term “mining property” means any property (within the meaning of section 614 after the application of subsections (c) and (e) thereof) with respect to which any expenditures allowed as a deduction under subsection (a)(1) are properly chargeable. (3) Disposal of coal or domestic iron ore with a retained economic interest A transaction which constitutes a disposal of coal or iron ore under section 631(c) shall be treated as a disposition. In such a case, the excess referred to in subsection (d)(1)(B) shall be treated as equal to the gain (if any) referred to in section 631(c).

“owner” applies in that section

the term “owner” means any person who owns an interest in such timber, including a sublessor and a holder of a contract to cut timber. (c) Disposal of coal or domestic iron ore with a retained economic interest In the case of the disposal of coal (including lignite), or iron ore mined in the United States, held for more than 1 year before such disposal, by the owner thereof under any form of contract by virtue of which such owner retains an economic interest in such coal or iron ore, the difference between the amount realized from the disposal of such coal or iron ore and the adjusted depletion basis thereof plus the deductions disallowed for the taxable year under section 272 shall be …

“timber” applies in that section

the term “timber” includes evergreen trees which are more than 6 years old at the time severed from the roots and are sold for ornamental purposes. (b) Disposal of timber In the case of the disposal of timber held for more than 1 year before such disposal, by the owner thereof under any form or type of contract by virtue of which such owner either retains an economic interest in such timber or makes an outright sale of such timber, the difference between the amount realized from the disposal of such timber and the adjusted depletion basis thereof, shall be considered as though it were a gain or loss, as the case may be, on the sale of such timber.

“mineral property” applies in that section

the term “mineral property” has the meaning assigned to the term “property” in section 614(a). (e) Regulations The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.

“electing small business trust” applies in that section

the term “electing small business trust” has the meaning given such term by section 1361(e)(1).

“qualified disability trust” applies in that section

the term “qualified disability trust” means any trust if— (I) such trust is a disability trust described in subsection (c)(2)(B)(iv) of section 1917 of the Social Security Act ( 42 U.S.C. 1396p ), and (II) all of the beneficiaries of the trust as of the close of the taxable year are determined by the Commissioner of Social Security to have been disabled (within the meaning of section 1614(a)(3) of the Social Security Act, 42 U.S.C. 1382c(a)(3) ) for some portion of such year. A trust shall not fail to meet the requirements of subclause (II) merely because the corpus of the trust may revert to a person who is not so disabled after the trust ceases to have any beneficiary who is so disabled.

“beneficiary” applies throughout its part

the term “beneficiary” includes heir, legatee, devisee. (d) Coordination with back-up withholding Except to the extent otherwise provided in regulations, this subchapter shall be applied with respect to payments subject to withholding under section 3406— (1) by allocating between the estate or trust and its beneficiaries any credit allowable under section 31(c) (on the basis of their respective shares of any such payment taken into account under this subchapter), (2) by treating each beneficiary to whom such credit is allocated as if an amount equal to such credit has been paid to him by the estate or trust, and (3) by allowing the estate or trust a deduction in an amount equal to the …

“cash” applies in that section

The term “cash” includes foreign currencies and cash equivalents. (B) Related person (i) In general A person is related to another person if the relationship between such persons would result in a disallowance of losses under section 267 or 707(b). In applying section 267 for purposes of the preceding sentence, section 267(c)(4) shall be applied as if the family of an individual includes the spouses of the members of the family. (ii) Allocation If any person described in paragraph (1)(B) is related to more than one person, the grantor or beneficiary to whom the treatment under this subsection applies shall be determined under regulations prescribed by the Secretary.

“distributable net income” applies throughout its part

the term “distributable net income” means, with respect to any taxable year, the taxable income of the estate or trust computed with the following modifications— (1) Deduction for distributions No deduction shall be taken under sections 651 and 661 (relating to additional deductions). (2) Deduction for personal exemption No deduction shall be taken under section 642(b) (relating to deduction for personal exemptions).

“applicable date” applies in that section

The term “applicable date” means— (A) if no return of tax imposed by chapter 11 is required to be filed, the date which is 2 years after the date of the decedent’s death, and (B) if such a return is required to be filed, the date which is 6 months after the date of the final determination of the liability for tax imposed by chapter 11. (c) Election The election under subsection (a) shall be made not later than the time prescribed for filing the return of tax imposed by this chapter for the first taxable year of the estate (determined with regard to extensions) and, once made, shall be irrevocable.

“qualified revocable trust” applies in that section

The term “qualified revocable trust” means any trust (or portion thereof) which was treated under section 676 as owned by the decedent of the estate referred to in subsection (a) by reason of a power in the grantor (determined without regard to section 672(e)). (2) Applicable date

“electing Settlement Trust” applies in that section

The term “electing Settlement Trust” means a Settlement Trust which has made the election, effective for a taxable year, described in subsection (c). (2) Native Corporation

“Native Corporation” applies in that section

The term “Native Corporation” has the meaning given such term by section 3(m) of the Alaska Native Claims Settlement Act ( 43 U.S.C. 1602(m) ). (3) Settlement Common Stock

“Settlement Common Stock” applies in that section

The term “Settlement Common Stock” has the meaning given such term by section 3(p) of the Alaska Native Claims Settlement Act ( 43 U.S.C. 1602(p) ). (4) Settlement Trust

“Settlement Trust” applies in that section

The term “Settlement Trust” means a trust that constitutes a settlement trust under section 3(t) of the Alaska Native Claims Settlement Act ( 43 U.S.C. 1602(t) ). (5) Sponsoring Native Corporation

“sponsoring Native Corporation” applies in that section

The term “sponsoring Native Corporation” means the Native Corporation which transfers assets to an electing Settlement Trust. (i) Special loss disallowance rule Any loss that would otherwise be recognized by a shareholder upon a disposition of a share of stock of a sponsoring Native Corporation shall be reduced (but not below zero) by the per share loss adjustment factor. The per share loss adjustment factor shall be the aggregate of all contributions to all electing Settlement Trusts sponsored by such Native Corporation made on or after the first day each trust is treated as an electing Settlement Trust expressed on a per share basis and determined as of the day of each such contribution.

“5-percent shareholder” applies in that section

the term “5-percent shareholder” means any person who owns (directly or through the application of section 318(a)) more than 5 percent of the outstanding stock of the corporation which issued such qualified employer securities or of any corporation which is a member of the same controlled group of corporations (within the meaning of section 409( l )(4)) as such corporation. For purposes of the preceding sentence, section 318(a) shall be applied without regard to the exception in paragraph (2)(B)(i) thereof. (C) Cross reference For excise tax on allocations described in subparagraph (A), see section 4979A.

“independent trustee” applies in that section

the term “independent trustee” means any trustee who is not a member of the family (within the meaning of section 2032A(e)(2)) of the decedent or a 5-percent shareholder. A plan shall not fail to be treated as meeting the requirements of section 401(a) by reason of meeting the requirements of this subsection. (4) Qualified employer securities For purposes of this section,

“qualified contingency” applies in that section

the term “qualified contingency” means any provision of a trust which provides that, upon the happening of a contingency, the payments described in paragraph (1)(A) or (2)(A) of subsection (d) (as the case may be) will terminate not later than such payments would otherwise terminate under the trust. (g) Qualified gratuitous transfer of qualified employer securities (1) In general For purposes of this section,

“qualified employer securities” applies in that section

the term “qualified employer securities” means employer securities (as defined in section 409( l )) which are issued by a domestic corporation— (A) which has no outstanding stock which is readily tradable on an established securities market, and (B) which has only 1 class of stock.

“qualified gratuitous transfer” applies in that section

the term “qualified gratuitous transfer” means a transfer of qualified employer securities to an employee stock ownership plan (as defined in section 4975(e)(7)) but only to the extent that— (A) the securities transferred previously passed from a decedent dying before January 1, 1999 , to a trust described in paragraph (1) or (2) of subsection (d), (B) no deduction under section 404 is allowable with respect to such transfer, (C) such plan contains the provisions required by paragraph (3), (D) such plan treats such securities as being attributable to employer contributions but without regard to the limitations otherwise applicable to such contributions under section 404, and (E) the …

“accumulation distribution” applies throughout its subpart

the term “accumulation distribution” means, for any taxable year of the trust, the amount by which— (1) the amounts specified in paragraph (2) of section 661(a) for such taxable year, exceed (2) distributable net income for such year reduced (but not below zero) by the amounts specified in paragraph (1) of section 661(a).

“qualified trust” applies in that section

the term “qualified trust” means any trust other than— (A) a foreign trust (or, except as provided in regulations, a domestic trust which at any time was a foreign trust), or (B) a trust created before March 1, 1984 , unless it is established that the trust would not be aggregated with other trusts under section 643(f) if such section applied to such trust. (d) Taxes imposed on the trust For purposes of this subpart— (1) In general

“taxes imposed on the trust” applies throughout its subpart

The term “taxes imposed on the trust” means the amount of the taxes which are imposed for any taxable year of the trust under this chapter (without regard to this subpart or part IV of subchapter A) and which, under regulations prescribed by the Secretary, are properly allocable to the undistributed portions of distributable net income and gains in excess of losses from sales or exchanges of capital assets. The amount determined in the preceding sentence shall be reduced by any amount of such taxes deemed distributed under section 666(b) and (c) to any beneficiary. (2) Foreign trusts In the case of any foreign trust,

“computation year” applies in that section

the term “computation year” means any of the three taxable years remaining after application of subsection (b)(1)(B). (e) Retention of character of amounts distributed from accumulation trust to nonresident aliens and foreign corporations In the case of a distribution from a trust to a nonresident alien individual or to a foreign corporation, the first sentence of subsection (a) shall be applied as if the reference to the determination of character under section 662(b) applied to all amounts instead of just to tax-exempt interest.

“partial tax” applies in that section

the term “partial tax” means the partial tax imposed by subsection (a)(2) determined under this subsection without regard to this paragraph. (C) Pre-death portion For purposes of this paragraph, the pre-death portion of the partial tax shall be an amount which bears the same ratio to the partial tax as the portion of the accumulation distribution which is attributable to the period before the date of the death of the decedent or the date of the generation-skipping transfer bears to the total accumulation distribution.

“undistributed income year” applies in that section

the term “undistributed income year” means any prior taxable year of the trust for which there is undistributed net income, other than a taxable year during all of which the beneficiary receiving the distribution was not a citizen or resident of the United States. (5) Determination of undistributed net income Notwithstanding section 666, for purposes of this subsection, an accumulation distribution from the trust shall be treated as reducing proportionately the undistributed net income for undistributed income years.

“adverse party” applies throughout its subpart

the term “adverse party” means any person having a substantial beneficial interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust. A person having a general power of appointment over the trust property shall be deemed to have a beneficial interest in the trust. (b) Nonadverse party For purposes of this subpart,

“nonadverse party” applies throughout its subpart

the term “nonadverse party” means any person who is not an adverse party. (c) Related or subordinate party For purposes of this subpart,

“related or subordinate party” applies throughout its subpart

the term “related or subordinate party” means any nonadverse party who is— (1) the grantor’s spouse if living with the grantor; (2) any one of the following: The grantor’s father, mother, issue, brother or sister; an employee of the grantor; a corporation or any employee of a corporation in which the stock holdings of the grantor and the trust are significant from the viewpoint of voting control; a subordinate employee of a corporation in which the grantor is an executive.

“power of administration” applies in that section

the term “power of administration” means any one or more of the following powers: (A) a power to vote or direct the voting of stock or other securities of a corporation in which the holdings of the grantor and the trust are significant from the viewpoint of voting control; (B) a power to control the investment of the trust funds either by directing investments or reinvestments, or by vetoing proposed investments or reinvestments, to the extent that the trust funds consist of stocks or securities of corporations in which the holdings of the grantor and the trust are significant from the viewpoint of voting control; or (C) a power to reacquire the trust corpus by substituting other property …

“unrelated business income” applies in that section

the term “unrelated business income” means an amount equal to the amount which, if such trust were exempt from tax under section 501(a) by reason of section 501(c)(3), would be computed as its unrelated business taxable income under section 512 (relating to income derived from certain business activities and from certain property acquired with borrowed funds). (b) Cross reference For disallowance of certain charitable, etc., deductions otherwise allowable under section 642(c), see sections 508(d) and 4948(c)(4).

“qualified funeral trust” applies in that section

the term “qualified funeral trust” means any trust (other than a foreign trust) if— (1) the trust arises as a result of a contract with a person engaged in the trade or business of providing funeral or burial services or property necessary to provide such services, (2) the sole purpose of the trust is to hold, invest, and reinvest funds in the trust and to use such funds solely to make payments for such services or property for the benefit of the beneficiaries of the trust, (3) the only beneficiaries of such trust are individuals with respect to whom such services or property are to be provided at their death under contracts described in paragraph (1), (4) the only contributions to the …

“estate tax” applies in that section

The term “estate tax” means the tax imposed on the estate of the decedent or any prior decedent under section 2001 or 2101, reduced by the credits against such tax. (B) The net value for estate tax purposes of all the items described in subsection (a)(1) shall be the excess of the value for estate tax purposes of all the items described in subsection (a)(1) over the deductions from the gross estate in respect of claims which represent the deductions and credit described in subsection (b). Such net value shall be determined with respect to the provisions of section 421(c)(2), relating to the deduction for estate tax with respect to stock options to which part II of subchapter D applies.

“life expectancy period” applies in that section

The term “life expectancy period” means the period beginning with the first day of the first period for which an amount is received by the surviving annuitant under the contract and ending with the close of the taxable year with or in which falls the termination of the life expectancy of the surviving annuitant. For purposes of this subparagraph, the life expectancy of the surviving annuitant shall be determined, as of the date of the death of the deceased annuitant, with reference to actuarial tables prescribed by the Secretary.

“transfer” applies in that section

the term “transfer” includes sale, exchange, or other disposition, or the satisfaction of an installment obligation at other than face value, but does not include transmission at death to the estate of the decedent or a transfer to a person pursuant to the right of such person to receive such amount by reason of the death of the decedent or by bequest, devise, or inheritance from the decedent.

“specified terrorist victim” applies in that section

the term “specified terrorist victim” means any decedent— (A) who dies as a result of wounds or injury incurred as a result of the terrorist attacks against the United States on April 19, 1995 , or September 11, 2001 , or (B) who dies as a result of illness incurred as a result of an attack involving anthrax occurring on or after September 11, 2001 , and before January 1, 2002 . Such term shall not include any individual identified by the Attorney General to have been a participant or conspirator in any such attack or a representative of such an individual.

“terroristic or military action” applies in that section

the term “terroristic or military action” means— (A) any terroristic activity which a preponderance of the evidence indicates was directed against the United States or any of its allies, and (B) any military action involving the Armed Forces of the United States and resulting from violence or aggression against the United States or any of its allies (or threat thereof). For purposes of the preceding sentence, the term “military action” does not include training exercises. (3) Treatment of multinational forces For purposes of paragraph (2), any multinational force in which the United States is participating shall be treated as an ally of the United States.

“built-in loss” applies throughout its chapter

the term “built-in loss” means the excess of the adjusted basis of the property (determined without regard to subparagraph (C)(ii)) over its fair market value at the time of contribution. (2) Special rule for distributions where gain or loss would not be recognized outside partnerships Under regulations prescribed by the Secretary, if— (A) property contributed by a partner (hereinafter referred to as the “contributing partner”) is distributed by the partnership to another partner, and (B) other property of a like kind (within the meaning of section 1031) is distributed by the partnership to the contributing partner not later than the earlier of— (i) the 180th day after the date of the …

“allocable cash basis item” applies in that section

the term “allocable cash basis item” means any of the following items with respect to which the partnership uses the cash receipts and disbursements method of accounting: (i) Interest. (ii) Taxes. (iii) Payments for services or for the use of property. (iv) Any other item of a kind specified in regulations prescribed by the Secretary as being an item with respect to which the application of this paragraph is appropriate to avoid significant misstatements of the income of the partners.

“majority interest taxable year” applies in that section

The term “majority interest taxable year” means the taxable year (if any) which, on each testing day, constituted the taxable year of 1 or more partners having (on such day) an aggregate interest in partnership profits and capital of more than 50 percent. (ii) Testing days The testing days shall be— (I) the 1st day of the partnership taxable year (determined without regard to clause (i)), or (II) the days during such representative period as the Secretary may prescribe.

“inventory item” applies in that section

The term “inventory item” has the meaning given such term by section 751(d) (determined by treating any reference to the partnership as referring to the partner and by applying section 1231 without regard to any holding period therein provided). (3) Substituted basis property (A) In general If any property described in subsection (a), (b), or (c) is disposed of in a nonrecognition transaction, the tax treatment which applies to such property under such subsection shall also apply to any substituted basis property resulting from such transaction. A similar rule shall also apply in the case of a series of non-recognition transactions.

“unrealized receivable” applies in that section

The term “unrealized receivable” has the meaning given such term by section 751(c) (determined by treating any reference to the partnership as referring to the partner). (2) Inventory item

“eligible partner” applies in that section

The term “eligible partner” means any partner who, before the date of the distribution, did not contribute to the partnership any property other than assets described in clause (i). (II) Exception for certain nonrecognition transactions The term “eligible partner” shall not include the transferor or transferee in a nonrecognition transaction involving a transfer of any portion of an interest in a partnership with respect to which the transferor was not an eligible partner.

“financial instrument” applies in that section

The term “financial instrument” includes stocks and other equity interests, evidences of indebtedness, options, forward or futures contracts, notional principal contracts, and derivatives. (3) Exceptions (A) In general Paragraph (1) shall not apply to the distribution from a partnership of a marketable security to a partner if— (i) the security was contributed to the partnership by such partner, except to the extent that the value of the distributed security is attributable to marketable securities or money contributed (directly or indirectly) to the entity to which the distributed security relates, (ii) to the extent provided in regulations prescribed by the Secretary, the property was not …

“investment partnership” applies in that section

The term “investment partnership” means any partnership which has never been engaged in a trade or business and substantially all of the assets (by value) of which have always consisted of— (I) money, (II) stock in a corporation, (III) notes, bonds, debentures, or other evidences of indebtedness, (IV) interest rate, currency, or equity notional principal contracts, (V) foreign currencies, (VI) interests in or derivative financial instruments (including options, forward or futures contracts, short positions, and similar financial instruments) in any asset described in any other subclause of this clause or in any commodity traded on or subject to the rules of a board of trade or commodity …

“marketable securities” applies in that section

The term “marketable securities” means financial instruments and foreign currencies which are, as of the date of the distribution, actively traded (within the meaning of section 1092(d)(1)). (B) Other property Such term includes— (i) any interest in— (I) a common trust fund, or (II) a regulated investment company which is offering for sale or has outstanding any redeemable security (as defined in section 2(a)(32) of the Investment Company Act of 1940) of which it is the issuer, (ii) any financial instrument which, pursuant to its terms or any other arrangement, is readily convertible into, or exchangeable for, money or marketable securities, (iii) any financial instrument the value of which …

“money” applies in that section

the term “money” includes marketable securities, and (B) such securities shall be taken into account at their fair market value as of the date of the distribution. (2) Marketable securities For purposes of this subsection: (A) In general

“control” applies in that section

the term “control” means ownership of stock meeting the requirements of section 1504(a)(2). (6) Indirect distributions For purposes of paragraph (1), if a corporation acquires (other than in a distribution from a partnership) stock the basis of which is determined (by reason of being distributed from a partnership) in whole or in part by reference to subsection (a)(2) or (b), the corporation shall be treated as receiving a distribution of such stock from a partnership.

“net precontribution gain” applies in that section

the term “net precontribution gain” means the net gain (if any) which would have been recognized by the distributee partner under section 704(c)(1)(B) if all property which— (1) had been contributed to the partnership by the distributee partner within 7 years of the distribution, and (2) is held by such partnership immediately before the distribution, had been distributed by such partnership to another partner. (c) Basis rules (1) Partner’s interest The adjusted basis of a partner’s interest in a partnership shall be increased by the amount of any gain recognized by such partner under subsection (a).

“electing investment partnership” applies in that section

the term “electing investment partnership” means any partnership if— (A) the partnership makes an election to have this subsection apply, (B) the partnership would be an investment company under section 3(a)(1)(A) of the Investment Company Act of 1940 but for an exemption under paragraph (1) or (7) of section 3(c) of such Act, (C) such partnership has never been engaged in a trade or business, (D) substantially all of the assets of such partnership are held for investment, (E) at least 95 percent of the assets contributed to such partnership consist of money, (F) no assets contributed to such partnership had an adjusted basis in excess of fair market value at the time of contribution, (G) …

“securitization partnership” applies in that section

the term “securitization partnership” means any partnership the sole business activity of which is to issue securities which provide for a fixed principal (or similar) amount and which are primarily serviced by the cash flows of a discrete pool (either fixed or revolving) of receivables or other financial assets that by their terms convert into cash in a finite period, but only if the sponsor of the pool reasonably believes that the receivables and other financial assets comprising the pool are not acquired so as to be disposed of.

“inventory items” applies throughout its subchapter

the term “inventory items” means— (1) property of the partnership of the kind described in section 1221(a)(1), (2) any other property of the partnership which, on sale or exchange by the partnership, would be considered property other than a capital asset and other than property described in section 1231, and (3) any other property held by the partnership which, if held by the selling or distributee partner, would be considered property of the type described in paragraph (1) or (2).

“unrealized receivables” applies throughout its subchapter

the term “unrealized receivables” includes, to the extent not previously includible in income under the method of accounting used by the partnership, any rights (contractual or otherwise) to payment for— (1) goods delivered, or to be delivered, to the extent the proceeds therefrom would be treated as amounts received from the sale or exchange of property other than a capital asset, or (2) services rendered, or to be rendered.

“liquidation of a partner’s interest” applies throughout its subchapter

the term “liquidation of a partner’s interest” means the termination of a partner’s entire interest in a partnership by means of a distribution, or a series of distributions, to the partner by the partnership.

“partner” applies in that section

the term “partner” means a member of a partnership. In the case of a capital interest in a partnership in which capital is a material income-producing factor, whether a person is a partner with respect to such interest shall be determined without regard to whether such interest was derived by gift from any other person.

“partnership” applies in that section

the term “partnership” includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a corporation or a trust or estate.

“qualified joint venture” applies throughout this title

the term “qualified joint venture” means any joint venture involving the conduct of a trade or business if— (A) the only members of such joint venture are a husband and wife, (B) both spouses materially participate (within the meaning of section 469(h) without regard to paragraph (5) thereof) in such trade or business, and (C) both spouses elect the application of this subsection. (g) Cross reference For rules in the case of the sale, exchange, liquidation, or reduction of a partner’s interest, see sections 704(b) and 706(c)(2).

“life insurance company taxable income” applies throughout its part

the term “life insurance company taxable income” means— (1) life insurance gross income, reduced by (2) life insurance deductions.

“gross amount of premiums and other consideration” applies throughout its part

the term “gross amount of premiums and other consideration” includes— (A) advance premiums, (B) deposits, (C) fees, (D) assessments, (E) consideration in respect of assuming liabilities under contracts not issued by the taxpayer, and (F) the amount of policyholder dividends reimbursable to the taxpayer by a reinsurer in respect of reinsured policies, on insurance and annuity contracts. (2) Policyholder dividends excluded from return premiums For purposes of subsection (a)(1)(B)— (A) In general Except as provided in subparagraph (B), the term “return premiums” does not include any policyholder dividends.

“life insurance gross income” applies throughout its part

the term “life insurance gross income” means the sum of the following amounts: (1) Premiums (A) The gross amount of premiums and other consideration on insurance and annuity contracts, less (B) return premiums, and premiums and other consideration arising out of indemnity reinsurance. (2) Decreases in certain reserves Each net decrease in reserves which is required by section 807(a) to be taken into account under this paragraph. (3) Other amounts All amounts not includible under paragraph (1) or (2) which under this subtitle are includible in gross income. (b) Special rules for premiums (1) Certain items included For purposes of subsection (a)(1)(A),

“life insurance deductions” applies throughout its part

the term “life insurance deductions” means the general deductions provided in section 805.

“100 percent dividend” applies throughout its part

the term “100 percent dividend” means any dividend if the percentage used for purposes of determining the deduction allowable under section 243 or 245(b) is 100 percent. (ii) Treatment of dividends from noninsurance companies The term “100 percent dividend” does not include any distribution by a corporation which is not an insurance company to the extent such distribution is out of tax-exempt interest, or out of the increase for the taxable year in policy cash values (within the meaning of subparagraph (F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies, or out of dividends which are not 100 percent dividends (determined with the application …

“adjusted cash value” applies throughout its part

the term “adjusted cash value” means the cash surrender value of the policy or contract increased by the sum of— (I) commissions payable with respect to such policy or contract for the taxable year, and (II) asset management fees, surrender charges, mortality and expense charges, and any other fees or charges specified in regulations prescribed by the Secretary which are imposed (or which would be imposed were the policy or contract canceled) with respect to such policy or contract for the taxable year. [(5) Repealed. Pub. L. 115–97, title I, § 13511(b)(5) , Dec. 22, 2017 , 131 Stat.

“prorated amounts” applies throughout its part

the term “prorated amounts” means tax-exempt interest, the increase for the taxable year in policy cash values (within the meaning of subparagraph (F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies, and dividends other than 100 percent dividends.

“CARVM” applies in that section

The term “CARVM” means the Commissioners’ Annuities Reserve Valuation Method prescribed by the National Association of Insurance Commissioners which is applicable to the contract and in effect as of the date the reserve is determined. (C) No additional reserve deduction allowed for deficiency reserves Nothing in any reserve method described under this paragraph shall permit any increase in the reserve because the net premium (computed on the basis of assumptions required under this subsection) exceeds the actual premiums or other consideration charged for the benefit. (4) Statutory reserves

“CRVM” applies in that section

The term “CRVM” means the Commissioners’ Reserve Valuation Method prescribed by the National Association of Insurance Commissioners which is applicable to the contract and in effect as of the date the reserve is determined. (ii) CARVM

“existing plan of insurance” applies in that section

the term “existing plan of insurance” means, with respect to any contract, any plan of insurance which was filed by the company using such contract in one or more States before January 1, 1984 , and is on file in the appropriate State for such contract. (5) Special rules for treatment of certain nonlife reserves (A) In general The amount taken into account for purposes of subsections (a) and (b) as— (i) the opening balance of the items referred to in subparagraph (B), and (ii) the closing balance of such items, shall be 80 percent of the amount which (without regard to this subparagraph) would have been taken into account as such opening or closing balance, as the case may be.

“qualified foreign contract” applies in that section

the term “qualified foreign contract” means any contract issued by a foreign life insurance branch (which has its principal place of business in a foreign country) of a domestic life insurance company if— (i) such contract is issued on the life or health of a resident of such country, (ii) such domestic life insurance company was required by such foreign country (as of the time it began operations in such country) to operate in such country through a branch, and (iii) such foreign country is not contiguous to the United States.

“qualified supplemental benefit” applies in that section

the term “qualified supplemental benefit” means any supplemental benefit described in subparagraph (C) if— (i) there is a separately identified premium or charge for such benefit, and (ii) any net surrender value under the contract attributable to any other benefit is not available to fund such benefit. (C) Supplemental benefits For purposes of this paragraph, the supplemental benefits described in this subparagraph are any— (i) guaranteed insurability, (ii) accidental death or disability benefit, (iii) convertibility, (iv) disability waiver benefit, or (v) other benefit prescribed by regulations, which is supplemental to a contract for which there is a reserve described in subsection (c).

“statutory reserves” applies in that section

The term “statutory reserves” means the aggregate amount set forth in the annual statement with respect to items described in section 807(c). Such term shall not include any reserve attributable to a deferred and uncollected premium if the establishment of such reserve is not permitted under section 811(c). (e) Special rules for computing reserves (1) Net surrender value For purposes of this section— (A) In general The net surrender value of any contract shall be determined— (i) with regard to any penalty or charge which would be imposed on surrender, but (ii) without regard to any market value adjustment on surrender.

“tax reserve method” applies in that section

The term “tax reserve method” means— (i) Life insurance contracts The CRVM in the case of a contract covered by the CRVM. (ii) Annuity contracts The CARVM in the case of a contract covered by the CARVM. (iii) Noncancellable accident and health insurance contracts In the case of any noncancellable accident and health insurance contract, the reserve method prescribed by the National Association of Insurance Commissioners which covers such contract as of the date the reserve is determined.

“1984 fresh-start adjustment for policyholder dividends” applies in that section

the term “1984 fresh-start adjustment for policyholder dividends” means the amounts held as of December 31, 1983 , by the taxpayer as reserves for dividends to policyholders under section 811(b) (as in effect on the day before the date of the enactment of the Tax Reform Act of 1984) other than for dividends which accrued before January 1, 1984 . Such amounts shall be properly reduced to reflect the amount of previously nondeductible policyholder dividends (as determined under section 809(f) as in effect on the day before the date of the enactment of the Tax Reform Act of 1984).

“accelerated policyholder dividends deduction” applies in that section

the term “accelerated policyholder dividends deduction” means the amount which (but for this subsection) would be determined for the taxable year under paragraph (1) of subsection (c) but which would have been determined (under such paragraph) for a later taxable year under the business practices of the taxpayer as in effect at the close of the preceding taxable year. (4) 1984 fresh-start adjustment for policyholder dividends For purposes of this subsection,

“excess interest” applies in that section

The term “excess interest” means any amount in the nature of interest— (A) paid or credited to a policyholder in his capacity as such, and (B) in excess of interest determined at the prevailing State assumed rate for such contract. (2) Premium adjustment

“experience-rated refund” applies in that section

The term “experience-rated refund” means any refund or credit based on the experience of the contract or group involved. (e) Treatment of policyholder dividends For purposes of this part, any policyholder dividend which— (1) increases the cash surrender value of the contract or other benefits payable under the contract, or (2) reduces the premium otherwise required to be paid, shall be treated as paid to the policyholder and returned by the policyholder to the company as a premium.

“policyholder dividend” applies throughout its part

the term “policyholder dividend” means any dividend or similar distribution to policyholders in their capacity as such. (b) Certain amounts included For purposes of this part,

“premium adjustment” applies in that section

The term “premium adjustment” means any reduction in the premium under an insurance or annuity contract which (but for the reduction) would have been required to be paid under the contract. (3) Experience-rated refund

“prevailing State assumed interest rate” applies throughout its subchapter

The term “prevailing State assumed interest rate” means, with respect to any contract, the highest assumed interest rate permitted to be used in computing life insurance reserves for insurance contracts or annuity contracts (as the case may be) under the insurance laws of at least 26 States. For purposes of the preceding sentence, the effect of nonforfeiture laws of a State on interest rates for reserves shall not be taken into account. (2) When rate determined The prevailing State assumed interest rate with respect to any contract shall be determined as of the beginning of the calendar year in which the contract was issued.

“year of change” applies in that section

the term “year of change” means the taxable year in which the change in business practices which results in the accelerated policyholder dividends deduction takes effect. (3) Accelerated policyholder dividends deduction defined For purposes of this subsection,

“company’s share” applies in that section

the term “company’s share” means, with respect to any taxable year beginning after December 31, 2017 , 70 percent. (b) Policyholder’s share For purposes of section 807,

“policyholder’s share” applies in that section

the term “policyholder’s share” means, with respect to any taxable year beginning after December 31, 2017 , 30 percent.

“insurance contract” applies in that section

the term “insurance contract” means any life, health, accident, or annuity contract or reinsurance contract or any contract relating thereto. (c) Separate accounting required Any taxpayer which makes the election provided by subsection (g) shall establish and maintain a separate account for the various income, exclusion, deduction, asset, reserve, liability, and surplus items properly attributable to the contracts described in subsection (b).

“tentative LICTI” applies in that section

the term “tentative LICTI” means life insurance company taxable income determined under this part (as in effect for such year) without regard to this paragraph. (f) Other rules (1) Treatment of foreign taxes No income, war profits, or excess profits taxes paid or accrued to any foreign country or possession of the United States which is attributable to income excluded under subsection (a) shall be taken into account for purposes of subpart A of part III of subchapter N (relating to foreign tax credit) or allowable as a deduction.

“insurance company” applies in that section

the term “insurance company” means any company more than half of the business of which during the taxable year is the issuing of insurance or annuity contracts or the reinsuring of risks underwritten by insurance companies. (b) Life insurance reserves defined (1) In general For purposes of this part,

“life insurance company” applies in that section

the term “life insurance company” means an insurance company which is engaged in the business of issuing life insurance and annuity contracts (either separately or combined with accident and health insurance), or noncancellable contracts of health and accident insurance, if— (1) its life insurance reserves (as defined in subsection (b)), plus (2) unearned premiums, and unpaid losses (whether or not ascertained), on noncancellable life, accident, or health policies not included in life insurance reserves, comprise more than 50 percent of its total reserves (as defined in subsection (c)). For purposes of the preceding sentence,

“life insurance reserves” applies throughout its part

the term “life insurance reserves” means amounts— (A) which are computed or estimated on the basis of recognized mortality or morbidity tables and assumed rates of interest, and (B) which are set aside to mature or liquidate, either by payment or reinsurance, future unaccrued claims arising from life insurance, annuity, and noncancellable accident and health insurance contracts (including life insurance or annuity contracts combined with noncancellable accident and health insurance) involving, at the time with respect to which the reserve is computed, life, accident, or health contingencies.

“total reserves” applies in that section

the term “total reserves” means— (1) life insurance reserves, (2) unearned premiums, and unpaid losses (whether or not ascertained), not included in life insurance reserves, and (3) all other insurance reserves required by law. (d) Adjustments in reserves for policy loans For purposes only of determining under subsection (a) whether or not an insurance company is a life insurance company, the life insurance reserves, and the total reserves, shall each be reduced by an amount equal to the mean of the aggregates, at the beginning and end of the taxable year, of the policy loans outstanding with respect to contracts for which life insurance reserves are maintained.

“annuity contract” applies throughout its part

the term “annuity contract” includes a contract which provides for the payment of a variable annuity computed on the basis of— (1) recognized mortality tables, and (2) (A) the investment experience of a segregated asset account, or (B) the company-wide investment experience of the company. Paragraph (2)(B) shall not apply to any company which issues contracts which are not variable contracts.

“variable contract” applies throughout its part

the term “variable contract” means a contract— (1) which provides for the allocation of all or part of the amounts received under the contract to an account which, pursuant to State law or regulation, is segregated from the general asset accounts of the company, (2) which— (A) provides for the payment of annuities, (B) is a life insurance contract, or (C) provides for funding of insurance on retired lives as described in section 807(c)(6), and (3) under which— (A) in the case of an annuity contract, the amounts paid in, or the amount paid out, reflect the investment return and the market value of the segregated asset account, (B) in the case of a life insurance contract, the amount of the …

“modified guaranteed contract” applies in that section

the term “modified guaranteed contract” means a contract not described in section 817— (1) all or part of the amounts received under which are allocated to an account which, pursuant to State law or regulation, is segregated from the general asset accounts of the company and is valued from time to time with reference to market values, (2) which— (A) provides for the payment of annuities, (B) is a life insurance contract, or (C) is a pension plan contract which is not a life, accident, or health, property, casualty, or liability contract, (3) for which reserves are valued at market for annual statement purposes, and (4) which provides for a net surrender value or a policyholder’s fund (as …

“segregated asset” applies in that section

the term “segregated asset” means any asset held as part of a segregated account referred to in subsection (d)(1) under a modified guaranteed contract. (c) Special rule in computing life insurance reserves For purposes of applying section 816(b)(1)(A) to any modified guaranteed contract, an assumed rate of interest shall include a rate of interest determined, from time to time, with reference to a market rate of interest. (d) Modified guaranteed contract defined For purposes of this section,

“insurance or annuity contract” applies throughout its part

the term “insurance or annuity contract” includes any contract supplementary thereto. (e) Special rules for consolidated returns (1) Items of companies other than life insurance companies If an election under section 1504(c)(2) is in effect with respect to an affiliated group for the taxable year, all items of the members of such group which are not life insurance companies shall not be taken into account in determining the amount of the tentative LICTI of members of such group which are life insurance companies.

“pension plan contract” applies throughout its part

the term “pension plan contract” means any contract— (1) entered into with trusts which (as of the time the contracts were entered into) were deemed to be trusts described in section 401(a) and exempt from tax under section 501(a) (or trusts exempt from tax under section 165 of the Internal Revenue Code of 1939 or the corresponding provisions of prior revenue laws); (2) entered into under plans which (as of the time the contracts were entered into) were deemed to be plans described in section 403(a), or plans meeting the requirements of paragraphs (3), (4), (5), and (6) of section 165(a) of the Internal Revenue Code of 1939; (3) provided for employees of the life insurance company under a …

“qualified accelerated death benefit rider” applies in that section

the term “qualified accelerated death benefit rider” means any rider on a life insurance contract if the only payments under the rider are payments meeting the requirements of section 101(g). (3) Exception for long-term care riders Paragraph (1) shall not apply to any rider which is treated as a long-term care insurance contract under section 7702B.

“controlled group” applies in that section

the term “controlled group” means any controlled group of corporations (as defined in section 1563(a)); except that— (I) “more than 50 percent” shall be substituted for “at least 80 percent” each place it appears in section 1563(a), and (II) subsections (a)(4) and (b)(2)(D) of section 1563 shall not apply. (D) Look-through of reinsurance and fronting arrangements In the case of reinsurance or any fronting, intermediary, or similar arrangement,

“insurance company” applies in that section

the term “insurance company” has the meaning given to such term by section 816(a). (d) Reporting Every insurance company for which an election is in effect under subsection (b) for any taxable year shall furnish to the Secretary at such time and in such manner as the Secretary shall prescribe such information for such taxable year as the Secretary shall require with respect to the requirements of subsection (b)(2)(A)(ii). (e) Cross references (1) For taxation of foreign corporations carrying on an insurance business within the United States, see section 842. (2) For exemption from tax for certain insurance companies other than life, see section 501(c)(15).

“policyholder” applies in that section

the term “policyholder” means each policyholder of the underlying direct written insurance with respect to such reinsurance or arrangement. (E) Inflation adjustment In the case of any taxable year beginning in a calendar year after 2015, the dollar amount set forth in subparagraph (A)(i) shall be increased by an amount equal to— (i) such dollar amount, multiplied by (ii) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting “calendar year 2013” for “calendar year 2016” in subparagraph (A)(ii) thereof.

“relevant specified assets” applies in that section

The term “relevant specified assets” means, with respect to any specified holder with respect to any insurance company, the aggregate amount of the specified assets, with respect to such insurance company, any interest in which is held (directly or indirectly) by any spouse or specified relation of such specified holder. Such term shall not include any specified asset solely by reason of an interest in such asset which was acquired by such spouse or specified relation by bequest, devise, or inheritance from a decedent during the taxable year of the insurance company or the preceding taxable year. For purposes of this subclause,

“specified assets” applies in that section

The term “specified assets” means, with respect to any insurance company, the trades or businesses, rights, or assets with respect to which the net written premiums (or direct written premiums) of such insurance company are paid. (III) Indirect interest An indirect interest includes any interest held through a trust, estate, partnership, or corporation. (IV) De minimis Except as otherwise provided by the Secretary in regulations or other guidance, 2 percentage points or less shall be treated as de minimis.

“specified holder” applies in that section

the term “specified holder” means, with respect to any insurance company, any individual who holds (directly or indirectly) an interest in such insurance company and who— (I) is a lineal descendent (including by adoption) of an individual who holds an interest (directly or indirectly) in the specified assets with respect to such insurance company or of such individual’s spouse, (II) is a spouse of any lineal descendent described in subclause (I), or (III) is not a citizen of the United States and is a spouse of an individual who holds an interest (directly or indirectly) in the specified assets with respect to such insurance company.

“specified relation” applies in that section

the term “specified relation” means any individual with respect to whom the specified holder bears a relationship described in subclause (I) or (II) of clause (iii). (II) Specified assets

“100 percent dividend” applies in that section

The term “100 percent dividend” means any dividend if the percentage used for purposes of determining the deduction allowable under section 243 or 245(b) is 100 percent. (II) Certain dividends received by foreign corporations A dividend received by a foreign corporation from a domestic corporation which would be a 100 percent dividend if section 1504(b)(3) did not apply for purposes of applying section 243(b)(2) shall be treated as a 100 percent dividend.

“applicable interest rate” applies in that section

The term “applicable interest rate” means the annual rate determined under 846(c)(2) for the calendar year in which the premiums are received. (iii) Applicable statutory premium recognition pattern