C.1 TCJA Flashcards
1
Q
Overview of the Tax Cuts and Jobs Act: Major Changes in the Taxation of Life Insurers
A
TCJA = remove provisions that were obsolete and to increase consistency with the treatment of non-insurers
Life Insurance Reserves:
- non-variable contracts: tax rsv = 92.81% STAT
- Variable contracts: onyl GA reserves in excess of max(CSV, SA reserves) are multipled by 92.81%
DAC Tax:
- TCJA increases DAC tax rates by 20%
- extends amortization period from 10yr to 15yr
proration of tax preferred income
- ex: div receive deduction
- TCJA simplifes but reduces DRD
Net Operating Losses
- prior law: LICs can carry losses back 3 years or forward 15 years
- TCJA: no loss carrybacks, but losses carry forward indefinitely
- up to 80% taxable income
Misc TCJA impacts:
-repeal small life insurance company deductions
Effect on products:
- no impact on buildup within life and annuity products
- lower average tax rate for individuals may indirectly make life insurance less attractive for tax-favored instruments
TCJA significantly reduced corporate tax rates
