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September 23, 2021

House Ways and Means Committee reconciliation bill contains proposed tax changes that would affect insurance companies

The tax portion of the budget reconciliation bill, which was approved by the House Ways and Means Committee on September 15, 2021, proposed significant tax increases on corporations and high-income individuals, both of which would affect the insurance industry (the HW&M Proposal). Proposed increases to the federal corporate income tax rate and significant changes to US international tax rules would directly affect insurance companies. Proposed changes affecting high-income individuals, the estate tax and various retirement plan rules would indirectly affect the life insurance industry.

In this Alert, EY discusses the key provisions in the HW&M Proposal that would affect insurance companies, including their SSAP No. 1011 tax accounting considerations. For more information on all of the tax provisions in the HW&M Proposal, see Tax Alert 2021-9021.

Changes to the taxation of corporations

Corporate tax rate

The HW&M Proposal would increase the federal corporate income tax rate to 26.5%. Specifically, this rate would apply to the highest bracket of a new graduated corporate income tax rate, starting at 18% on taxable income of $400,000 or less, then 21% on income from $400,000 to $5 million, and finally 26.5% on income over $5 million. For corporations whose taxable income exceeds $10 million, the benefit of the lower rates would be effectively phased out through a top-up tax to equal the 26.5% rate on all income.

General considerations

The 2017 Tax Cuts and Jobs Act (TCJA) significantly expanded the tax base of insurers to help offset the cost of corporate tax rate reduction to 21%. In all, the insurance industry's base broadeners were scored at $40 billion over 10 years by the Joint Committee on Taxation (JCT). An increase in the corporate tax rate to 26.5% (assuming the higher rate brackets apply) that applies to a much larger tax base would disproportionately increase insurers' cash tax liabilities relative to other industries/sectors.

Proration rules for property and casualty (P&C) insurance companies

The TCJA changed the P&C proration rate in Internal Revenue Code (IRC)2 Section 832(b)(5)(B) to 25% by linking the 21% maximum corporate rate in effect under IRC Section 11(b) to produce a 5.25% reduction in a P&C insurer's deduction for losses incurred. The graduated corporate tax rate structure in the HW&M Proposal would complicate the computation of the proration adjustment. Numerous different fact patterns would raise questions as to how to apply the proration rules under a graduated tax rate structure. For example, what corporate tax rate would be "in effect" when the insurer generates a loss for the year? Alternatively, what corporate tax rate would be "in effect" when the P&C insurer's taxable income is offset by a net operating loss (NOL) carryforward or when a NOL is carried back?

SSAP No. 101 Considerations

An increase in the corporate tax rate would increase the value of an insurer's adjusted gross deferred tax assets (DTAs) that can be admitted under SSAP No. 101 paragraph 11. Paragraph 8 of SSAP No. 101 requires changes in DTAs and deferred tax liabilities (DTLs), including changes attributable to changes in tax rates and changes in tax status, if any, to be recognized as a separate component of gains and losses in unassigned surplus. The increase in the value of adjusted gross DTAs should increase an insurer's surplus so long as the insurer has sufficient projected future taxable income under SSAP No. 101 paragraph 11.b.i. and is not limited by paragraph 11.b.ii. (assuming the reporting entity is in a net overall DTA position). P&C insurance companies that admit a majority of their adjusted gross DTAs under SSAP No. 101 paragraph 11.a., however, may not experience an increased surplus position. With a 21% tax rate in prior years under SSAP No. 101 paragraph 11.a., P&C insurers would need to rely on SSAP No. 101 paragraph 11.b.i. to realize the full benefit of their reversing DTAs. Additionally, the surplus would not increase for any insurance company that is limited under SSAP No. 101 paragraph 11.b.ii.

Regarding the admissibility of DTAs and their impact on an insurance company's surplus, one complicating factor in the HW&M Proposal is the graduated corporate income tax rate structure. Under SSAP No. 101 paragraph 11.b.i., reporting entities must perform a "with and without" calculation to support the adjusted gross DTAs that are "expected to be realized within the applicable period." If the "with" calculation results in taxable income of less than $10 million, the amount "expected to be realized" may produce a federal income tax benefit at a rate that is lower than the top corporate rate of 26.5%. Under current law, which is a flat 21% corporate tax rate, insurers could project $0 in the "with" calculation and realize the full value of their reversing DTAs within the applicable period. If the graduated tax rate structure were enacted, the SSAP No. 101 paragraph 11.b.i. "with and without" calculations could require an enhanced level of precision.

Before the TCJA's enactment, the corporate tax rate was a graduated structure. The pre-TCJA graduated tax brackets, however, were much narrower than those proposed in the HW&M Proposal. SSAP No. 101 Q&A3 3 provides guidance on the definition of the term "enacted tax rates." During 2019, comprehensive revisions to SSAP No. 101 Q&A were adopted to align its content with the TCJA's requirements. Consequently, the guidance on graduated tax rates was eliminated. As SSAP No. 101 adopted the provisions of FASB Statement No. 109, Accounting for Income Taxes (FAS 109), with certain modifications, insurers presumably can rely on the guidance contained in FAS 109 paragraphs 18 and 236.4 For those insurers that file as part of a consolidated tax return, SSAP No. 101 Q&A 8.3 states the following with respect to SSAP No. 101 paragraph 11.b.i.:

The entity must estimate its separate company taxable income and the tax benefit that it expects to receive from reversing deductible temporary differences in the form of lower tax payments to its parent. If the reporting entity has reversing adjusted gross DTAs during the applicable period for which it does not expect to realize a benefit under paragraph 11.b. on a separate company basis, the reporting entity cannot admit an amount related to such DTAs under paragraph 11.b., even though the reporting entity may be paid a tax benefit for such items pursuant to its tax allocation agreement.

Insurers that join in the filing of a consolidated federal income tax return may need to examine their existing intercompany tax-sharing agreements to determine whether those agreements need to be modified to address the graduated tax brackets.

International tax changes

Global intangible low-tax Income (GILTI)

The HW&M Proposal would require a US shareholder to compute its GILTI inclusion on a country-by-country basis by aggregating the items (e.g., net controlled foreign corporation (CFC) tested income, qualified business asset investment (QBAI), etc.) of taxable units within a single foreign country and computing a separate GILTI amount for each country. Consequently, tested losses in one country would not be allowed to reduce the GILTI inclusion attributable to tested income in another country. However, the HW&M Proposal would allow tested losses to be carried forward to the succeeding tax year and offset that year's tested income, if any. The HW&M Proposal would lower the IRC Section 250 deduction percentage for GILTI from 50% to 37.5%. When combined with the proposed corporate tax rate of 26.5%, the resulting effective rate on GILTI would be 16.5625%.

Implications: Although a net tested loss from one or more CFCs in one country would be unavailable under the HW&M Proposal to offset net tested income from one or more CFCs in another country, the ability to carry forward net tested losses to offset future same-country net tested income is welcome, particularly for insurance company CFCs. Insurance company CFCs may experience large tested losses due to economic losses from catastrophic or other events or timing differences, such as differences in the treatment of reserves under US tax rules and local tax rules or the requirement to mark-to-market investment assets under local tax rules. The ability to carry forward net tested losses to offset future same-country tested income would ensure that economic losses will be taken into account in determining a US shareholder's GILTI, and mitigates the impact of timing differences between US tax rules and local country tax rules, which are commonplace in the insurance industry.

Foreign tax credit (FTC) limitation

Country-by-country FTC limitation and repeal of foreign branch income category

The HW&M Proposal would determine a US shareholder's FTC limitation for all baskets on a country-by-country basis based on taxable units, thus preventing excess FTCs from high-tax jurisdictions from being credited against income from low-tax jurisdictions (CbC FTC Limitation). The proposal would also repeal the separate limitation category for foreign branch income. Corresponding modifications to the treatment of separate limitation losses (SLL) would be made to reflect the CbC FTC limitation.

The HW&M Proposal would provide four types of taxable units: (1) each CFC with respect to which the taxpayer is a US shareholder; (2) an interest in a pass-through entity (e.g., a partnership or disregarded entity) that the taxpayer or a CFC holds directly or indirectly if the pass-through entity is a tax resident of a different country; (3) a branch of the taxpayer or a CFC if the branch gives rise to a taxable presence in a different country; and (4) the taxpayer itself (if not otherwise described as another taxable unit).5 Rules for attributing income and foreign income taxes to each taxable unit would be left to Treasury and the IRS to address by regulation.

If the HW&M Proposal were enacted, Treasury and the IRS would likely need to issue guidance to provide transition rules for pre-2022 excess FTCs that are (1) in the foreign branch, general and passive categories, (2) carried forward to 2022, and (3) subject to the CbC FTC Limitation, which would no longer include the foreign branch category.

Changes to the GILTI FTC

The current 20% haircut under IRC Section 960(d) for foreign taxes attributable to GILTI inclusions would decrease to 5%. The combined effect of the changes to the US corporate rate, the reduced IRC Section 250 deduction percentage, and the rule to limit expenses allocable to the GILTI category (discussed later) would be that taxpayers subject to an effective foreign tax rate of 17.43% in any given country generally would have no residual US tax on GILTI from that country. Additionally, tested foreign income taxes that may be deemed paid under IRC Section 960(d) would include foreign income taxes attributable to a tested loss. For purposes of determining foreign-source taxable income, only the IRC Section 250 deduction would be allocable to GILTI inclusions; none of the taxpayer's other expenses (such as interest and stewardship) would be allocable to the GILTI basket or reduce the GILTI FTC limitation.

Repeal of current IRC 904(b)(4) and treatment of IRC Section 245A dividends as tax-exempt

Under current law, IRC Section 904(b)(4) requires domestic corporations to disregard, for purposes of determining their FTC limitation, both the foreign-source portion of any dividend income from a "specified 10%-owned foreign corporation" and any deductions that are attributable to producing that income. The HW&M Proposal would repeal current IRC Section 904(b)(4) and amend IRC Section 864(e)(3) to favorably treat IRC Section 245A-eligible dividends as "tax-exempt income" (and the corresponding portion of stock of the foreign corporation that relates to the IRC Section 245A-eligible dividend as a "tax-exempt asset") for purposes of allocating and apportioning expenses.

Changes to FTC carryover rules

Any excess FTCs, including excess GILTI FTCs, would be carried forward five years, with no carryback. This contrasts with current law, which prohibits any carryover for GILTI FTCs, while allowing a 10-year carryforward and 1-year carryback for non-GILTI FTCs.

Implications: The CbC FTC Limitation is not likely to be a strict per-country limitation for a multinational insurer. It is fairly common for a US-based insurance group to own CFCs in multiple jurisdictions, have one or more foreign branches of an insurance company treated as domestic for US federal income tax purposes under an IRC Section 953(d) election, and derive foreign-source investment income on portfolio investments held directly by US insurance companies in the group. To the extent that a US insurer's foreign-source income is not received through a CFC, pass-through entity or branch taxable unit, the foreign-source income and associated foreign taxes likely would reside in the taxpayer's own taxable unit. Accordingly, such directly-received foreign-source income would be subject to a different FTC limitation than the taxpayer's per-country FTC limitations containing income and taxes with respect to CFC, foreign branch and/or pass-through entity taxable units; a different FTC limitation would apply even if the foreign-source income directly received by the US insurer were from the same country as one of its other per-country FTC limitations.

With the exception of the five-year carryforward period, the changes to the GILTI FTC are generally expected to be favorable to multinational insurers. Allowing deemed-paid foreign taxes with respect to tested-loss CFCs, and the ability to carry forward a net tested loss in determining GILTI (discussed previously), would help mitigate the effect of timing differences common to CFC insurance companies. The five-year GILTI FTC carryforward period, while an improvement over current law, would not accommodate the economic cycle of insurance companies, particularly those insurers exposed to catastrophe losses.

The HW&M Proposal does not address how the CbC Limitation would interact with the IRC Section 904(d)(2)(C) exception to passive-category income for financial services income, and whether the exception would apply on a country-by-country basis to the taxable unit(s) that reside in that country.

Interest expense limitations

The HW&M Proposal would add new IRC Section 163(n), which would limit the interest deductibility of certain domestic corporations that are part of a multinational group that prepares consolidated financial statements (IFR group) according to the domestic corporation's allocable share of the group's net interest expense. This new limitation would apply in conjunction with current IRC Section 163(j) so that interest deductions could not exceed whichever limitation is more restrictive. Proposed IRC Section 163(o) would allow disallowed interest expense under IRC Section 163(j) or proposed IRC Section 163(n) to be carried forward, but only up to five years, not indefinitely like current IRC Section 163(j).

The limitation would apply only to a "specified domestic corporation" (SDC), or a domestic corporation whose three-year average net interest expense exceeds $12 million. For purposes of this threshold, an aggregation rule treats domestic corporations that are members of the same IFR group as a single corporation.

Implications: Because all domestic corporations within an IFR group would be treated as a single corporation for purposes of determining whether a domestic corporation is an SDC, one group member's interest income from portfolio investments could presumably offset another's interest expense when determining the group's SDC status. On this basis, proposed IRC Section 163(n) should not apply to a domestic insurance group if the interest income earned by the domestic group members outweighs their interest expense.

Base erosion and anti-abuse tax (BEAT)

The HW&M Proposal would significantly modify IRC Section 59A while retaining its general framework. Specifically, the proposal would increase the BEAT rate from 10% to 12.5% for tax years beginning after December 31, 2023, and before January 1, 2026; for tax years beginning after December 31, 2025, the rate would increase from 12.5% to 15%. Additionally, the base erosion percentage threshold would be eliminated prospectively for any tax year beginning after December 31, 2023.

Under current law, an applicable taxpayer's "base erosion minimum tax amount" (BEMTA) equals the excess, if any, of the BEAT rate (e.g., 10%) multiplied by the taxpayer's "modified taxable income" (MTI) over the taxpayer's regular tax liability as reduced (but not below zero) by all income tax credits except for the research credit and a certain portion of other IRC Section 38 credits. The HW&M Proposal would modify the BEMTA definition such that an applicable taxpayer's regular tax liability would not be reduced by any credits (including foreign tax credits), potentially resulting in a larger offset against the BEAT rate as applied to MTI.

The HW&M Proposal would also modify the amount of the NOL deduction taken into account for purposes of computing MTI. Under current law, the NOL deduction for purposes of computing MTI is determined without regard to the base erosion percentage of any NOL. Under the HW&M Proposal, the NOL deduction for purposes of computing MTI would be determined without regard to any deduction that is a base erosion tax benefit. Moreover, the HW&M Proposal would modify IRC Section 172, with respect to the MTI adjustment, to provide that the 80% limitation on an NOL deduction applies to MTI (rather than taxable income). Thus, for purposes of calculating MTI, the general cap on the NOL deduction for any tax year would be 80% of MTI (rather than 80% of taxable income). Corresponding modifications would be provided for measuring the remaining amount of the NOL deduction available in subsequent carryforward years.

The HW&M Proposal would provide an exception from treatment as a "base erosion payment" for payments subject to an effective rate of foreign income tax that equals or exceeds the applicable BEAT rate (currently 10% and 12.5% for tax years after December 31, 2023) (the Sufficient Foreign Tax Exception). The HW&M Proposal would also grant Treasury and the IRS broad regulatory authority to issue guidance necessary or appropriate to carry out the purposes of the Sufficient Foreign Tax Exception, including guidance on determining the effective rate of foreign income tax that may "require that any transaction or series of transactions among multiple parties be recharacterized as one or more transactions directly among any two or more such parties where the Secretary determines that such recharacterization is appropriate to carry out, or prevent avoidance of, the purposes of this section."

The HW&M Proposal would also provide an exception from treatment as a "base erosion payment" for payments that are subject to US income tax (the US Tax Exception). According to the JCT report, "payments that are subject to US income tax by either the payor or the payee are outside the scope of base erosion payments, without regard to whether the income related to such payments was eligible for a reduced rate of tax. Thus, outbound payments to a related party that are included in the computation of GILTI … , subject to withholding tax or taxable as effectively connected income to the recipient are not base erosion payments. Whether a payment is subject to Federal income tax is determined using principles similar [to] those in former [IRC Section] 163(j)(5)."

The HW&M Proposal would amend the definition of "net income tax" under IRC Section 38(c)(1) by including a reference to the tax imposed by IRC Section 59A. This change would mean that an applicable taxpayer's BEAT liability would be taken into account for purposes of the limitation on general business credits allowed under IRC Section 38(a). According to the JCT report, it is intended that taxpayers may apply general business credits under IRC Section 38 to offset the BEAT liability, though additional modifications may be necessary to achieve that result.

Implications: Although the HW&M Proposal would retain the general framework of BEAT, the proposed modifications to BEAT would significantly affect multinational insurers that engage in cross-border reinsurance or other transactions between a domestic and related foreign party. The phase out of the base erosion percentage threshold for tax years beginning after December 31, 2023, would increase the scope of insurance groups potentially subject to BEAT. Conversely, the proposed US Tax Exception and Sufficient Foreign Tax Exception would potentially mitigate a domestic insurance group's exposure to BEAT.

For example, it appears that reinsurance premiums paid by a domestic insurance group to a CFC of that group would not be treated as base erosion payments, provided that the group included the reinsurance premium in its GILTI computation. Although not stated in the JCT report, it appears that reinsurance premiums that are paid to a CFC and included in the computation of the CFC's subpart F income would also be excluded from treatment as a base erosion payment. Likewise, a reinsurance premium paid to a non-CFC foreign related party would not be treated as a base erosion payment as long as the payment were subject to an effective rate of foreign income tax that is at least the BEAT rate.

How beneficial the Sufficient Foreign Tax Exception and US Tax Exception would be would depend on how certain key items are ultimately defined, and how the effective rate of foreign income tax is determined for a particular amount paid to a foreign related party. Whether the determination is based on foreign tax rules or US federal income tax principles and takes into account timing and base differences between US and foreign rules will be of critical importance to related foreign insurers, due to routine timing and base differences for items such as reserves.

Reinsurance premiums paid by a domestic insurer or reinsurer to a foreign related party would appear to be ineligible for the US Tax Exception, as the excise tax that applies to those payments under IRC Section 4371 is not an income tax.

Other notable changes

The HW&M Proposal would make other substantive changes to the international tax rules, including:

  • Reinstating IRC Section 958(b)(4) to prohibit downward attribution from a foreign corporation, retroactive to December 31, 2017, and adding new IRC Section 951B to more narrowly allow downward attribution only to foreign-controlled US corporations
  • Repealing the one-month deferral election under IRC Section 898(c)(2) for foreign corporations with tax years beginning after November 30, 2021
  • Limiting the IRC Section 245A deduction to dividends received from CFCs, and amending IRC Section 1059 to require US shareholders to reduce their basis in CFC stock (and potentially recognize gain) upon receipt of CFC dividends attributable to earnings and profits earned during a period in which the foreign corporation was not a CFC or did not have US shareholders
  • Narrowing the definition of subpart F foreign base company sales and services income such that income currently taxed as subpart F income would be taxed as GILTI tested income unless the transaction involves a US resident, directly or by way of a branch or pass-through
  • Modifying the pro rata share rules in IRC Section 951 to provide more detailed rules addressing both a change in CFC ownership during year and dividends paid by the CFC during the year
  • Retroactively removing the application of the IRC Section 78 gross up to IRS Section 960(b)
  • Clarifying that IRC Section 961(c) basis adjustment rules apply for GILTI purposes, and that IRC Section 961(c) would apply for all purposes of the IRC
  • Expanding IRC Section 382(d) to cover carryovers of GILTI net tested losses when ownership changes
  • Extending the principles of IRC Section 338(h)(16) to transactions treated as an asset disposition for US tax purposes but as a stock disposition (or disregarded) for foreign tax purposes
  • Revising IRC Section 905(c) to broaden the scope of an FTC and shorten the time to elect to claim it

For a more detailed analysis of the international tax provisions in the HW&M Proposal, including a discussion on the proposed effective date for each provision, see Tax Alert 2021-9023.

Individual, estate, and retirement income tax changes

For life insurers, the proposed changes affecting high-income individuals, the estate tax, and various retirement plan rules would likely lead to increased demand for life insurance products. The key proposals include:

  • Increasing the top capital gains and qualified dividend income rate to 25%
  • Returning the top individual income tax rate to 39.6% from 37%
  • Expanding the net investment income tax to cover net income derived in the ordinary course of a trade or business for taxpayers with greater than $400k (single filer) or $500k (joint filer) in taxable income
  • Charging a 3% surtax on an individual's modified adjusted gross income in excess of $5 million
  • Allowing the TCJA-doubled estate tax exemption to expire after 2021, rather than after 2025
  • Modifying the estate tax valuation rules for transfers of nonbusiness assets
  • Changing how and when grantor trusts are taxed for gift and estate tax purposes and treating sales to grantor trusts as income taxable events
  • Prohibiting individuals from contributing to their individual retirement accounts (IRAs) and qualified defined contribution plans (such as 401(k) plans) once aggregate account balance values exceed $10 million
  • Accelerating the required minimum distribution rules for traditional IRAs, Roth IRAs and defined contribution retirement accounts once the aggregate account value exceeds $10 million
  • Ending higher-income individuals' ability to contribute to a Roth IRA through a conversion

For a detailed analysis of the proposed tax changes affecting individuals, estates and retirement plans in the HW&M Proposal, please see Tax Alert 2021-1696.

In addition to considering the substantive changes in the HW&M Proposal and their effects on the marketability of life insurance products, life insurers would also need to consider possible effects on product administration. Changes to systems, information reporting and withholding, and other business processes could be required if these rules were enacted.

Other business considerations

The HW&M Proposal creates a new direct pay bond called a "qualified infrastructure bond." This is similar to the Build America Bonds that were part of the American Recovery and Reinvestment Act of 2009 (ARRA).

Insurance companies were among the largest investors in Build America Bonds. According to the American Council of Life Insurers, life insurers purchased more than 23% of Build America Bonds, with a total value of nearly $15 billion, issued by state and municipal governments as part of the ARRA. If enacted, it would not be surprising if life insurers were similarly significant buyers of the new qualified infrastructure bonds.

The US insurance industry is a major institutional investor in the $3.9 trillion municipal securities market. P&C insurance companies have traditionally invested heavily in the municipal bond market. An increase in the corporate tax rate would negatively affect the after-tax yield associated with taxable bonds, which could make municipal bonds a more attractive investment, causing insurance companies to rethink their investment strategies.

A mitigating factor on the attractiveness of tax-exempt investments by insurance companies are the proration adjustments, which impact both P&C and life insurance companies. The specific proration adjustments and the treatment of P&C and life insurance companies under the HW&M Proposal differ. A P&C insurance company's tax-exempt earnings are currently subject to a 25% proration adjustment. A life insurance company's tax-exempt earnings are subject to proration based on the policyholders' share of the company's income, which is set at 30%. As discussed previously, the P&C proration adjustment is linked to corporate tax rate. Thus, if the corporate tax rate is 26.5%, the P&C proration adjustment would be 19.81% (instead of the current 25% proration rate). For life insurers, however, the policyholders' share of a life insurance company's income is fixed at 30% and does not adjust for changes in the corporate tax rate. As such, an increase in the corporate tax rate would negatively affect the tax-equivalent yield of municipal bonds for life insurers.6

For domestic equity investments, the dividends-received deduction would increase to hold constant the tax on domestic corporate-to-corporate dividends. Specifically, the deduction for dividends received from other-than-certain small businesses or those treated as "qualifying dividends" would increase from 50% to 60%. Dividends received from 20%-owned corporations would increase from 65% to 72.5%.

For both P&C and life insurers, the net impact of a corporate tax increase will generally affect product profitability, which may lead to changes in product design and pricing. On the other hand, due to the policyholder tax treatment, a corporate tax rate increase could also make corporate or bank-owned life insurance more attractive, just as increased individual rates and other changes in the HW&M Proposal could make individual life and annuity products more attractive to individuals.


The HW&M Proposal is expected to evolve prior to floor consideration, and it then must be reconciled with a tax package expected to emerge from the Senate. Thus, the HW&M Proposal should be considered as a key part of a process but not necessarily a final product that will be enacted into law. Insurance companies should consider modeling the tax changes in the HW&M Proposal, engaging with lawmakers and the Administration, and actively thinking through how to manage the potential changes to their current tax profiles if the tax legislation is enacted.


Contact Information
For additional information concerning this Alert, please contact:
Financial Services Office
   • Michael Beaty (
   • Rick Gelfond (
   • Chris Ocasal (
   • John Owsley (
Financial Services Office Professional Practice
   • Dave Osborn (


1 Statement of Statutory Accounting Principles No. 101, Income Taxes (SSAP No. 101).

2 All "Section" references are to the Internal Revenue Code (IRC) of 1986 as amended.

3 SSAP No. 101 — Exhibit A, Implementation Question and Answers (SSAP No. 101 Q&A).

4 The corresponding ASC 740 Subsections to FAS 109 paragraph 18 are ASC 740-10-30-8 and 740-10-30-9. The corresponding ASC 740 Subsection to FAS 109 paragraph 236 is ASC 740-10-55-136.

5 The term "tax resident" generally means a person or arrangement subject to tax as a resident, or a person or arrangement that gives rise to a taxable presence by reason of its activities. If an entity is organized or resident in a country that does not impose an income tax, that entity would be treated as subject to tax, unless otherwise provided.

6 For life insurers, the Tax-Equivalent Yield = [Tax-Free Municipal Bond Yield - (Tax-Free Municipal Bond Yield * Tax Rate * 30%)] / (1- Tax Rate).