IRS PROVIDES GUIDANCE FOR MUTUAL INSURERS ON FILING 1992 RETURNS.

Announcement 93-117

This announcement provides guidance to mutual life insurance companies in filing 1992 Form 1120L, U.S. Life Insurance Income Tax Return, regarding the asset valuation reserve and interest maintenance reserve. Section 1.809-10T of the temporary Income Tax Regulations provides that the equity base includes both the asset valuation reserve and the interest maintenance reserve for taxable years ending after December 31, 1991.

In determining the equity base of a mutual life insurance company, the capital and surplus of the company is included, as well as an amount referred to as the mandatory securities valuation reserve. See sections 809(b)(2) and 809(b)(5)(A) of the Internal Revenue Code. This reference is to an amount that appeared on the annual statement prescribed by the National Association of Insurance Commissioners (NAIC) until 1992. The 1992 annual statement has replaced the mandatory securities valuation reserve with two separate reserves. The new reserves are the asset valuation reserve and the interest maintenance reserve, both of which are required to be reported on the annual statement for 1992 and thereafter.

These changes to the 1992 annual statement were made after the 1992 Form 1120L, U.S. Life Insurance Company Income Tax Return was in final print. Schedule C -- Differential Earnings Amount -- Mutual Life Insurance Companies Only (Section 809), line 5, of that form requires the reporting of the "mandatory securities valuation reserve" for both the end of the preceding tax year (column (a)) and the end of this tax year (column (b)). To implement section 1.809- 10T of the regulations, the sum of the asset valuation reserve and interest maintenance reserve is to be reported on line 5, column (b), of Schedule C of 1992 Form 1120L.

The principal author of this announcement is Katherine Ann Hossofsky of the Office of the Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this announcement contact Ms. Hossofsky on (202) 622-3477 (not a toll-free number).