Page:United States Statutes at Large Volume 98 Part 1.djvu/781

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 733

"(3) EXPERIENCE-RATED REFUND.—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.. "SEC. 809. REDUCTION IN CERTAIN DEDUCTIONS OF MUTUAL LIFE INSURANCE COMPANIES.

26 USC 809.

"(a) GENERAL RULE.—

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"(1) PoucYHOLDER DIVIDENDS.—In the case of any mutual life insurance company, the amount of the deduction allowed under section 808 shall be reduced (but not below zero) by the differential earnings amount.

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Ante, p. 732.

"(2) REDUCTION IN RESERVE DEDUCTION IN CERTAIN CASES.—In

the case of any mutual life insurance company, if the differential earnings amount exceeds the amount allowable as a deduction under section 808 for the taxable year (determined without regard to this section), such excess shall be taken into account under subsections (a) and (b) of section 807. "(3) DIFFERENTIAL EARNINGS AMOUNT.—For purposes of this section, the term 'differential earnings amount' means, with respect to any taxable year, an amount equal to the product of— "(A) the life insurance company's average equity base for the taxable year, multiplied by "(B) the differential earnings rate for such taxable year. "(b) AVERAGE EQUITY BASE.—For purposes of this section— "(1) IN GENERAL.—The term 'average equity base' means, with respect to any taxable year, the average of^ "(A) the equity base determined as of the close of the taxable year, and "(B) the equity base determined as of the close of the preceding taxable year. "(2) EQUITY BASE.—The term 'equity base' means an amount determined in the manner prescribed by regulations equal to— "(A) the surplus and capital, "(B) adjusted as provided in paragraphs (3), (4), (5), and (6) of this subsection. "(3) INCREASE FOR NONADMITTED FINANCIAL ASSETS.—

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"(A) IN GENERAL.—The amount of the surplus and capital shall be increased by the amount of the nonadmitted finanni tjf cial assets. "(B) NONADMITTED FINANCIAL ASSETS.—For purposes of subparagraph (A), the term 'nonadmitted financial asset' means any nonadmitted asset of the company which is— "(i) a bond, "(ii) stock, - ; "(iii) real estate, "(iv) a mortgage loan on real estate, or "(v) any other invested asset. "(4) INCREASE WHERE STATUTORY RESERVES EXCEED TAX RESERVES.—

Ante, p. 726.

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