Page:United States Statutes at Large Volume 100 Part 3.djvu/592

 100 STAT. 2400

PUBLIC LAW 99-514—OCT. 22, 1986 of such time) separately computed under this section with respect to unpaid losses in each line of business attributable to each accident year. "(2) METHOD OF DISCOUNTING.—The amount of the discounted unpaid losses as of the end of any taxable year attributable to any accident year shall be the present value of such losses (as of such time) determined by using— "(A) the amount of the undiscounted unpaid losses as of such time, "(B) the applicable interest rate, and "(C) the applicable loss payment pattern. "(3) LIMITATION ON AMOUNT OF DISCOUNTED LOSSES.—In no

event shall the amount of the discounted unpaid losses with respect to any line of business attributable to any accident year exceed the aggregate amount of unpaid losses with respect to such line of business for such accident year included on the annual statement filed by the taxpayer for the year ending with or within the taxable year. "(4) DETERMINATION OF APPLICABLE FACTORS.—In determining the amount of the discounted unpaid losses attributable to any accident year— "(A) the applicable interest rate shall be the interest rate determined under subsection (c) for the calendar year with which such accident year ends, and "(B) the applicable loss payment pattern shall be the loss payment pattern determined under subsection (d) which is in effect for the calendar year with which such accident year ends. "(b) DETERMINATION OF UNDISCOUNTED UNPAID LOSSES.—For purposes of this section— "(1) IN GENERAL.—Except as otherwise provided in this subsection, the term 'undiscounted unpaid losses' means the unpaid losses shown in the annual statement filed by the taxpayer for the year ending with or within the taxable year of the taxpayer. "(2) ADJUSTMENT IF LOSSES DISCOUNTED ON ANNUAL STATEMENT.—If—

"(A) the amount of unpaid losses shown in the annual statement is determined on a discounted basis, and "(B) the extent to which the losses were discounted can be determined on the basis of information disclosed on or with the annual statement, the amount of the unpaid losses shall be determined without regard to any reduction attributable to such discounting. "(c) RATE OF INTEREST.—

"(1) IN GENERAL.—For purposes of this section, the rate of interest determined under this subsection shall be the annual rate determined by the Secretary under paragraph (2). "(2) DETERMINATION OF ANNUAL RATE.—

"(A) IN GENERAL.—The annual rate determined by the Secretary under this paragraph for any calendar year shall be a rate equal to the average of the applicable Federal mid-term rates (as defined in section 1274(d) but based on annual compounding) effective as of the beginning of each of the calendar months in the test period. "(B) TEST PERIOD.—For purposes of subparagraph (A), the

test period is the most recent 60-calendar-month period

�