Computation of, and Rules Relating to, Medical Loss Ratio, 27873-27877 [2013-11297]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 78, Number 92 (Monday, May 13, 2013)]
[Proposed Rules]
[Pages 27873-27877]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-11297]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-126633-12]
RIN 1545-BL05


Computation of, and Rules Relating to, Medical Loss Ratio

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations that provide 
guidance to Blue Cross and Blue Shield organizations, and certain other 
health care organizations, on computing and applying the medical loss 
ratio added to the Internal Revenue Code by the Patient Protection and 
Affordable Care Act. This document also contains a request for comments 
and provides notice of a public hearing on these proposed regulations.

DATES: Comments must be received by August 12, 2013. Requests to speak 
and outlines of topics to be discussed at the public hearing scheduled 
for Tuesday, September 17, 2013, at 10 a.m. must be received by August 
12, 2013.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-126633-12), Internal 
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 
20044. Submissions may be hand-delivered Monday through Friday between 
the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-126633-12), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW., 
Washington, DC, or sent electronically

[[Page 27874]]

via the Federal eRulemaking Portal at www.regulations.gov (IRS REG-
126633-12). The public hearing will be held in the IRS Auditorium of 
the Internal Revenue Building, 1111 Constitution Avenue NW., 
Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Graham R. Green, (202) 622-3970; concerning the submission of comments, 
the public hearing, and/or to be placed on the business access list to 
attend the hearing, Oluwafunmilayo Taylor, (202) 622-7180 (not toll-
free numbers).

SUPPLEMENTARY INFORMATION:

Background

    Section 833 of the Internal Revenue Code (Code) provides that Blue 
Cross and Blue Shield organizations, and certain other health care 
organizations, are entitled to: (1) Treatment as stock insurance 
companies; (2) a special deduction; and (3) computation of unearned 
premium reserves based on 100 percent, and not 80 percent, of unearned 
premiums under section 832(b)(4). This document contains proposed 
amendments to 26 CFR part 1 (Income Tax Regulations) under section 
833(c)(5). Section 833(c)(5) was added to the Code by section 9016 of 
the Patient Protection and Affordable Care Act (Affordable Care Act), 
Public Law 111-148 (124 Stat. 119 (2010)), effective for taxable years 
beginning after December 31, 2009. Section 833(c)(5) provides that 
section 833 does not apply to any organization unless the 
organization's percentage of total premium revenue expended on 
reimbursement for clinical services provided to enrollees under its 
policies during such taxable year (as reported under section 2718 of 
the Public Health Service Act), a ratio referred to for this purpose as 
the medical loss ratio (MLR), is not less than 85 percent.
    Section 2718 of the Public Health Service Act (42 U.S.C. 300gg-18) 
(PHSA) was added by section 1001 and amended by section 10101 of the 
Affordable Care Act and was incorporated into the Code by section 
9815(a)(1). Section 2718 of the PHSA is administered by the Department 
of Health and Human Services. Section 2718(a) of the PHSA requires a 
health insurance issuer to submit a report for each plan year to the 
Secretary of the Department of Health and Human Services concerning the 
percentage of total premium revenue, after accounting for collections 
or receipts for risk adjustment and risk corridors and payments of 
reinsurance, that the issuer expends: (1) On reimbursement for clinical 
services provided to enrollees under such coverage; (2) for activities 
that improve health care quality; and (3) on all other non-claims 
costs, excluding Federal and State taxes and licensing or regulatory 
fees.
    Section 2718(b) of the PHSA requires that a health insurance issuer 
offering group or individual health insurance coverage, with respect to 
each plan year, provide an annual rebate to each enrollee under such 
coverage, on a pro rata basis, if the ratio of the amount of premium 
revenue the issuer expends on costs for reimbursement for clinical 
services provided to enrollees under such coverage and for activities 
that improve health care quality to the total amount of premium revenue 
(excluding Federal and State taxes and licensing or regulatory fees and 
after accounting for payments or receipts for risk adjustment, risk 
corridors, and reinsurance under sections 1341, 1342, and 1343 of the 
Affordable Care Act (42 U.S.C. 18061, 18062, and 18063)) for the plan 
year is less than a prescribed percentage. Section 2718(b)(1)(B)(ii) 
provides that beginning on January 1, 2014, the medical loss ratio 
computed under section 2718(b) of the PHSA shall be based on expenses 
and premium revenues for each of the previous three years of the plan.
    The Department of Health and Human Services issued interim final 
regulations on December 1, 2010, effective January 1, 2011, and 
December 7, 2011, effective January 3, 2012, that were subject to 
technical corrections on December 30, 2010, and May 16, 2012, and final 
regulations on December 7, 2011, effective January 3, 2012, May 16, 
2012, effective June 15, 2012, and March 11, 2013, effective April 30, 
2013 under section 2718 of the PHSA that are codified at 45 CFR part 
158 (HHS Regulations). Relevant portions of these HHS Regulations are 
described in this preamble.

Prior Guidance

    On November 23, 2010, the Treasury Department and the IRS issued 
Notice 2010-79 (2010-49 IRB 809), which provided interim guidance and 
transitional relief to organizations under section 833(c)(5). The 
interim guidance applied to an organization's first taxable year 
beginning after December 31, 2009.
    The interim guidance provided that for purposes of determining 
whether an organization's percentage of total premium revenue expended 
on reimbursement for clinical services provided to enrollees was at 
least 85 percent (and thus satisfied the requirement of section 
833(c)(5)), organizations were required to use the definition of 
``reimbursement for clinical services provided to enrollees'' set forth 
in the HHS Regulations. In addition, the interim guidance provided that 
for purposes of determining whether the 85-percent requirement of 
section 833(c)(5) was satisfied, the IRS would not challenge the 
inclusion of amounts expended for ``activities that improve health care 
quality'' as described in the HHS Regulations.
    Notice 2010-79 also stated that the consequences for an 
organization with an MLR of less than 85 percent (an insufficient MLR) 
were as follows: (1) The organization would not be taxable as a stock 
insurance company by reason of section 833(a)(1) (but may have been 
taxable as an insurance company if it otherwise met the requirements of 
section 831(c)); (2) the organization would not be allowed the special 
deduction set forth in section 833(b); and (3) the organization would 
only take into account 80 percent, rather than 100 percent, of its 
unearned premiums for purposes of computing premiums earned on 
insurance contracts under section 832(b)(4). However, Notice 2010-79 
provided that solely for the first taxable year beginning after 
December 31, 2009, the IRS would not treat an organization as losing 
its status as a stock insurance company by reason of section 833(c)(5) 
provided the following conditions were met: (1) the organization was 
described in section 833(c) in the immediately preceding taxable year; 
(2) the organization would have been taxed as a stock insurance company 
for the current taxable year but for the enactment of section 
833(c)(5); and (3) the organization would have met the requirements of 
section 831(c) to be taxed as an insurance company for the current 
taxable year but for its activities in the administration, adjustment, 
or settlement of claims under cost-plus or administrative services-only 
contracts.
    Notice 2010-79 further provided interim guidance on whether the 
application of section 833 in a taxable year followed by nonapplication 
of that provision in the subsequent taxable year (or vice versa) could 
result in one or more changes in accounting method.
    Notice 2010-79 invited comments on: (1) What further guidance, if 
any, was needed under section 833(c)(5); (2) whether specific guidance 
was needed on accounting method issues that would arise if an 
organization lost its status as an insurance company; (3) whether 
guidance would be needed in the future on the appropriate Subchapter L 
treatment of rebates that are paid under section 2718 of the PHSA; and 
(4) how guidance could coordinate the medical loss ratio computation 
under section

[[Page 27875]]

2718 of the PHSA with the computation of MLR under section 833(c)(5).
    In Notice 2011-4 (2011-2 IRB 282) and Rev. Proc. 2011-14 (2011-4 
IRB 330), the Treasury Department and the IRS provided procedures for 
an organization to obtain automatic consent to change its method of 
accounting for unearned premiums by reason of the application of 
section 833(c)(5).
    On June 12, 2011, the Treasury Department and the IRS issued Notice 
2011-51 (2011-27 IRB 36) extending the interim guidance and 
transitional relief provided in Notice 2010-79 to an organization's 
first taxable year beginning after December 31, 2010. On May 26, 2012, 
the Treasury Department and the IRS issued Notice 2012-37 (2012-24 IRB 
1014) extending the interim guidance and transitional relief provided 
in Notice 2010-79 and Notice 2011-51, as clarified by Notice 2011-4 and 
Rev. Proc. 2011-14, through an organization's first taxable year 
beginning after December 31, 2012. Notice 2012-37 indicated that 
proposed regulations would be issued and requested comments on all 
aspects of section 833(c)(5), including how the proposed regulations 
might account for the specific reporting required under section 2718 of 
the PHSA and coordinate the computations under section 2718 of the PHSA 
and section 833(c)(5).
    The Treasury Department and the IRS received four comments in 
response to Notice 2010-79 and two comments in response to Notice 2012-
37 and have considered all comments in drafting these proposed 
regulations. The comments are discussed in more detail in this 
preamble.

Explanation of Provisions

1. Determining the MLR

    In describing the MLR computation under section 833(c)(5), the 
statute provides that the elements in the computation are to be ``as 
reported under section 2718 of the Public Service Health Act.'' As more 
specifically discussed below, commenters argued that this cross 
reference indicates that the MLR computation under section 833(c)(5) 
should be the same as the medical loss ratio computation under section 
2718(b) of the PHSA. The Treasury Department and IRS have concluded 
that this cross reference indicates that Congress intended that, to the 
extent consistent with the express language in section 833(c)(5), the 
meaning of terms and the methodology used in the MLR computation under 
section 833(c)(5) should be consistent with the definition of those 
same terms and the methodology under section 2718 of the PHSA.
a. MLR Numerator
    Commenters suggested that the term ``reimbursement for clinical 
services provided to enrollees'' in section 833(c)(5) has the same 
meaning as provided under section 2718 of the PHSA. Both section 
833(c)(5) and section 2718 of the PHSA include ``reimbursement for 
clinical services provided to enrollees'' in the numerator. Through the 
phrase ``as reported under section 2718 of the Public Health Service 
Act,'' section 833(c)(5) suggests that the meaning of ``reimbursement 
for clinical services provided to enrollees'' should be the same as the 
meaning of that phrase for section 2718 of the PHSA and the regulations 
issued under that section. Accordingly, the proposed regulations adopt 
this suggestion.
    Commenters suggested that in addition to amounts expended for 
reimbursement for clinical services provided to enrollees, the MLR 
numerator include amounts expended for ``activities that improve health 
care quality'' as reported under section 2718 of the PHSA. The proposed 
regulations do not adopt this suggestion. Unlike the phrase 
``reimbursement for clinical services provided to enrollees'' that 
appears in the description of the numerator in both section 833(c)(5) 
and section 2718 of the PHSA, ``activities that improve health care 
quality'' appears only in the description of the numerator in section 
2718 of the PHSA; it does not appear in section 833(c)(5). Accordingly, 
the Treasury Department and IRS have concluded that the MLR numerator 
in section 833(c)(5) does not include costs for ``activities that 
improve health care quality.''
b. MLR Denominator
    Commenters suggested that term total premium revenue in the MLR 
denominator under section 833(c)(5) should have the same exclusions as 
provided for under section 2718(b) of the PHSA. The proposed 
regulations adopt this suggestion. Section 833(c)(5) refers to total 
premium revenue in describing the denominator. Section 2718(b) of the 
PHSA, which sets forth the rules for computing medical loss ratio for 
that section, also refers to total premium revenue and lists specific 
exclusions that should be taken from total premium revenue, including 
taxes and regulatory fees. These proposed regulations provide that the 
same exclusions that are permitted from total premium revenue under 
section 2718(b) of the PHSA are permitted exclusions from total premium 
revenue under section 833(c)(5) because, while these exclusions are not 
expressly included in the references to total premium revenue in 
section 833(c)(5) or section 2718(a) of the PHSA, both section 
833(c)(5) and section 2718(b) of the PHSA use the term ``total premium 
revenue.'' Under the HHS Regulations, these exclusions include 
assessments and fees imposed by the Affordable Care Act (see 45 CFR 
158.221(c) and 158.240(c)). However, an organization's operating costs 
or any administrative costs associated with taxes or fees are not part 
of a State or Federal assessment and therefore may not be deducted from 
total premium revenue for purposes of the MLR calculation.
    Accordingly, the proposed regulations provide that the term ``total 
premium revenue'' for purposes of section 833(c)(5) means the total 
amount of premium revenue (excluding Federal and State taxes and 
licensing or regulatory fees and after accounting for payments or 
receipts for risk adjustment, risk corridors, and reinsurance under 
sections 1341, 1342, and 1343 of the Affordable Care Act (42 U.S.C. 
18061, 18062, and 18063)) as those terms are used for purposes of 
section 2718(b) of the PHSA and the regulations issued under that 
section.
c. Computation of MLR
    For purposes of section 2718(b) of the PHSA, section 
2718(b)(1)(B)(ii) of the PHSA and the HHS Regulations use a three-year 
period to compute the medical loss ratio, allowing certain limited 
adjustments after the end of the year to determine expenses and premium 
revenue. (See 45 CFR 158.220(b) and 158.140.) Although section 2718(b) 
of the PHSA provides that the medical loss ratio is computed for each 
``plan year,'' the HHS Regulations interpret the term ``plan year'' as 
referring to the ``MLR reporting year.'' The HHS regulations further 
define the MLR reporting year as the calendar year for medical loss 
ratio reporting and rebating purposes under section 2718(a) and (b) of 
the PHSA. (See 45 CFR 158.103.) Section 833(c)(5) refers to expenses 
and revenues for a taxable year, which is generally a calendar year for 
the organizations described in section 833(c). See section 843.
    The Treasury Department and the IRS have concluded that, for 
administrative convenience and to be consistent with the medical loss 
ratio calculation under section 2718(b)(1)(B)(ii) of the PHSA, it is 
appropriate to compute the MLR for a taxable year under section 
833(c)(5) using the same three-year period used

[[Page 27876]]

under section 2718(b) of the PHSA. Therefore, beginning with the 
effective date of these regulations, amounts used for purposes of 
section 833(c)(5) (that is, total premium revenue and total premium 
revenue expended on reimbursement for clinical services provided to 
enrollees) for each taxable year should be determined based on amounts 
reported under section 2718(a) of the PHSA for that taxable year and 
the two preceding taxable years, subject to the same adjustments that 
apply for purposes of section 2718 of the PHSA. Comments are requested 
as to whether organizations should, instead of using the three-year 
period used for purposes of section 2718(b)(1)(B)(ii) of the PHSA, 
compute their expenses and total premium revenue only for the taxable 
year for which the computation is being made under section 833(c)(5), 
and whether adoption of the proposed approach would create difficulties 
with respect to the computation of the MLR for the 2014 taxable year.

2. Nonapplication of Section 833 in Case of an Insufficient MLR

    Commenters requested that the consequences of having an 
insufficient MLR under section 833(c)(5) be limited to losing certain 
benefits of section 833. Specifically, commenters posited that an 
organization that fails the MLR requirement under section 833(c)(5) 
should not lose its status as an insurance company under section 
833(a)(1). Rather, the commenters argued that the organization should 
only suffer the loss of eligibility for the special deduction in 
section 833(b) and the less favorable computation of unearned premium 
reserves based on 80 percent, and not 100 percent, of its unearned 
premiums under section 832(b)(4).
    The proposed regulations do not adopt this recommendation. Section 
833(c)(5) provides that ``this section [833]'' shall not apply to any 
organization unless the organization satisfies the MLR requirement in 
section 833(c)(5). This language does not contemplate disallowance of 
some, but not all, of the benefits associated with treatment under 
section 833. Accordingly, the proposed regulations provide that for an 
organization described in section 833(c) that fails to satisfy the MLR 
requirement under section 833(c)(5): (1) The organization is not 
taxable as a stock insurance company by reason of section 833(a)(1), 
but may be taxable as an insurance company if it otherwise meets the 
requirements of section 831(c); (2) the organization is not allowed the 
special deduction set forth in section 833(b); and (3) if the 
organization qualifies as an insurance company under section 831(c), it 
must take into account 80 percent, rather than 100 percent, of its 
unearned premiums under section 832(b)(4) as it applies to other non-
life insurance companies.
    The determination of whether an organization's MLR under section 
833(c)(5) is at least 85 percent is made annually. Accordingly, an 
organization's MLR may be sufficient in one year, but not another. For 
this reason, the Treasury Department and the IRS have concluded that an 
organization described in section 833(c) that has an insufficient MLR 
under section 833(c)(5) will lose the benefits of section 833 only for 
the taxable year or years for which the organization's MLR is 
insufficient. If the same organization meets the MLR standard for a 
later taxable year, the organization would be entitled to claim the 
benefits of section 833 for that taxable year and subsequent taxable 
years for which its MLR is sufficient. Comments are requested on 
whether further guidance is needed for an organization that is 
described in section 833 for only some taxable years because of section 
833(c)(5).
    Commenters requested that the Treasury Department and the IRS 
establish a regime under which an organization that has failed to 
satisfy the MLR ratio by a de minimis amount would have an opportunity 
to pay an amount to the IRS to prevent loss of treatment under section 
833. The proposed regulations do not adopt this suggestion. The 
Treasury Department and the IRS understand that the consequences under 
section 833(c)(5) may be severe if an organization's MLR is 
insufficient. However, the statutory framework does not contemplate a 
penalty or other payment to the IRS. The Treasury Department and the 
IRS request comments on whether there are other possible means 
consistent with the statute of mitigating these consequences.

3. Other Comments

    Commenters requested that the Treasury Department and the IRS 
permit certain nondeductible fees and taxes imposed by the Affordable 
Care Act to be taken into account for purposes of calculating an 
organization's special deduction for items attributable to the health-
related business of the organization under section 833(b). Commenters 
also submitted comments regarding the treatment of MLR rebates as 
return premiums under section 832(b)(4), and the income and employment 
tax consequences of MLR rebates. The proposed regulations do not 
address these issues because they are not within the scope of the 
proposed regulations.

Proposed Effective Date

    These proposed regulations are proposed to apply to taxable years 
beginning after December 31, 2013.

Availability of IRS Documents

    The IRS notices and revenue procedure cited in this preamble are 
published in the Internal Revenue Cumulative Bulletin and are available 
at https://www.irs.gov.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866, as supplemented by Executive Order 13563. Therefore, a 
regulatory assessment is not required. It also has been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
does not apply to these proposed regulations and because the 
regulations do not impose an information collection on small entities, 
the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. 
Pursuant to section 7805(f) of the Code, this notice of proposed 
rulemaking has been submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comments on its impact on small 
business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the ADDRESSES heading. 
The Treasury Department and the IRS request comments on all aspects of 
the proposed rules. Comments are specifically requested on the 
relationship between section 833(c)(5) and section 2718 of the PHSA. 
All comments will be available at www.regulations.gov or upon request.
    A public hearing has been scheduled for Tuesday, September 17, 
2013, at 10 a.m., in the IRS Auditorium of the Internal Revenue 
Building, 1111 Constitution Avenue NW., Washington, DC. Due to building 
security procedures, visitors must enter at the Constitution Avenue 
entrance. In addition, all visitors must present photo identification 
to enter the building. Because of access restrictions, visitors will 
not be admitted beyond the immediate entrance more than 30 minutes 
before the hearing starts. For information about having your name

[[Page 27877]]

placed on the building access list to attend the hearing, see the FOR 
FURTHER INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit written 
(signed original and eight (8) copies) or electronic comments and an 
outline of the topics to be discussed and the time to be devoted to 
each topic by August 12, 2013. A period of 10 minutes will be allotted 
to each person for making comments. An agenda showing the scheduling of 
the speakers will be prepared after the deadline for receiving outlines 
has passed. Copies of the agenda will be available free of charge at 
the hearing.

Drafting Information

    The principal author of these regulations is Graham R. Green, 
Office of Associate Chief Counsel (Financial Institutions & Products). 
However, other personnel from the Treasury Department and the IRS 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendment to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *
0
Par. 2. Section 1.833-1 is added to read as follows:


Sec.  1.833-1  Medical loss ratio under section 833(c)(5).

    (a) In general. Section 833 does not apply to an organization 
unless the organization's medical loss ratio (MLR) for a taxable year 
is at least 85 percent. Paragraph (b) of this section provides 
definitions that apply for purposes of section 833(c)(5) and this Sec.  
1.833-1. Paragraph (c) of this section provides rules for computing an 
organization's MLR under section 833(c)(5). Paragraph (d) of this 
section addresses the treatment under section 833 of an organization 
that has an MLR of less than 85 percent. Paragraph (e) of this section 
provides the effective/applicability date.
    (b) Definitions. The following definitions apply for purposes of 
section 833(c)(5) and Sec.  1.833-1.
    (1) Reimbursement for clinical services provided to enrollees. The 
term reimbursement for clinical services provided to enrollees has the 
same meaning as that term has in 42 U.S.C. 300gg-18 and the regulations 
issued under that section (see 45 CFR 158.140).
    (2) Total premium revenue. The term total premium revenue means the 
total amount of premium revenue (excluding Federal and State taxes and 
licensing or regulatory fees and after accounting for payments or 
receipts for risk adjustment, risk corridors, and reinsurance under 
sections 1341, 1342, and 1343 of the Patient Protection and Affordable 
Care Act, Public Law 111-148 (124 Stat. 119 (2010)) (42 U.S.C. 18061, 
18062, and 18063)) as those terms are used for purposes of 42 U.S.C. 
300gg-18(b) and the regulations issued under that section (see 45 CFR 
part 158).
    (c) Computation of MLR under section 833(c)(5)--(1) In general. An 
organization's MLR with respect to a taxable year is the ratio, 
expressed as a percentage, of the MLR numerator, as described in 
paragraph (c)(2) of this section, to the MLR denominator, as described 
in paragraph (c)(3) of this section.
    (2) MLR numerator. The numerator of an organization's MLR is the 
total premium revenue expended on reimbursement for clinical services 
provided to enrollees under its policies for the taxable year, computed 
in the same manner as those expenses are computed for the plan year for 
purposes of 42 U.S.C. 300gg-18(b) and regulations issued under that 
section (see 45 CFR part 158).
    (3) MLR denominator. The denominator of an organization's MLR is 
the organization's total premium revenue for the taxable year, computed 
in the same manner as the total premium revenue is computed for the 
plan year for purposes of 42 U.S.C. 300gg-18(b) and regulations issued 
under that section (see 45 CFR part 158).
    (d) Failure to qualify under section 833(c)(5). If, for any taxable 
year, an organization's MLR is less than 85 percent, then beginning in 
that taxable year and for each subsequent taxable year for which the 
organization's MLR remains less than 85 percent, paragraphs (d)(1) 
through (d)(3) of this section apply.
    (1) Automatic stock insurance company status. The organization is 
not taxable as a stock insurance company by reason of section 
833(a)(1), but may be taxable as an insurance company if it otherwise 
meets the requirements of section 831(c);
    (2) Special deduction. The organization is not allowed the special 
deduction set forth in section 833(b); and
    (3) Premiums earned. The organization must take into account 80 
percent, rather than 100 percent, of its unearned premiums under 
section 832(b)(4) as it applies to other non-life insurance companies, 
provided the organization qualifies as an insurance company by meeting 
the requirements of section 831(c).
    (e) Effective/applicability date. This section applies to taxable 
years beginning after December 31, 2013.


Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2013-11297 Filed 5-10-13; 8:45 am]
BILLING CODE 4830-01-P