• Back To The Future: The Insurance Industry And Tax Reform
  • May 22, 2018 | Author: M. Kristan Rizzolo
  • Law Firm: Eversheds Sutherland (US) LLP - Washington Office
  • Over the years, Congress has repeatedly overhauled the insurance-specific provisions of the Internal Revenue Code, which are found in Subchapter L.[1] For example, under the Revenue Act of 1918, both investment income and underwriting income were included in the taxable income of all insurance companies.[2] By 1921, Congress had been persuaded that this treatment did not accurately reflect the nature of the life insurance enterprise.[3] For the first time, life insurance companies were taxed on investment income only, while all other insurance companies continued to be taxed on both investment and underwriting income.[4] The Life Insurance Company Income Tax Act of 1959 flipped the treatment again, such that life insurance companies were taxed on both their investment income and their underwriting income under a new three-phase system.[5] This three-phase system was then supplanted by the Deficit Reduction Act of 1984.[6]