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Department of the Treasury 2020 Internal Revenue Service Instructions for Form 1120-PC U.S. Property and Casualty Insurance Company Income Tax Return

Section references are to the Internal Revenue Temporary allowance of 100% for Code unless otherwise noted. Future Developments For the latest information about business meals. A corporation is Contents Page developments related to Form 1120-PC allowed a 100% deduction for certain What's New ...... 1 and its instructions, such as legislation business meal expenses paid or incurred Photographs of Missing Children ....1 enacted after they were published, go to in 2021 and 2022. See Travel, meals, and The Taxpayer Advocate Service .....1 IRS.gov/Form1120PC. entertainment. How To Get Forms and Modification for net operating losses Publications ...... 2 Additional guidance may be issued (NOLs). Losses that occurred in 2018, General Instructions ...... 2 subsequent to the publication of these 2019, or 2020 can be carried back up to 5 instructions. Please review any additional Purpose of Form ...... 2 tax years preceding the year of the loss. information in the website prior to the Who Must File ...... 2 See the instructions for line 37. completion of the form. Where To File ...... 2 Electronic Filing ...... 2 What's New Photographs of When To File ...... 2 Missing Children Who Must Sign ...... 2 New payroll credit for required paid The Internal Revenue Service is a proud Paid Preparer Authorization .....3 sick leave or family leave. Under the partner with the National Center for Statements ...... 3 Family First Coronovirus Response Act Missing & Exploited Children® (NCMEC). Assembling the Return ...... 3 (FFCRA), as amended, an eligible Photographs of missing children selected Tax Payments ...... 3 employer can take a credit for amounts by the Center may appear in instructions paid against payroll taxes owed for Estimated Tax Payments ...... 4 on pages that would otherwise be blank. qualified sick leave or family leave if Interest and Penalties ...... 4 You can help bring these children home incurred during the allowed period. by looking at the photographs and calling Accounting Methods ...... 4 However, there is no double tax benefit Accounting Period ...... 5 1-800-THE-LOST (1-800-843-5678) if you allowed and the amounts claimed are recognize a child. Rounding Off to Whole reportable as income on Schedule A, Dollars ...... 5 line 13. See the instructions for Recordkeeping ...... 5 Schedule A, line 13, later. The Taxpayer Advocate Other Forms and Service New employee retention credit. The Statements That May Be The Taxpayer Advocate Service (TAS) is Required ...... 5 Coronavirus Aid, Relief, and Economic an independent organization within the Specific Instructions ...... 5 Security Act (CARES Act) allows a new employee retention credit for qualified IRS that helps taxpayers and protects Period Covered ...... 5 taxpayer rights. TAS's job is to ensure that Name and Address ...... 5 wages. Any qualified wages for which an eligible employer claims against payroll every taxpayer is treated fairly and knows Identifying Information ...... 6 taxes for the employee retention credit and understands their rights under the Employer Identification Taxpayer Bill of Rights. Number (EIN) ...... 6 may not be taken into account for purposes of determining other credits. Section 953 Elections ...... 6 As a taxpayer, the corporation has Final Return, Name Change, Temporary suspension of limitations rights that the IRS must abide by in its Address Change, or on certain contributions. Under the dealings with the corporation. TAS can Amended Return ...... 7 CARES Act, a corporation may elect to help the corporation if: Taxable Income ...... 7 deduct certain qualified cash contributions • A problem is causing financial difficulty Tax Computation and made in 2020 and 2021 without regard to for the business, Payments ...... 7 the 10% taxable income limit. The total • The business is facing an immediate Schedule A ...... 9 amount of the contributions claimed threat of adverse action, and Schedule B, Part I ...... 15 cannot exceed 25% of the excess of the • The corporation has tried repeatedly to Schedule B, Part II ...... 15 corporation's taxable income over all other contact the IRS but no one has Schedule C ...... 16 allowable charitable contributions. See the responded, or the IRS hasn't responded Schedule E ...... 18 instructions for line 21, later. by the date promised. Schedule F ...... 18 Disaster relief charitable contribu- The TAS tax toolkit at Schedule G ...... 19 tions. The 10% limit on the deduction for TaxpayerAdvocate.IRS.gov can help the Schedule H ...... 19 charitable contributions does not apply to corporation understand these rights. Schedule I ...... 19 contributions made after December 31, Schedule L ...... 22 2019, and before February 26, 2021, to TAS has offices in every state, the Schedule M-1 ...... 22 certain charitable organizations for relief in District of Columbia, and Puerto Rico. Index ...... 23 qualified disaster areas. See Temporary Local advocates' numbers are in their suspension of 10% limitation for certain local directories and at disaster-related contributions, later. TaxpayerAdvocate.IRS.gov/Contact-Us.

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The corporation can also call TAS at 877-777-4778. Where To File

TAS also works to resolve large-scale File the corporation's return at the applicable IRS address listed below. or systemic problems that affect many taxpayers. If the corporation knows of one of these broad issues, please report it to If the corporation's principal business, office, TAS through the Systemic Advocacy or agency is located in: Use the following addresses: Management System at IRS.gov/SAMS. Department of the Treasury The United States Internal Revenue Service For more information, go to Ogden, UT 84201-0012 IRS.gov/Advocate. Internal Revenue Service How To Get Forms A foreign country or U.S. possession P.O. Box 409101 and Publications Ogden, UT 84409 Internet. You can access the IRS website 24 hours a day, 7 days a week, at IRS.gov and reserves, or otherwise ceases to be must generally file by the 15th day of the to: taxed under section 831, but continues its 4th month after the short period ends. A • Download forms, instructions, and corporate existence while winding up and corporation that has dissolved must publications; liquidating its affairs, should file Form generally file by the 15th day of the 4th • Order IRS products online; 1120, U.S. Corporation Income Tax month after the date it dissolved. • Research your tax questions online; Return. • Search publications online by topic or However, a corporation with a fiscal tax Life insurance companies. Life keyword; year ending June 30 must file by the 15th insurance companies should file Form • View Internal Revenue Bulletins (IRBs) day of the 3rd month after the end of its 1120-L, U.S. Life Insurance Company published in recent years; and tax year. A corporation with a short tax Income Tax Return. • Sign up to receive local and national tax year ending anytime in June will be news by email. Foreign-owned domestic disregarded treated as if the short year ended on June entities. For tax years beginning after 30, and must file by the 15th day of the 3rd Tax forms and publications. The 2016 and ending after December 12, month after the end of its tax year. corporation can download or print all of the 2017, if a foreign person, including a forms and publications it may need on If the due date falls on a Saturday, foreign corporation, wholly owns a IRS.gov/FormsPubs. Otherwise, the Sunday, or legal holiday, the corporation domestic disregarded entity (DE), the corporation can go to IRS.gov/ can file on the next business day. domestic DE is treated as a domestic OrderForms to place an order and have corporation separate from its owner (the Private Delivery Services forms mailed to it. The IRS will process foreign corporation) for purposes of the your order for forms and publications as Corporations can use certain private reporting requirements under section soon as possible. delivery services (PDSs) designated by 6038A that apply to 25% foreign-owned the IRS to meet the “timely mailing as domestic corporations. These rules apply timely filing” rule for tax returns. Go to General Instructions to a domestic DE owned by a foreign IRS.gov/PDS for the current list of insurance company that makes an designated services. election under section 953(c)(3)(C) but do Purpose of Form The PDS can tell you how to get written not apply to a domestic DE owned by a Use Form 1120-PC, U.S. Property and proof of the mailing date. foreign insurance company that makes an Casualty Insurance Company Income Tax election under section 953(d) (for Return, to report the income, gains, For the IRS mailing address to use if information on these elections, see the losses, deductions, credits, and to figure you are using a PDS, go to IRS.gov/ instructions for Item D). If a foreign the income tax liability of insurance PDSstreetAddress. insurance company electing under section companies, other than life insurance 953(c)(3)(C) wholly owns a domestic DE, Private delivery services cannot companies. the DE may be required to file Form 5472, ! deliver items to P.O. boxes. You Information Return of a Foreign Owned CAUTION must use the U.S. Postal Service Who Must File Corporation. For additional information to mail any item to an IRS P.O. box Every domestic nonlife insurance and coordination with Form 5472 filing by address. company and every foreign corporation the domestic DE, see the Instructions for that would qualify as a nonlife insurance Form 5472. Extension of Time To File company subject to taxation under section File Form 7004, Application for Automatic 831, if it were a U.S. corporation, must file Electronic Filing Extension of Time To File Certain Form 1120-PC. This includes See IRS.gov/Filing for the latest Business Income Tax, Information, and organizations described in section 501(m) information. Also, see IRS.gov/MeF and Other Returns, to request an extension of (1) that provide commercial-type click on the link for “Modernized e-File time to file. Generally, the corporation insurance and organizations described in Forms” for information on which forms the must file Form 7004 by the regular due section 833. corporation can or must e-file. date of the return. See the Instructions for Exceptions. A nonlife insurance Form 7004. company that is: When To File Who Must Sign • Exempt under section 501(c)(15) Generally, a corporation must file its should file Form 990, Return of income tax return by the 15th day of the The return must be signed and dated by: Organization Exempt From Income Tax; 4th month after the end of its tax year. A • The president, vice president, treasurer, • Subject to taxation under section 831, new corporation filing a short-period return assistant treasurer, chief accounting and disposes of its insurance business officer; or

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• Any other corporate officer (such as a 2021 tax return. If the corporation wants to 11. Additional schedules in tax officer) authorized to sign. expand the paid preparer's authorization alphabetical order. or revoke the authorization before it ends, 12. Additional forms in numerical order. If a return is filed on behalf of a see Pub. 947, Practice Before the IRS and corporation by a receiver, trustee, or Power of Attorney. 13. Supporting statements and assignee, the fiduciary must sign the attachments. return instead of the corporate officer. Returns and forms signed by a receiver or Statements Complete every applicable entry space trustee in bankruptcy on behalf of a on Form 1120-PC. Do not enter “See NAIC annual statement. Regulations Attached” or “Available Upon Request” corporation must be accompanied by a section 1.6012-2(c) requires that the NAIC copy of the order or instructions of the instead of completing the entry spaces. If annual statement be filed with Form more space is needed on the forms or court authorizing signing of the return or 1120-PC. A foreign insurance company form. schedules, attach separate sheets using subject to tax under section 831 that is not the same size and format as the printed If an employee of the corporation required to file an annual statement must forms. If there are supporting statements completes Form 1120-PC, the paid file a copy of the pro forma annual and attachments, arrange them in the preparer space should remain blank. statement. A penalty for the late filing of a same order as the schedules or forms Anyone who prepares Form 1120-PC but return may be imposed for not including they support and attach them last. Show does not charge the corporation should the annual statement when the return is the totals on the printed forms. Enter the not complete that section. Generally, filed. However, see Electronic filing, next. corporation's name and EIN on each anyone who is paid to prepare the return Electronic filing. If the domestic or supporting statement or attachment. must sign it and fill in the “Paid Preparer foreign nonlife insurance company files Use Only” section. Form 1120-PC electronically, do not Tax Payments The paid preparer must complete the attach the annual statement or pro forma Generally, the corporation must pay any required preparer information and: annual statement to the electronically filed tax due in full no later than the due date for • Sign the return in the space provided return. However, you must provide a copy filing its tax return (not including for the preparer's signature, and of the annual statement or pro forma extensions). See the instructions for • Give a copy of the return to the annual statement to the IRS if requested line 17. If the due date falls on a Saturday, taxpayer. and retain it with your other tax records for Sunday, or legal holiday, the payment is the period required by the regulations. due on the next day that isn't a Saturday, Note. A paid preparer may sign original or Reconciliation. Corporations that do Sunday, or legal holiday. amended returns by rubber stamp, not file a Schedule M-3 (Form 1120-PC) mechanical device, or computer software Electronic Deposit with Form 1120-PC must attach a Requirement program. statement that reconciles the NAIC Annual Statement to Form 1120-PC. Corporations must use electronic funds Paid Preparer transfer to make all federal tax deposits Authorization Assembling the Return (such as deposits of employment, excise, and corporate income tax). Generally, If the corporation wants to allow the IRS to To ensure that the corporation's tax return electronic funds transfers are made using discuss its 2020 tax return with the paid is correctly processed, attach all the Electronic Federal Tax Payment preparer who signed it, check the “Yes” schedules and other forms after page 9 of System (EFTPS). box in the signature area of the return. Form 1120-PC in the following order. This authorization applies only to the 1. Schedule N (Form 1120), Foreign If the corporation does not want to use individual whose signature appears in the Operations of U.S. Corporations. EFTPS, it can arrange for its tax “Paid Preparer Use Only” section of the professional, financial institution, payroll 2. Schedule D (Form 1120), Capital return. It does not apply to the firm, if any, service, or other trusted third party to Gains and Losses. shown in that section. make deposits on its behalf. Also, it can 3. Schedule O (Form 1120), Consent arrange for its financial institution to If the “Yes” box is checked, the Plan and Apportionment Schedule for a submit a same-day payment (discussed corporation is authorizing the IRS to call Controlled Group. later) on its behalf. EFTPS is a free service the paid preparer to answer any questions 4. Form 8991, Tax on Base Erosion provided by the Department of the that may arise during the processing of its Payments of Taxpayers With Substantial Treasury. Services provided by a tax return. The corporation is also authorizing Gross Receipts. professional, financial institution, payroll the paid preparer to: service, or other third party may have a Give the IRS any information that is 5. Form 8992, U.S. Shareholder • fee. missing from the return, Calculation of Global Intangible Low-Tax • Call the IRS for information about the Income (GILTI). To get more information about EFTPS processing of the return or the status of 6. Form 8993, Section 250 Deduction or to enroll in EFTPS, visit EFTPS.gov or any related refund or payment(s), and for Foreign-Derived Intangible Income call 800-555-4477 (TTY/TDD • Respond to certain IRS notices about (FDII) and Global Intangible Low-Taxed 800-733-4829). math errors, offsets, and return Income (GILTI). preparation. Depositing on time. To make EFTPS 7. Form 8302, Electronic Deposit of deposits on time, the corporation must The corporation is not authorizing the Tax Refund of $1 Million or More. submit the transaction by 8 p.m. Eastern paid preparer to receive any refund check, 8. Form 4136, Credit for Federal Tax time the day before the date the deposit is bind the corporation to anything (including Paid on Fuels. due. If the corporation uses a third party to any additional tax liability), or otherwise 9. Form 8941, Credit for Small make deposits on its behalf, they may represent the corporation before the IRS. Employer Health Insurance Premiums. have different cutoff times. The authorization will automatically end 10. Form 851, Affiliations Schedule. Same-day wire payment option. If the no later than the due date (excluding corporation fails to submit a deposit extensions) for filing the corporation's transaction on EFTPS by 8 p.m. Eastern

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time the day before the date a deposit is Foreign insurance companies, full amount of the unpaid trust fund tax. due, it can still make the deposit on time ! see Notice 90-13, 1990-1 C.B. See the Instructions for Form 720 or Pub. by using the Federal Tax Collection CAUTION 321, before computing estimated 15 (Circular E), Employer's Tax Guide, for Service (FTCS). Before using the tax. details, including the definition of same-day wire payment method, the responsible persons. corporation will need to make Other penalties. Other penalties can be arrangements with its financial institution Interest and Penalties imposed for negligence, substantial ahead of time regarding availability, If the corporation receives a notice understatement of tax, reportable deadlines, and costs. Financial institutions about penalties after it files its transaction understatements, and fraud. may charge a fee for payments made this return, send the IRS an See sections 6662, 6662A, and 6663. way. To learn more about making a explanation and we will determine if the same-day wire payment, go to IRS.gov/ corporation meets the criteria for the SameDayWire. reasonable cause exception to the Accounting Methods penalties. Do not attach an explanation Figure taxable income using the method of Estimated Tax Payments when the corporation's return is filed. accounting regularly used in keeping the corporation's books and records. In all Generally, the following rules apply to the cases, the method used must clearly show corporation's payments of estimated tax. Interest. Interest is charged on taxes taxable income. Permissible methods The corporation must make installment paid late even if an extension of time to file • include cash, accrual, or any other method payments of estimated tax if it expects its is granted. Interest is also charged on authorized by the Internal Revenue Code. total tax for the year (less applicable penalties imposed for failure to file, credits) to be $500 or more. negligence, fraud, substantial valuation The gross amounts of underwriting and • The installments are due by the 15th misstatements, substantial investment income should be computed day of the 4th, 6th, 9th, and 12th months understatements of tax, and reportable on the basis of the Statement of Income of of the tax year. If any date falls on a transaction understatements from the due the NAIC annual statement to the extent Saturday, Sunday, or legal holiday, the date (including extensions) to the date of not inconsistent with the Internal Revenue installment is due on the next regular payment. The interest charge is figured at Code and its Regulations. In all cases, the business day. a rate determined under section 6621. method used must clearly show taxable • The corporation must use electronic Late filing of return. A corporation that income. funds transfer to make installment does not file its tax return by the due date, Change in accounting method. payments of estimated tax. including extensions, may be penalized • Use Form 1120-W, Estimated Tax for Generally, the corporation must get IRS 5% of the unpaid tax for each month or consent to change either an overall Corporations, as a worksheet to compute part of a month the return is late, up to a estimated tax. See the Instructions for method of accounting or the accounting maximum of 25% of the unpaid tax. The treatment of any material item for income Form 1120-W. minimum penalty for a return that is over • Penalties may apply if the corporation tax purposes. To obtain consent, the 60 days late is the smaller of the tax due corporation must generally file Form 3115, does not make required estimated tax or $435 (adjusted for inflation). The payment deposits. See Estimated tax Application for Change in Accounting penalty will not be imposed if the Method, during the tax year for which the penalty below. corporation can show that the failure to file • If the corporation overpaid estimated change was requested. See the on time was due to reasonable cause. See Instructions for Form 3115 for more tax, it may be able to get a quick refund by Caution, earlier. filing Form 4466, Corporation Application information and exceptions, including filing for Quick Refund of Overpayment of Late payment of tax. A corporation that exceptions for qualified small business Estimated Tax. does not pay the tax when due may taxpayers and filing exceptions for certain generally be penalized 1/2 of 1% of the first-year tangible property changes for See the instructions for Form 1120-PC, unpaid tax for each month or part of a small business taxpayers. Also, see Pub. lines 15c and 15e, later. month the tax is not paid, up to a 538. Estimated tax penalty. A corporation maximum of 25% of the unpaid tax. See Safe harbor method of accounting for that does not make estimated tax Caution, earlier. premium acquisition expenses. payments when due may be subject to an Trust fund recovery penalty. This Insurance companies subject to tax under underpayment penalty for the period of penalty may apply if certain excise, section 831 are provided with a safe underpayment. Generally, a corporation is income, social security, and Medicare harbor method of accounting for premium subject to the penalty if its tax liability is taxes that must be collected or withheld acquisition expenses. Form 3115 must be $500 or more and it did not timely pay at are not collected or withheld, or these filed in order to change to the safe harbor least the smaller of: taxes are not paid. These taxes are method. For more information, see the • Its tax liability for the current year, or generally reported on: Instructions for Form 3115. Its prior year tax. • • Form 720, Quarterly Federal Excise Certain changes in method of account- See section 6655 for details and Tax Return; ing for organizations to which section exceptions, including special rules for • Form 941, Employer's QUARTERLY 833 applies. Blue Cross or Blue Shield large corporations. Federal Tax Return; organizations under section 833(c)(2), or Use Form 2220, Underpayment of • Form 944, Employer's ANNUAL organizations described in section 833(c) Estimated Tax by Corporations, to see if Federal Tax Return; or (3), can obtain automatic consent to the corporation owes a penalty and to • Form 945, Annual Return of Withheld change the method of accounting for figure the amount of the penalty. If Form Federal Income Tax. unearned premiums resulting from either a 2220 is completed, enter the penalty on The trust fund recovery penalty may be failure to meet the medical loss ratio line 16. See the instructions for line 16. imposed on all persons who are (MLR) requirements of section 833(c)(5), determined by the IRS to be responsible or meeting the MLR requirements after for collecting, accounting for, or paying failing to do so in a prior year. Form 3115 over these taxes, and who acted willfully in must be filed in order to make this change not doing so. The penalty is equal to the

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in accounting method. See the Form 8993, Section 250 Deduction for an elective relief agreement and/or an Instructions for Form 3115. Foreign-Derived Intangible Income annual certification, as provided in See Rev. Proc. 2017-30. (FDII) and Global Intangible Regulations section 1.1503-2(g)(2). Low-Taxed Income (GILTI). Use Form Election to reduce basis under section Accounting Period 8993 to figure the amount of the eligible 362(e)(2)(C). If property is transferred to An insurance company must figure its deduction for FDII and GILTI under a corporation subject to section 362(e)(2), taxable income on the basis of a tax year. section 250 and attach it to Form the transferor and the acquiring A tax year is the annual accounting period 1120-PC. corporation may elect, under section an insurance company uses to keep its Reportable transaction disclosure 362(e)(2)(C), to reduce the transferor's records and report its income and statement. Participants in any reportable basis in the stock received instead of expenses. transaction must file Form 8886, reducing the acquiring corporation's basis Reportable Transaction Disclosure in the property transferred. Once made, As a general rule under section 843, Statement. See the Instructions for Form the election is irrevocable. For more the tax year for every insurance company 8886. information, see section 362(e)(2) and is the calendar year. However, if an Regulations section 1.362-4. If an election insurance company joins in the filing of a Reportable transactions by material is made, a statement must be filed in consolidated return, it may adopt the tax advisors. Material advisors to any accordance with Regulations section year of the common parent corporation reportable transaction must file Form 1.362-4(d)(3). even if that year is not a calendar year. 8918, Material Advisor Disclosure Statement. See the Instructions for Form Other forms and statements. See Pub. Rounding Off to Whole 8918. 542, Corporations, for a list of other forms and statements a corporation may need to Dollars Transfers to a corporation controlled file in addition to the forms and statements The corporation may enter decimal points by the transferor. Every significant discussed throughout these instructions. and cents when completing its tax return. transferor (as defined in Regulations However, the corporation should round off section 1.351-3(d)) that receives stock of cents to whole dollars on its return, forms, a corporation in exchange for property in a Specific Instructions and schedules to make completing its nonrecognition event must include the return easier. The corporation must either statement required by Regulations section Period Covered round off all amounts on its return to whole 1.351-3(a) on or with the transferor's tax Generally, file the 2020 return for calendar dollars, or use cents for all amounts. To return for the tax year of the exchange. year 2020. However, if an insurance round, drop amounts under 50 cents and The transferee corporation must include company joins in the filing of a increase amounts from 50 to 99 cents to the statement required by Regulations consolidated return, it may adopt the tax the next dollar. For example, $8.40 rounds section 1.351-3(b) on or with its return for year of the common parent corporation to $8 and $8.50 rounds to $9. the tax year of the exchange, unless all the even if that year is not a calendar year. For required information is included in any a fiscal or short tax year return, fill in the If two or more amounts must be added statement(s) provided by a significant tax year space at the top of the form. to figure the amount to enter on a line, transferor that is attached to the same include cents when adding the amounts return for the same section 351 exchange. and round off only the total. If the transferor or transferee corporation Name and Address is a controlled foreign corporation, each Enter the corporation's true name (as set Recordkeeping U.S. shareholder (within the meaning of forth in the charter or other legal document creating it), address, and EIN on the Keep the corporation's records for as long section 951(b)) must include the required appropriate lines. Enter the address of the as they may be needed for the statement on or with its return. corporation's principal office or place of administration of any provision of the Distributions under section 355. Every business. Include the suite, room, or other Internal Revenue Code. Usually, records corporation that makes a distribution of unit number after the street address. If the that support an item of income, deduction, stock or securities of a controlled post office does not deliver mail to the or credit on the return must be kept for 3 corporation, as described in section 355 street address and the corporation has a years from the date the return is due or (or so much of section 356 as it relates to P.O. box, show the box number instead. filed, whichever is later. Keep records that section 355), must include the statement verify the corporation's basis in property required by Regulations section Note. Do not use the address of the for as long as they are needed to figure 1.355-5(a) on or with its return for the year registered agent for the state in which the the basis of the original or replacement of the distribution. A significant distributee corporation is incorporated. For example, property. (as defined in Regulations section if a business is incorporated in Delaware The corporation should keep copies of 1.355-5(c)) that receives stock or or Nevada and the corporation's principal all filed returns. They help in preparing securities of a controlled corporation must office is located in Little Rock, Arkansas, future and amended returns and in the include the statement required by the corporation should enter the Little calculation of earnings and profits. Regulations section 1.355-5(b) on or with Rock address. its return for the year of receipt. If the If the corporation has a foreign Other Forms and distributing or distributee corporation is a address, include the city or town, state or controlled foreign corporation, each U.S. province, country, and foreign postal Statements That May Be shareholder (within the meaning of section code. Do not abbreviate the country Required 951(b)) must include the statement on or name. Follow the country's practice for with its return. entering the name of the state or province Form 8992, U.S. Shareholder Calcula- and postal code. tion of Global Intangible Low-Taxed In- Dual consolidated losses. If a domestic come (GILTI). Use Form 8992 to figure corporation incurs a dual consolidated If the corporation receives its mail in the domestic corporation’s GILTI under loss (as defined in Regulations section care of a third party (such as an section 951A and attach it to Form 1.1503-2(c)(5)), the corporation (or accountant or an attorney), enter on the 1120-PC. consolidated group) may need to attach street address line “C/O” followed by the

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third party's name and street address or 1120-PC, write “Supporting Statement to Instructions for Schedule M-3 (Form P.O. box. Consolidated Return.” 1120-PC) for more details. Item A. Identifying Life-Nonlife Consolidated Note. If you do not file Schedule M-3 Information Return (Form 1120-PC) with Form 1120-PC, see If the corporation is the common parent of Reconciliation under Statements earlier. Consolidated Return a life-nonlife consolidated group, check If an affiliated group of corporations boxes 1 and 2 of Item A. Item B. Employer includes one or more domestic life Filing requirements. The common Identification Number insurance companies taxed under section parent of a life-nonlife consolidated group (EIN) 801, the common parent may elect to treat is required to do the following. Enter the corporation's EIN. If the those companies as includible • File the applicable consolidated corporation does not have an EIN, it must corporations. The life insurance corporate income tax return as one of the apply for one. An EIN can be applied for: companies must have been members of following: a Form 1120-L, U.S. Life • Online—Go to the group for the 5 tax years immediately Insurance Company Income Tax Return, IRS.gov/EIN. The EIN is issued preceding the tax year for which the where the common parent is a life immediately once the application election is made. See section 1504(c)(2) insurance company; a Form 1120-PC, information is validated. and Regulations section 1.1502-47(b)(12). U.S. Property and Casualty Insurance • By faxing or mailing Form SS-4, Corporations filing a consolidated Company Income Tax Return, where the Application for Employer Identification return must check box 1 of Item A and common parent is an insurance company, Number. attach Form 851, Affiliations Schedule, other than a life insurance company; or a Form 1120, U.S. Corporation Income Tax Corporations located in the United and other supporting statements to the States or U.S. possessions can return. Also, for the first year a subsidiary Return, where the common parent is any ! CAUTION use the online application. Foreign corporation is being included in a other type of corporation. • Indicate clearly on the face of the return corporations may call 267-941-1099 (not a consolidated return, attach Form 1122, toll-free number) for more information on Authorization and Consent of Subsidiary that the corporate tax return is a life-nonlife return. This requirement is obtaining an EIN. See the Instructions for Corporation To Be Included in a Form SS-4. Consolidated Income Tax Return, to the satisfied by checking boxes 1 and 2 of Item A on page 1. parent's consolidated return. Attach a EIN applied for, but not received. If the separate Form 1122 for each new • Show any setoffs required by paragraphs (e), (h), and (j) of Regulations corporation has not received its EIN by the subsidiary being included in the time the return is due, enter “Applied For” consolidated return. section 1.1502-47. • Report separately the nonlife and the date the corporation applied in the File supporting statements for each consolidated taxable income or loss, space for the EIN. However, if the corporation included in the consolidated determined under Regulations section corporation is filing its return electronically, return. Do not use Form 1120-PC as a 1.1502-47(f), on a Form 1120 or 1120-PC an EIN is required at the time the return is substitute for the supporting statement. (whether filed by the common parent or as filed. An exception applies to subsidiaries On the supporting statement, use columns an attachment to the consolidated return), of corporations whose returns are filed to show the following, both before and for all nonlife members of the consolidated with the parent's electronically filed after adjustments. group. consolidated Form 1120. These subsidiaries should enter “Applied For” in 1. Items of gross income and • Report separately the consolidated Life the space for the EIN on their returns. The deductions. Insurance Company Taxable Income (as defined by Regulations section subsidiaries' returns are identified under 2. A computation of taxable income. 1.1502-47(b)(3)) determined under the parent corporation's EIN. 3. Balance sheets as of the beginning Regulations section 1.1502-47, on a Form For more information, see the and end of the tax year. 1120-L (whether filed by the common Instructions for Form SS-4. 4. A reconciliation of income per parent or as an attachment to the books with income per return. consolidated return), for all life members Item D. Section 831(b) and of the consolidated group. 5. A reconciliation of retained Section 953 Elections earnings. Schedule M-3 (Form 1120-PC) Check the 831(b) box if the insurance Enter on Form 1120-PC the totals for A nonlife insurance company with total company elects to be taxed on taxable each item of income, gain, loss, expense, assets (nonconsolidated or consolidated investment income in lieu of the tax or deduction, net of eliminating entries for for all companies included within a tax otherwise applicable under section 831(a). intercompany transactions between consolidation group) of $10 million or Section 831(b) applies to a small corporations within the consolidated more on the last day of the tax year must company, as defined under section 831(b) group. Attach consolidated balance file Schedule M-3 (Form 1120-PC), Net (2)(A), if such company meets the sheets and a reconciliation of Income (Loss) Reconciliation for U.S. diversification requirements of section consolidated retained earnings. Property and Casualty Insurance 831(b)(2)(B) and such corporation elects Companies With Total Assets of $10 the application of section 831(b) for such For more information on consolidated Million or More, instead of Schedule M-1. taxable year under section 831(b)(2)(A) returns, see the regulations under section A corporation filing Form 1120-PC that is (iii). See the instructions for Schedule I, 1502. not required to file Schedule M-3 may Question 14, later. See Regulations voluntarily file Schedule M-3 instead of section 301.9100-8(a) for the rules Note. If a nonlife insurance company is a Schedule M-1. regarding the timing and manner of member of an affiliated group, file Form making the election under section 831(b) 1120-PC as an attachment to the If you are filing Schedule M-3 (Form (2)(A)(iii). consolidated return in addition to the 1120-PC), check Item A, box 3, at the top supporting statements discussed earlier. of page 1 of Form 1120-PC. See the Note. The election under section 831(b) Across the top of page 1 of Form (2)(A)(iii) applies to the tax year for which

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made and for all subsequent taxable years Taxable Income Line 5. Enter amount of tax that a re- for which a corporation is a small ciprocal must include. A mutual company, as defined under section 831(b) Line 1, Taxable income, and line 2, insurance company that is an interinsurer (2)(A), and such corporation meets the Taxable investment income. If the or reciprocal underwriter may elect, under diversification requirements of section corporation is a small company as defined section 835, to limit the deduction for 831(b)(2)(B). Once made, an election in section 831(b)(2) and elects under amounts paid or incurred to a qualifying under section 831(b)(2)(A)(iii) may only be section 831(b)(2)(A)(iii) to be taxed on attorney-in-fact to the amount of the revoked with the consent of the Secretary. taxable investment income, complete deductions of the attorney-in-fact allocable Schedule B (ignore Schedule A) and enter Check the applicable box if the to the income received by the the amount from Schedule B, line 21, on attorney-in-fact from the reciprocal. If this corporation is a foreign corporation and page 1, line 2. Also, complete Question 14 elects under: election is made, any increase in taxable on Schedule I. All other corporations income of a reciprocal as a result of this 1. Section 953(c)(3)(C) to treat its should complete Schedule A (ignore limitation is taxed at the highest rate of tax related person insurance income as Schedule B) and enter on page 1, line 1, specified in section 11(b). effectively connected with the conduct of a the amount from Schedule A, line 37. trade or business in the United States, or Make no entry on line 5 if the mutual Tax Computation and insurance company's taxable income 2. Section 953(d) to be treated as a before including the section 835(b) domestic corporation. Payments amount is $100,000 or more. Otherwise, Generally, a foreign corporation making P.L. 115-97 changed the this tax is 21% of the section 835(b) either section 953 election must file its corporate tax rates under section amount. If an entry is made on line 5, ! attach a statement showing how the tax return by sending it to: CAUTION 11 for tax years beginning after 2017. was computed. Internal Revenue Service Center Reciprocal underwriters making the P.O. Box 409101 Line 3 section 835(a) election are allowed a Ogden, UT 84409 credit on line 15h for the amount of tax If the corporation is a member of a paid by the attorney-in-fact that is related controlled group, check the box on line 3. See Notice 87-50, 1987-2 C.B. 357, and to the income received by the Complete and attach Schedule O (Form Rev. Proc. 2003-47, 2003-28 I.R.B. 55, for attorney-in-fact from the reciprocal in the 1120), Consent Plan and Apportionment the procedural rules, election statement tax year. Schedule for a Controlled Group. formats, and filing addresses for making Component members of a controlled See section 835 and the related the respective elections under section group must use Schedule O to report the regulations for special rules and 953(c)(3)(C) or section 953(d). apportionment of taxable income, income information regarding the statements required to be attached to the return. Note. Once either election is made, it will tax, and certain tax benefits between the apply to the tax year for which made and members of the group. See Schedule O Line 6. Base erosion minimum tax all subsequent tax years unless revoked and the Instructions for Schedule O for amount (BEAT). If the corporation had with the consent of the IRS. Also, any loss more information. gross receipts of at least $500 million in of a foreign corporation electing to be Line 4 any one of the 3 preceding tax years, see treated as a domestic insurance company section 59A and the Instructions for Form Corporations figure their tax by multiplying under section 953(d) will be treated as a 8991 for further guidance on the taxable income by 21% (0.21). dual-consolidated loss and may not be determination of the amount of base used to reduce the taxable income of any Deferred tax under section 1291. If the erosion minimum tax. other member of the affiliated group for corporation was a shareholder in a Line 8a. Foreign tax credit. To find out this tax year or any other tax year. passive foreign investment company when a corporation can take the credit for (PFIC) and received an excess distribution payment of income tax to a foreign country Note. If a section 953(d) election is made, or disposed of its investment in the PFIC include the additional tax required to be or U.S. possession, see Form 1118, during the year, it must include the total Foreign Tax Credit—Corporations. paid on page 1, line 13. On the dotted line increase in taxes due under section to the left of line 13, page 1, write “Section 1291(c)(2) from Form 8621 in the amount Line 8b. Credit from Form 8834. Enter 953(d)” and the amount. Attach a entered on line 4. On the dotted line next any qualified electric vehicle passive statement showing the computation. See to line 4, enter “Section 1291” and the activity credits from prior years allowed for section 953(d) for more details. amount. the current tax year from Form 8834, Do not include on line 4 any interest Qualified Electric Vehicle Credit. Attach Item E. Final Return, Name due under section 1291(c)(3). Instead, Form 8834. Change, Address Change, include the amount of interest owed on Line 8c. General business credit. Enter or Amended Return line 12. on line 8c the allowable credit from Form 3800, Part II, line 38. Indicate a final return, name change, For more information on reporting the address change, or amended return by deferred tax and interest, see the The corporation is required to file Form checking the appropriate box. Instructions for Form 8621. 3800, General Business Credit, to claim Additional tax under section 197(f). A most business credits. For a list of Note. If a change in address or corporation that elects to recognize gain allowable credits, see Form 3800. Also, responsible party occurs after the return is and pay tax on the sale of a section 197 see the applicable credit form and its filed, use Form 8822-B, Change of intangible under the related person instructions. Address or Responsible Party — exception to the anti-churning rules should Line 8d. Credit for prior year minimum Business, to notify the IRS. See the include any additional tax due in the total tax. Enter any allowable credit from Form Instructions for Form 8822-B for details. for line 4. On the dotted line next to line 4, 8827, Credit for Prior Year Minimum enter “Section 197” and the amount. See Tax—Corporations. Complete and attach section 197(f)(9)(B)(ii). Form 8827.

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Line 8e. Bond credits from Form 8912. See Schedule PH (Form 1120), U.S. Line 13. Total Tax Personal Holding Company (PHC) Tax, Enter the allowable credits from Form Include any deferred tax on the 8912, Credit to Holders of Tax Credit for definitions and details on how to figure the tax. termination of a section 1294 election Bonds, line 12. applicable to shareholders in a qualified Line 10. Foreign corporations. A electing fund in the amount entered on foreign corporation carrying on an Line 12. Other Taxes line 13. insurance business in the United States is Include any of the following taxes and taxed as a domestic insurance company interest in the total on line 12. Check the Subtract any deferred tax on the on its income effectively connected with appropriate box(es) for the form, if any, corporation's share of undistributed the conduct of a trade or business in the used to compute the total. earnings of a qualified electing fund (see United States (see sections 864(c) and Form 8621). Recapture of investment credit. If the 897 for a definition). corporation disposed of investment credit How to report. Attach a statement Generally, any other U.S.-source property or changed its use before the end showing the computation of each item income received by the foreign of its useful life or recovery period, it may included in, or subtracted from, the total corporation is taxed at 30% (or at a lower owe a tax. See Form 4255, Recapture of for line 13. On the dotted line next to treaty rate) under section 881. If the Investment Credit. line 13, specify (a) the applicable Code corporation has this income, attach a section, (b) the type of tax, and (c) the statement showing the kind and amount of Recapture of low-income housing amount of tax. income, the tax rate, and the amount of credit. If the corporation disposed of property (or there was a reduction in the Line 14. 2020 Net 965 Tax Liability tax. Enter the tax on line 10. However, see Paid for the Reporting Year. Complete Reduction of section 881 tax, later. qualified basis of the property) for which it took the low-income housing credit, and and attach Form 965-B. Note. Interest received from certain the corporation did not follow the Line 15b. Reserved for future use. This portfolio debt investments that were procedures that would have prevented line is reserved for future use. issued after July 18, 1984, is not subject to recapture of the credit, it may owe a tax. Line 15c. Estimated tax payments. the tax. See section 881(c). See Form 8611, Recapture of Low-Income Housing Credit. Enter any estimated tax payments the See section 842 for more information. corporation made for the tax year. Other. Additional taxes and interest Minimum effectively connected net amounts can be included in the total Line 15d. 2019 Net 965 Tax Liability. investment income. See section 842(b) entered on line 12. Check the “Other” box Complete and attach Form 965-B. and Notice 89-96, 1989-2 C.B. 417, for the if the corporation includes any additional Line 15e. Overpaid estimated tax. If the general rules for computing this amount. taxes and interest such as the items corporation overpaid estimated tax, it may Also, see Rev. Proc. 2018-45, 2018-37 discussed below. See How to report be able to get a quick refund by filing Form I.R.B. 428, for the domestic asset/liability below for details on reporting these 4466. The overpayment must be at least percentages and domestic investment amounts on an attached statement. 10% of the corporation's expected income yields needed to compute this amount. • Recapture of Indian employment credit. tax liability and at least $500. File Form Any additional income required by Generally, if an employer terminates the 4466 after the end of the corporation's tax section 842(b) must be included in taxable employment of a qualified employee less year, and no later than the due date for income (for example, Schedule A, line 13). than 1 year after the date of initial filing the corporation’s tax return. Form employment, any Indian employment Reduction of section 881 tax. 4466 must be filed before the corporation credit allowed for a prior tax year because Additional taxes resulting from the net files its tax return. See the Instructions for of wages paid or incurred to that employee investment income adjustment may offset Form 4466. must be recaptured. See Form 8845 and a corporation's section 881 tax on section 45A. Line 15h. Credit by reciprocal for tax U.S.-source income. The tax reduction is Recapture of new markets credit (see paid by attorney-in-fact under section determined by multiplying the section 881 • Form 8874, New Markets Credit, and 835(d). Enter the amount of tax paid by tax by the ratio of the amount of income Form 8874-B, Notice of Recapture Event an attorney-in-fact as a result of income adjustment to income subject to the for New Markets Credit). received by the attorney-in-fact from the section 881 tax, computed without the Recapture of employer-provided reciprocal during the tax year. For more exclusion for interest on state and local • childcare facilities and services credit (see information, see section 835, the related bonds or income exempted from taxation Form 8882). regulations, and the instructions for line 5, by treaty. See section 842(c)(2). Attach a Interest on deferred tax attributable to earlier. statement showing how the reduction • certain nondealer installment obligations under section 881 was figured. Enter the Line 15i. Other credits and payments. (section 453A(c)). net tax imposed by section 881 on line 10. Enter the amount of any other credits the • Interest due on deferred gain (section corporation may take and/or payments Line 11. Personal holding company 1260(b)). made. Write an explanation of the entry to tax. A corporation (other than a • Interest due under section 1291(c)(3). the left of the entry space. corporation described in section 542(c)) is See Form 8621 and its instructions. taxed as a personal holding company • Alternative tax on qualifying shipping Backup withholding. If the corporation (PHC) under section 542 if: activities (see Form 8902). had federal income tax withheld from any • At least 60% of its adjusted ordinary payments it received because, for gross income for the tax year is PHC How to report. If the corporation example, it failed to give the payer its income, and checked the “Other” box, attach a correct EIN, include the amount withheld • At any time during the last half of the tax statement showing the computation of in the total for line 15i. Write the amount year more than 50% in value of its each item included in the total for line 12 withheld and the words “Backup outstanding stock is directly or indirectly and identify the applicable Code section Withholding” on the dotted line to the left owned by five or fewer individuals. and the type of tax or interest. of the entry space for line 15i.

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Line 15k. Total payments. Add the accrued at the end of the tax year; and losses and to provide for the payment of amounts on lines 15f through 15i and deduct interest, dividends, or rents due dividends and similar distributions to enter the total on line 15k. and accrued at the end of the preceding policyholders. tax year. For rules regarding the accrual of Line 16. Estimated tax penalty. dividends, see Regulations section Subject to the limitations in section Generally, the corporation does not have 1.301-1(b). 1212(a), a net capital loss can be carried to file Form 2220 with its income tax return back 3 years and forward 5 years as a because the IRS will figure the amount of Line 3a, column (a). Interest. Enter the short-term capital loss. any penalty and notify the corporation of gross amount of interest income, including all tax-exempt interest. Line 8. Certain mutual fire or flood in- any amount due. However, see the surance company premiums. A mutual Instructions for Form 2220 at IRS.gov/ Line 3b, column (a).Tax-Exempt Inter- fire or flood insurance company whose Form2220 for circumstances where the est. Section 103(a) excludes interest on principal business is the issuance of corporation must file Form 2220 even if it state or local bonds from gross income. policies (1) for which the premium owes no penalty. This exclusion does not apply to any: deposits are the same (regardless of the length of the term the policies are written 1. Private activity bond which is not a If Form 2220 is attached, check the box for) and (2) under which the unabsorbed qualified bond, as defined by section 141; on line 15 and enter any penalty on this portion of such premium deposits not line. See Estimated tax penalty, under 2. Arbitrage bond, as defined by required for losses, expenses, or Estimated Tax Payments, earlier. section 148; or establishment of reserves is returned or Line 17. Amount owed. If the 3. Bonds not meeting the credited to the policyholder on corporation cannot pay the full amount of requirements of section 149 (regarding the cancellation or expiration of the policy, tax owed, it can apply for an installment registration of tax-exempt bonds). must include in income an amount equal agreement online. See IRS.gov/OPA for to 2% of the premiums earned on the latest information. Lines 3a and 3b, column (b). Amortiza- insurance contracts during the tax year tion of premium. Enter on line 3a, with respect to such policies after Line 19. Electronic deposit of tax re- column (b), the total amortization of bond deduction of premium deposits returned or fund of $1 million or more. If the premium, including amortization on credited during the same tax year. See corporation is due a refund of $1 million or tax-exempt bonds. Enter on line 3b, section 832(b)(1)(D). more and wants it electronically deposited column (b), the amortization of bond Line 9. Income on account of special into its checking or savings account at any premium on tax-exempt bonds only. U.S. bank or other financial institution income and deduction accounts. instead of having a check sent to the Note. Insurance companies electing to Corporations which write the kinds of corporation, complete Form 8302 and amortize discount for tax purposes must insurance below must maintain the attach it to the corporation's tax return. reduce the amortization of premium by following special accounts. A corporation any amortization of discount. which writes: 1. Mortgage guaranty insurance must Line 4. Gross rents. Enter gross rents, Schedule A—Taxable maintain a mortgage guaranty account, Income computed as indicated under the instructions for Gross income, earlier. 2. Lease guaranty insurance must Gross income. Under section 832, gross Deduct expenses, such as repairs, maintain a lease guaranty account, and amounts of underwriting and investment interest, taxes, and depreciation, on the 3. Insurance on obligations the income should be computed on the basis proper lines for deductions. interest on which is excludable from gross of the Statement of Income of the NAIC income under section 103 must maintain Line 6. Capital gain net income. Every annual statement to the extent not an account with respect to insurance on sale or exchange of a capital asset must inconsistent with the Internal Revenue state and local obligations. be reported in detail on Schedule D (Form Code and its Regulations. 1120), Capital Gains and Losses, even if Amounts required to be subtracted Income from qualifying shipping activ- there is no gain or loss. from these accounts under sections ities. Gross income does not include Generally, losses from sales or 832(e)(5) and 832(e)(6) must be reported income from qualifying shipping activities exchanges of capital assets are only as income on line 9. See section 832(e) if the corporation makes an election under allowed to the extent of gains. However, for more information. section 1354 to be taxed on its notional corporations taxed under section 831 may shipping income (as defined in section Line 10. Income from protection claim losses from capital assets sold or against loss account. Although section 1353) at the highest corporate tax rate exchanged to get funds to meet abnormal specified in section 11. If the election is 1024 of P.L. 99-514 repealed section 824 insurance losses and to pay dividends and relating to the protection against loss made, the corporation may generally not similar distributions to policyholders. Do claim any loss, deduction, or credit with (PAL) account, PAL account balances are not include those types of losses here, but includible in income as though section 824 respect to qualifying shipping activities. A instead, report them on Schedule G. corporation making this election may also were still in effect. Attach a statement The net capital loss for these elect to defer gain on the disposition of a showing the computation. corporations is the amount by which qualifying vessel. Line 11. Mutual interinsurers or recip- losses for the year from sales or rocal underwriters—decrease in sub- Use Form 8902, Alternative Tax on exchanges of capital assets exceed the scriber accounts. Enter the decrease for Qualifying Shipping Activities, to figure the gains from these sales or exchanges plus the tax year in savings credited to tax. Include the alternative tax on Form the smaller of: 1120-PC, page 1, line 12. subscriber accounts of a mutual insurance 1. Taxable income (computed without company that is an interinsurer or Note. In computing the amounts for lines gains or losses from sales or exchanges reciprocal underwriter. of capital assets); or 2, 3, and 4, take all interest, dividends, or Line 13. Other income. Enter any other rents received during the year; add 2. Losses from the sale or exchange taxable income not reported on lines 1 interest, dividends, or rents due and of capital assets sold or exchanged to through 11. List the type and amount of obtain funds to meet abnormal insurance

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income on an attached statement. If the • The corporation's share of the following a limited amount of start-up and corporation has only one item of other income from Form 8621, Information organizational costs it paid or incurred. income, describe it in parentheses on Return by a Shareholder of a Passive Any remaining costs must generally be line 13. Examples of other income to Foreign Investment Company or Qualified amortized over an 180-month period. See report on line 13 include the following. Electing Fund. sections 195 and 248 and the related • Any income under P.L. 115-97, section 1. Ordinary earnings of a qualified regulations. 13517(c)(3)(B)(ii) (transitional relief for electing fund (QEF). change in reserve). Time for making an election. The • The amount included in income from 2. Gain or loss from marking passive corporation generally elects to deduct Form 6478, Biofuel Producer Credit. foreign investment company (PFIC) stock start-up or organizational costs by • The amount included in income from to market. claiming the deduction on its income tax Form 8864, Biodiesel and Renewable 3. Gain or loss from sale or other return filed by the due date (including Diesel Fuels Credit. disposition of section 1296 stock. extensions) for the tax year in which the active trade or business begins. However, • Refunds of taxes deducted in prior 4. Excess distributions from a section years to the extent they reduced income for start-up or organizational costs paid or 1291 fund allocated to the current year incurred before September 9, 2008, the subject to tax imposed. See section 111 and pre-PFIC years, if any. and the related regulations. Do not offset corporation is required to attach a See Form 8621 and its instructions for current year taxes against tax refunds. statement to its return to elect to deduct details. Ordinary income from trade or business those costs. • • The amount of payroll tax credit taken activities of a partnership from For more details including special rules by an employer on its employment tax Schedule K-1 (Form 1065). Do not offset for costs paid or incurred before returns (Forms 941, 943, and 944) for ordinary losses against ordinary income. September 9, 2008, see the Instructions qualified paid sick leave and qualified paid Instead, include the losses on line 31. for Form 4562. Also, see Pub. 535, family leave under FFCRA (both the Show the partnership's name, address, Business Expenses. nonrefundable and refundable portions). and EIN on a separate statement attached These amounts must be included in gross If the corporation timely filed its return to this return. If the amount entered is from income for the tax year that includes the for the year without making an election, it more than one partnership, identify the last day of the calendar quarter in which can still make an election by filing an amount from each partnership. the credit is allowed. amended return within 6 months of the • Section 91 Transferred Loss Amount. due date of the return (excluding Enter the transferred loss amount and Deductions extensions). Clearly indicate the election identify the amount as “Section 91 on the amended return and write “Filed Transferred Loss Amount” required to be Limitations on Deductions pursuant to Regulations section recognized under section 91 resulting 301.9100-2” at the top of the amended from a transfer of substantially all the Section 263A uniform capitalization return. File the amended return at the assets of a foreign branch (within the rules. The uniform capitalization rules of same address the corporation filed its meaning of section 367(a)(3)(C), as in section 263A require corporations to original return. The election applies when effect before its repeal) to a specified 10% capitalize certain costs. figuring taxable income for the current tax owned foreign corporation (as defined in See Regulations sections 1.263A-1 year and all subsequent years. section 245A(b)) with respect to which you through 1.263A-3. The corporation can choose to forgo were a U.S. shareholder immediately after the election by affirmatively electing to the transfer as other income. Under Transactions between related taxpay- capitalize its start-up or organizational section 91(d), transferred loss amounts ers. Generally, an accrual basis taxpayer costs on its income tax return filed by the recognized are treated as derived from can only deduct business expenses and due date (including extensions) for the tax sources within the United States. interest owed to a related party in the year year in which the active trade or business Part or all of the proceeds received the payment is included in the income of • begins. from certain corporate-owned life the related party. See sections 163(e)(3) insurance contracts issued after August and 267 for limitations on deductions for Note. The election to either amortize or 17, 2006. Corporations that own one or unpaid interest and expenses. capitalize start-up costs is irrevocable and more employer-owned life insurance Business interest. See section 163(j) for applies to all start-up costs that are related contracts issued after August 17, 2006, limitations on deductions for business to the trade or business. must file Form 8925, Report of interest. Employer-Owned Life Insurance Report the deductible amount of such Contracts. Section 291 limitations. Corporations costs and any amortization on • NOL reduction amount that is includible may be required to adjust certain Schedule A, line 31. For amortization that in income if the corporation made an deductions. See section 291 to determine begins during the 2020 tax year, complete election under section 965(n). See the amount of the adjustment. and attach Form 4562, Depreciation and Line 36b. Net operating loss deduction Amortization. Golden parachute payments. A portion (NOL), later. of the payments made by a corporation to Reducing certain expenses for which Any GILTI included under section 951A. • key personnel that exceeds their usual credits are allowable. If the corporation Enter the amount from Form 8992, Part II, compensation may not be deductible. This claims certain credits, it may need to line 5. Attach Form 8992 to the occurs when the corporation has an reduce allowable deductions for expenses corporation's return. If applicable, attach agreement (golden parachute) with these used to figure the credit. This applies to Form(s) 5471. key employees to pay them these excess credits such as the following. One-eighth of any adjustment • amounts if control of the corporation • Employment credits. See Employment attributable to the application of the changes. See section 280G and credits, later. discount factors published in Rev. Proc. Regulations section 1.280G-1. Also, see • Credit for increasing research activities 2019-06 to unpaid losses for the tax year the instructions for line 15. (Form 6765). preceding the first tax year beginning after • Orphan drug credit (Form 8820). December 31, 2017. See section Business start-up and organizational • Disabled access credit (Form 8826). 13523(e) of P.L. 115-97. costs. A corporation can elect to deduct

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• Employer credit for social security and compensation in excess of $1 million In addition, a portion of any parachute Medicare taxes paid on certain employee below). Attach a statement for all officers payments made to a covered executive by tips (Form 8846). using the following columns. an applicable employer participating in a • Credit for small employer pension plan 1. Name of officer. TARP is not deductible as compensation if start-up costs (Form 8881). the payments are made because of a • Credit for employer-provided childcare 2. Social security number. severance from employment during an facilities and services (Form 8882). 3. Percentage of time devoted to applicable tax year. For this purpose, a • Credit for small employer health business. parachute payment is any payment to a insurance premiums (Form 8941). 4. Amount of compensation. senior executive officer for departure from If the corporation has any of these a company for any reason, except for If a consolidated return is filed, each credits, figure the current year credit payments for services performed or member of an affiliated group must furnish before figuring the deduction for expenses benefits accrued. These limits do not this information. on which the credit is based. If the apply to a payment already treated as a corporation capitalized any costs on which Disallowance of deduction for employ- parachute payment. See section 280G(e) it figured the credit, it may need to reduce ee compensation in excess of $1 mil- and Notice 2008-94. the amount capitalized by the credit lion. Publicly held corporations cannot Line 16. Salaries and wages. Enter the attributable to these costs. deduct compensation to a “covered total salaries and wages paid for the tax See the instructions for the form used employee” to the extent that the year. Do not include salaries and wages to figure the applicable credit for more compensation exceeds $1 million. deductible elsewhere on the return, such details. Generally, a covered employee is: as amounts included in officers' • The principal executive officer of the compensation, elective contributions to a Limitations on deductions related to corporation (or an individual acting in that section 401(k) cash or deferred property leased to tax-exempt entities. capacity) as of the end of the tax year, or arrangement, or amounts contributed If a corporation leases property to a • An employee whose total under a salary reduction SEP agreement governmental or other tax-exempt entity, compensation must be reported to or a SIMPLE IRA plan. the corporation cannot claim deductions shareholders under the Securities If the corporation provided taxable related to the property to the extent that Exchange Act of 1934 because the fringe benefits to its employees, such as they exceed the corporation's income from employee is among the three highest the personal use of a car, do not deduct as the lease payments. This disallowed compensated officers for that tax year wages the amount allocated for tax-exempt use loss can be carried over to (other than the principal executive officer). the next tax year and treated as a depreciation and other expenses that are For this purpose, compensation does deduction with respect to the property for claimed elsewhere on the return (for not include the following. that tax year. See section 470(d) for example, on Schedule A, line 22 or • Income from certain employee trusts, exceptions. line 31). annuity plans, or pensions. Limitation on tax benefits for remuner- • Any benefit paid to an employee that is If the corporation claims a credit ation under the Patient Protection and excluded from the employee's income. ! for any wages paid or incurred, it CAUTION may need to reduce any Affordable Care Act. The $1 million The deduction limit does not apply to: compensation limit is reduced to $500,000 corresponding deduction for officers' • Commissions based on individual compensation and salaries and wages. for remuneration for services provided by performance; individuals for or on behalf of certain See Reducing certain expenses for which • Qualified performance-based credits are allowable, earlier. health insurance providers. The $500,000 compensation; and limitation applies to remuneration that is • Income payable under a written, deductible in the tax year during which the Also, reduce the amounts binding contract in effect on February 17, deducted as compensation of services were performed and 1993. remuneration for services during the year officers and salaries and wages that is deductible in a future tax year The $1 million limit is reduced by by the nonrefundable and refundable (called “deferred deduction amounts disallowed as excess parachute portions of the new CARES Act employee remuneration”). The $500,000 limitation is payments under section 280G. retention credit claimed on the reduced by any amounts disallowed as See section 162(m) and Regulations corporation's employment tax return(s). excess parachute payments. See section section 1.162-27. Also, see Notice 162(m)(6) and Regulations section 2007-49, 2007-25 I.R.B. 1429. Employment credits. If the corporation 1.162-31 for definitions and other special claims a credit on any of the forms below, Limitations on tax benefits for execu- it may need to reduce its deduction for rules. Also, see Notice 2011-2, 2011-2 tive compensation under the Treasury I.R.B. 260. salaries and wages. See the applicable Troubled Asset Relief Program form for details. Line 15. Compensation of officers. (TARP). The $1 million compensation • Form 5884, Work Opportunity Credit; Enter deductible officers' compensation limit is reduced to $500,000 for executive • Form 8844, Empowerment Zone on line 15. See Employment credits, later, remuneration and deferred deduction Employment Credit; for employment credits that may reduce executive remuneration paid to covered • Form 8845, Indian Employment Credit; your deduction for officers' compensation. executives by any entity that receives or • Form 8932, Credit for Employer Do not include compensation deductible has received financial assistance under Differential Wage Payments; and elsewhere on the return, such as elective TARP. The limit applies for each period in • Form 8994, Employer Credit for Paid contributions to a section 401(k) cash or which obligations arising from financial Family and Medical Leave. deferred arrangement, or amounts assistance under TARP remain contributed under a salary reduction SEP outstanding. The $500,000 is reduced by Line 18. Rents. If the corporation rented agreement or a SIMPLE IRA plan. any amounts disallowed as excess or leased a vehicle, enter the total annual rent or lease expense paid or incurred Include only the deductible part of each parachute payments. See section 162(m) (5) for definitions and other special rules. during the year. Also, complete Form officer's compensation on line 15. (See 4562, Depreciation and Amortization, Part Disallowance of deduction for employee Also, see Notice 2008-94, 2008-44 I.R.B. 1070, for additional guidance. V. If the corporation leased a vehicle for a

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term of 30 days or more, the deduction for risks. The fee is treated as a tax described 1. Business interest income, the vehicle lease expense may have to be in section 275 relating to taxes for which 2. 30% of the adjusted taxable reduced by an amount includible in no deduction is allowed. For more income, and income called the “inclusion amount”. The information, see the final regulations and corporation may have an inclusion amount Revenue Ruling 2013-27. 3. Floor plan financing interest if: expense. Do not reduce the corporation's Special rules apply to: And the vehicle's ! deduction for social security and FMV on the first day CAUTION Medicare taxes by the following • Forgone interest on certain of the lease amounts claimed on its employment tax below-market-rate loans (see section The lease term began: exceeded: returns: (1) the nonrefundable and 7872). Cars (excluding trucks and refundable portions of the CARES Act • Original issue discount (OID) on certain vans) employee retention credit (ERC), and (2) high-yield discount obligations. See After 12/31/17 but before $50,000 the nonrefundable and refundable section 163(e)(5) to determine the 1/1/21 ...... portions of the FFCRA credits for qualified disqualified amount of the deduction for After 12/31/12 but before $19,000 sick and family leave wages. Instead, item OID that is deferred and the amount that is 1/1/18 ...... (1) reduces the deductions for disallowed on a high-yield discount After 12/31/07 but before compensation of officers and salaries and obligation. The rules under section 163(e) 1/1/13 ...... $18,500 wages on lines 15 and 16, and item (2) (5) do not apply to certain high-yield Trucks and Vans must be reported as income on line 13. discount obligations issued before After 12/31/17 but before January 1, 2011. See section 163(e)(5) 1/1/21 ...... $50,000 Line 20a. Interest. (F), and Notice 2010-11, 2010-4 I.R.B. After 12/31/13 but before 326. 1/1/18 ...... $19,500 Note. Do not offset interest income • Interest which is allocable to After 12/31/09 but before against interest expense. unborrowed policy cash values of life 1/1/14 ...... $19,000 The corporation must allocate the insurance, endowment, or annuity After 12/31/08 but before interest expense if the proceeds of a loan contracts issued after June 8, 1997. See 1/1/10 ...... $18,500 were used for more than one purpose (for section 264(f). Attach a statement After 12/31/07 but before showing the computation of the deduction. 1/1/09 ...... $19,000 example, to purchase a portfolio investment and to acquire an interest in a Line 20b. Less tax-exempt interest ex- passive activity). See Temporary pense. Enter interest paid or accrued See Pub. 463, Travel, Gift, and Car Regulations section 1.163-8T for the during the tax year on indebtedness Expenses, for instructions on figuring the interest allocation rules. incurred or continued to purchase or carry inclusion amount. The inclusion amount Do not deduct the following interest. obligations if the interest is wholly exempt for lease terms that began in 2020 is • Interest on indebtedness incurred or from income tax. See section 265. published in Rev. Proc. 2020-37. The continued to purchase or carry obligations Line 21. Charitable contributions. inclusion amount for lease terms if the interest is wholly exempt from Include charitable contributions, as beginning in 2021 will be published in the income tax. See section 265(b) for special provided in section 170. See section 170 Internal Revenue Bulletin in early 2021. rules and exceptions for financial and its regulations for limitations, institutions. Also, see section 265(b)(7) for Line 19. Taxes and licenses. Enter carryover, exclusions, requirements, a temporary de minimis exception for taxes paid or accrued during the tax year, substantiation, and other rules. financial institutions for certain tax-exempt but do not include the following. bonds issued in 2009 and 2010. See Pub. 526, Charitable Federal income taxes. • Interest and carrying charges on Contributions, for more information. Foreign or U.S. possession income • • straddles. Generally, these amounts must taxes if a tax credit is claimed. Temporary suspension of limitations be capitalized. See section 263(g). Taxes not imposed on the corporation. on certain contributions. The CARES • Interest on debt allocable to the Taxes, including state or local sales • Act allows a corporation to elect to deduct • production of designated property by a taxes, that are paid or incurred in qualified cash contributions without regard corporation for its own use or for sale. The connection with an acquisition or to the 10% taxable income limit. Qualified corporation must capitalize this interest. disposition of property (these taxes must contributions are charitable contributions Also, capitalize any interest on debt be treated as a part of the cost of the that were made during calendar year 2020 allocable to an asset used to produce the acquired property or, in the case of a or 2021 to an organization described in property. See section 263A(f) and disposition, as a reduction in the amount section 170(b)(1)(A) (other than certain Regulations sections 1.263A-8 through realized on the disposition). private foundations described in section 1.263A-15 for definitions and more Taxes assessed against local benefits 509(a)(3) or donor-advised funds • information. that increase the value of the property described in section 4966(d)(2)). The total Interest on unpaid taxes attributable to assessed (such as for paving, etc.). • amount of the contribution claimed cannot nondisclosed reportable transactions. See Taxes deducted elsewhere on the exceed 25% of the excess of the • section 163(m). return. corporation's taxable income (as computed above substituting “25%” for See section 164(d) for information on Limitation on deductions. The amount “10%” ) over all other allowable charitable the apportionment of taxes on real allowed as a deduction for the tax year for contributions. Contributions over the 25% property between a seller and a business interest expense may be limited. limitation cannot be deducted for the tax purchaser. See section 163(j) and Form 8990, year, but can be carried over to the next 5 Limitation on Business Interest Expense tax years. Note. Section 9010 of the Patient Under Section 163(j), and Instructions for Protection and Affordable Care Act Form 8990. If section 163(j) applies to Temporary suspension of 10% limita- imposes a fee on each covered entity you, the business interest expense tion for certain disaster-related contri- engaged in the business of providing deduction allowed for the tax year is butions. A corporation may elect to health insurance for United States health limited to the sum of: deduct qualified cash contributions

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without regard to the 10% taxable income distributions paid or declared to • Travel, meals, and entertainment limit. Qualified contributions are any policyholders, as policyholders, except in expenses. Special rules apply (discussed charitable contributions that were made the case of a mutual fire insurance later). after December 31, 2019, and before company exclusively issuing perpetual • Utilities. February 26, 2021, to an organization policies. Whether dividends have been • Ordinary losses from trade or business described in section 170(b)(1)(A) (other paid or declared should be determined activities of a partnership from than certain private foundations described according to the method of accounting Schedule K-1 (Form 1065). Do not offset in section 509(a)(3) or donor-advised employed by the insurance company. ordinary income against ordinary losses. funds described in section 4966(d)(2)) for Instead, include the income on line 13. Dividends and similar distributions. relief efforts in one or more qualified Show the partnership's name, address, Include amounts returned or credited to disaster areas. The corporation must and EIN on a separate statement attached policyholders on cancellation or expiration obtain contemporaneous written to this return. If the amount entered is from of policies issued by a mutual fire or flood acknowledgment (within the meaning of more than one partnership, identify the insurance company: section 170(f)(8)) from the qualified amount from each partnership. charitable organization that the 1. Where the premium deposits for • Any extraterritorial income exclusion contribution was used or is to be used for the policy are the same (regardless of the from Form 8873, Extraterritorial Income disaster relief efforts. length of the policy), and Exclusion. The total amount of the contribution 2. The unabsorbed portion of the • Deduction for certain energy efficient claimed for disaster relief efforts cannot premium deposits not required for losses, commercial building property placed in exceed 100% of the excess of the expenses, or establishment of reserves is service during the tax year, if applicable. corporation's taxable income (as returned or credited to the policyholder on • Dividends paid in cash on stock held by computed above substituting "100%" for cancellation or expiration of the policy. an employee stock ownership plan. However, a deduction may only be taken "10%" ) over all other allowable charitable In the case of a qualified group contributions. Any excess qualified for the dividends above if, according to the self-insurers fund, the fund's deduction for plan, the dividends are: contributions are carried over to the next 5 policyholder dividends is allowed no years. earlier than the date the state regulatory 1. Paid in cash directly to the plan participants or beneficiaries; Line 22. Depreciation. Include on line 22 authority determines the amount of the depreciation and the cost of certain policyholder dividend that may be paid. 2. Paid to the plan, which distributes property that the corporation elected to See section 6076 of the Technical and them in cash to the plan participants or expense under section 179. See Form Miscellaneous Revenue Act of 1988. their beneficiaries no later than 90 days 4562 and the Instructions for Form 4562. after the end of the plan year in which the Line 30. Mutual interinsurers or recip- dividends are paid; Line 23. Depletion. See sections 613 rocal underwriters—increase in sub- and 613A for percentage depletion rates scriber accounts. A mutual insurance 3. At the election of the participants or applicable to natural deposits. Also, see company that is an interinsurer or their beneficiaries (a) payable as provided section 291 for the limitation on the reciprocal underwriter may deduct the under 1 or 2 above, or (b) paid to the plan depletion deduction for iron ore and coal increase in savings credited to subscriber and reinvested in qualifying employer (including lignite). accounts for the tax year. securities; or Attach Form T (Timber), Forest Savings credited to subscriber 4. Used to make payments on a loan Activities Schedule, if a deduction for accounts means the surplus credited to described in section 404(a)(9). depletion of timber is taken. the individual accounts of subscribers See section 404(k) for more details and There are special rules for intangible before the 16th day of the 3rd month the limitation on certain dividends. drilling and development costs incurred following the close of the tax year. This is Do not deduct expenses such as the outside the United States. See section true only if the corporation would be following. 263(i). required to pay this amount promptly to a • Amounts paid to, or at the direction of, a subscriber if the subscriber ended the government or specified nongovernmental See Pub. 535 for more information on contract when the corporation's tax year depletion. entity for the violation, or investigation or ends. inquiry, of a law. However, see exceptions Line 24. Pension, profit-sharing, etc., Line 31. Other deductions. Attach a discussed later. plans. Enter the deduction for statement listing by type and amount all • Lobbying expenses. However, see contributions to qualified pension, allowable deductions under sections exceptions discussed later. profit-sharing, or other funded deferred 832(c)(1) and (10) (net of the annual • Amounts paid or incurred for any compensation plans. statement change in undiscounted unpaid settlement, payout, or attorney fees loss adjustment expenses) that are not related to sexual harassment or sexual Note. Employers who maintain a plan are deductible on lines 15 through 30. abuse, if such payments are subject to a generally required to file Form 5500, Form nondisclosure agreement. See new Examples of other deductions may 5500-SF, or Form 5500-EZ. See section 162(q). www.efast.dol.gov and IRS.gov/ include the following. See Pub. 535 for Form5500EZ. details on other deductions that may apply Travel, meals, and entertainment. to corporations. Subject to limitations and restrictions Line 25. Employee benefit programs. • Any deduction under P.L. 115-97, discussed below, a corporation can Enter contributions to employee benefit section 13517(c)(3)(B)(i) (transitional relief deduct ordinary and necessary travel, programs not claimed elsewhere on the for change in reserve). meals, and non-entertainment expenses return (for example, insurance, health and • Certain business start-up and paid or incurred in its trade or business. welfare programs, etc.) that are not an organizational costs (discussed earlier Generally, entertainment expenses, incidental part of a pension, profit-sharing, under Limitations on Deductions). membership dues, and facilities used in etc., plan included on line 24. • Legal and professional fees. connection with these activities cannot be Line 29. Dividends to policyholders. • Supplies used and consumed in the deducted. In addition, no deduction is Enter the total dividends and similar business. generally allowed for qualified

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transportation fringe benefits. Also, usually considered entertainment, to capitalize specified policy acquisition special rules apply to deductions for gifts, amusement, or recreation. expenses and deduct them ratably over luxury water travel, and convention time. Attach a statement showing all expenses. See section 274, Pub. 463, and Amounts treated as compensation. computations. See section 848 and its Pub. 535. Generally, the corporation may be able to regulations. deduct otherwise nondeductible Travel. The corporation cannot deduct entertainment, amusement, or recreation Line 34b. Deduction on account of the travel expenses of any individual expenses if the amounts are treated as special income and deduction ac- accompanying a corporate officer or compensation to the recipient and counts. Enter the total of the amounts employee, including a spouse or reported on Form W-2 for an employee or required to be added under sections dependent of the officer or employee, on Form 1099-NEC for an independent 832(e)(4) and (6). However, no deduction unless: contractor. is permitted unless tax and loss bonds are • That individual is an employee of the However, if the recipient is an officer, purchased in an amount equal to the tax corporation, and director, beneficial owner (directly or benefit of the deduction. See section • His or her travel is for a bona fide indirectly), or other “specified individual” 832(e). business purpose and would otherwise be (as defined in section 274(e)(2)(B) and Note. The deduction on account of the deductible by that individual. Regulations section 1.274-9(b)), special special income and deduction accounts is rules apply. See section 274(e)(2) and Meals. Generally, the corporation can limited to taxable income for the tax year Regulations sections 1.274-9 and deduct only 50% of the amount otherwise (computed without regard to this 1.274-10. allowable for non-entertainment related deduction or to any carryback of a net meal expenses paid or incurred in its trade Fines and penalties. Generally, no operating loss). or business. However, the corporation can deduction is allowed for fines or similar Line 36b. Net operating loss deduction deduct 100% of business meal expenses penalties paid or incurred to, or at the (NOL). Section 172 provides for an NOL for food and beverages provided by a direction of, a government or deduction, limitation, carryovers, and restaurant. This applies only to amounts governmental entity for violating any law, carrybacks. Attach a statement showing paid or incurred after December 31, 2020. or for the investigation or inquiry into the the computation of the NOL deduction. Meals not separately stated from potential violation of a law, except: entertainment are generally not • Amounts that constitute restitution, The following special rules apply. deductible. In addition (subject to • Amounts paid to come into compliance • A corporation may elect under section exceptions under section 274(k)(2)): with the law, 965(n) to reduce the amount of the NOL • Meals must not be lavish or • Amounts paid or incurred as the result for a taxable year determined under extravagant; and of certain court orders or agreements in section 172 and the amount of taxable • An employee of the corporation must which no government or governmental income reduced by NOL carryovers or be present at the meal. entity is a party, and carrybacks to such tax year under section • Amounts paid or incurred for taxes due. 172. The amount of the reduction Membership dues. The corporation No deduction is allowed unless the (reduction amount) is equal to the amount can deduct amounts paid or incurred for amounts are specifically identified in the of the section 965(a) inclusion (net of the membership dues in civic or public service order or agreement and the corporation section 965(c) deduction) plus, in the case organizations, professional organizations establishes that the amounts were paid for of a domestic corporation that claims a (such as bar and medical associations), that purpose. Also, any amount paid or credit for deemed paid foreign taxes, the business leagues, trade associations, incurred as reimbursement to the section 78 gross up with respect to the chambers of commerce, boards of trade, government for the costs of any foreign taxes deemed paid with respect to and real estate boards. However, no investigation or litigation are not eligible for the section 965(a) inclusion. If, as a result deduction is allowed if a principal purpose the exceptions and are nondeductible. of an election under section 965(n), the of the organization is to entertain or See section 162(f). amount of the NOL for the tax year is provide entertainment facilities for reduced, the reduction amount is included members or their guests. This includes Lobbying expenses. Generally, in other income on line 13. If, as a result of country clubs, golf and athletic clubs, lobbying expenses are not deductible. an election under section 965(n), the airline and hotel clubs, and clubs operated These expenses include: taxable income reduced by NOL to provide meals under conditions • Amounts paid or incurred in connection carryovers or carrybacks is reduced, the favorable to business discussion. with influencing federal, state, or local NOL deduction on line 36b is reduced by legislation (but not amounts paid or the reduction amount. See section 965(n) Qualified transportation fringes incurred before December 22, 2017, in and Regulations section 1.965-7(e) for (QTFs). Generally, no deduction is connection with local legislation); or more information. allowed under section 274(a)(4) for QTFs • Amounts paid or incurred in connection Section 382 provides a limitation on provided by employers to their employees. • with any communication with certain NOL carryforwards and certain built-in QTFs are defined in section 132(f)(1) and federal executive branch officials in an losses following ownership change. include: attempt to influence the official actions or • Transportation in a commuter highway positions of the officials. See Regulations Note. P.L. 115-97 amended section 382 vehicle between the employee’s residence section 1.162-29 for the definition of for tax years beginning after 2017. and place of environment, “influencing legislation.” • If a corporation acquires control of Any transit pass, and • Dues and other similar amounts paid to another corporation (or acquires its assets Qualified parking. • certain tax-exempt organizations may not in a reorganization), the amount of See section 274, Pub. 15-B, and Pub. be deductible. If certain in-house lobbying pre-acquisition losses that may offset 535 for details. expenditures do not exceed $2,000, they recognized built-in gain may be limited (see section 384). Entertainment facilities. Generally, are deductible. If a corporation elects the alternative tax the corporation cannot deduct an expense • Line 32. Total deductions. Section 848 on qualifying shipping activities under paid or incurred for a facility (such as a (capitalization of certain policy acquisition section 1354, no deduction is allowed for yacht or hunting lodge) used for an activity expenses) requires insurance companies an NOL attributable to the qualifying

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shipping activities to the extent that the amount of interest income, including all any property. Do not include any amount loss is carried forward from a tax year tax-exempt interest income. spent on foreclosed property before the preceding the first tax year for which the property is held for rent. Line 1b, column (a). Interest exempt alternative tax election was made. See under section 103. Enter the amount of Line 11. Depreciation. Enter section 1358(b)(2). interest on state and local bonds that is depreciation on assets only to the extent Section 831(b)(3) provides for a • exempt from taxation under section 103. that the assets are used to produce gross limitation on use of net operating losses. See the instructions for Schedule A, investment income reported on For more details on the NOL deduction, line 3b, column (a), for more information. Schedule B, lines 1 through 7. For more see section 172 and the Instructions for information, see the instructions for Lines 1a and 1b, column (b). Amortiza- Form 1139, Corporation Application for Schedule A, line 22. Tentative Refund. tion of premium. Enter on line 1a, column (b), the total amortization of bond Line 37. Taxable income. If line 37 Note. See section 834(d)(1) regarding premium, including amortization on the limitation of expenses on real estate (figured without regard to the items listed tax-exempt bonds. under Minimum taxable income) is zero or owned and occupied in part or in whole by Enter on line 1b, column (b), the less, the corporation may have an NOL a mutual insurance company. amortization of bond premium on that can be carried back or forward as a tax-exempt bonds. Line 12. Depletion. Enter any allowable deduction to other tax years. depletion on royalty income reported on Minimum taxable income. The Note. Insurance companies electing to Schedule B, line 4. See the instructions for corporation's taxable income cannot be amortize discount for tax purposes must Schedule A, Line 23, for more information. less than the largest of the following reduce the amortization of premium by Line 13. Trade or business deductions. amounts. any amortization of discount. Enter the total deductions related to any • The inversion gain of the corporation for Line 3. Rents. Enter the gross rents trade or business income included in the tax year, if the corporation is an received or accrued during the tax year. gross investment income under section expatriated entity or a partner in an Deduct rental expenses such as repairs, 834(b)(2). Do not include deductions for expatriated entity. See section 7874(a). interest, taxes, and depreciation on the any insurance business. Do not include • The sum of the corporation's excess proper lines in the Deductions section. losses from sales or exchanges of capital inclusions from its residual interest in a assets or property used in the business, or REMIC from Schedules Q (Form 1066), Line 5. Gross income from a trade or from the compulsory or involuntary line 2c, and the corporation's taxable business, other than an insurance conversion of property used in the trade or income determined solely with respect to business, and from Form 4797. Enter business. its ownership and high-yield interests in the gross income from a trade or FASITs. See section 860E(a). business, other than an insurance Line 14. Interest. See the instructions for business, carried on by the insurance Schedule A, lines 20a and 20b. Net operating loss (NOL). An NOL company or by a partnership of which the Line 17. Investment expenses. Enter incurred in a tax year beginning in 2018, insurance company is a partner. Include 2019, or 2020 can be carried back 5 years expenses that are properly chargeable as section 1245 and section 1250 gains (as investment expenses. If general expenses preceding the year of the loss. For NOLs modified by section 291) and other gains that can be carried back, the corporation are allocated to investment expenses, the from Form 4797, Sales of Business total deduction cannot be more than the can elect to waive the carryback period Property, on investment assets only. and instead carry the NOL forward to amount on Schedule B, Part II, line 39. future tax years. See the Instructions for Line 6. Income from leases described Attach a statement showing the kind and Form 1139. See the instructions for in sections 834(b)(1)(B) and 834(b)(1) amount of general expenses. Minor items Schedule I, Item 10, for information on (C). Enter gross income from entering may be grouped together. making the election to waive the entire into, changing, or ending any lease, See section 267 for the limitation on carryback period for 2020. mortgage, or other instrument or deductions for unpaid expenses and See the Instructions for Form 1139 for agreement from which the company earns interest in transactions between related other special rules and elections. interest, rents, or royalties. taxpayers. Line 8. Gross investment income. If gross investment income includes an Schedule B, Part Schedule B, Part amount subtracted from the protection I—Taxable Investment against loss account, write on the dotted II—Invested Assets Book Income of Electing Small line next to line 8, “PAL” and the amount. Values Deductions Use Schedule B, Part II, to compute the Companies limitation on investment expenses under Line 9. Real estate taxes. Enter taxes section 834(c)(2) when any general Note. (1) Once an election under section paid or accrued on real estate owned by expenses are in part assigned to, or 831(b) is made to be taxed only on the corporation and deductible under included in, the investment expenses investment income, it can only be revoked section 164. deducted on Schedule B, Part I, line 17. with the consent of the Secretary; and (2) a corporation making this election must Line 10. Other real estate expenses. include on line 8, Gross investment Enter all ordinary and necessary real income, any amount subtracted from a estate expenses, such as fire insurance, protection against loss account. heat, light, and labor. Also, enter the cost of incidental repairs, such as labor and Income supplies, that do not add to the property's Line 1a, column (a). Interest (including value or appreciably prolong its life. Do not tax-exempt interest). Enter the gross include any amount paid for new buildings or for permanent improvements or betterments made to increase the value of

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• Qualified for the 50% deduction under Also, include dividends received from a Schedule C—Dividends, section 243(a)(1). less-than-20%-owned foreign sales Inclusions, See section 246 and section 854 for corporation (FSC) that: limitations and exclusions. • Are attributable to income treated as Dividends-Received effectively connected with the conduct of a Report so-called dividends or earnings trade or business within the United States Deduction, and Other received from mutual savings banks, etc., Special Deductions (excluding foreign trade income), and as interest. Do not treat them as • Qualify for the 50% deduction under Definitions dividends. section 245(c)(1)(B). Line 2. Enter on line 2: Prorated amounts. Prorated amounts Line 7. Enter the U.S.-source portion of • Dividends (except those received on dividends that: mean tax-exempt interest and dividends certain debt-financed stock acquired after for which a deduction is allowable under • Are received from 20%-or-more-owned July 18, 1984) that are received from foreign corporations, and section 243, 244 (as affected by P.L. 20%-or-more-owned domestic 113-295, Div. A, section 221(a)(41)(A), • Qualify for the 65% deduction under corporations subject to income tax and sections 245(a) and 242 by reference. December 19, 2014, 128 Stat. 4043), or that are subject to the 65% deduction 245 (other than 100% dividends). under section 243(c), and Also, include dividends received from a 20%-or-more-owned FSC that: 100% dividend. 100% dividend means • Taxable distributions from an IC-DISC Are attributable to income treated as any dividend if the percentage used for or former DISC that are considered • effectively connected with the conduct of a purposes of determining the deduction eligible for the 65% deduction. trade or business within the United States allowable under section 243, 244 (as Line 3. Enter the following. (excluding foreign trade income), and affected by P.L. 113-295, Div. A, section • Dividends received on certain Qualify for the 65% deduction provided 221(a)(41)(A), December 19, 2014, 128 • debt-financed stock acquired after July 18, in section 245(c)(1)(B). Stat. 4043), or 245(b) is 100%. See 1984, from domestic and foreign section 243, section 244 as affected by corporations subject to income tax that Line 8. Enter dividends received from P.L. 113-295, and section 245. would otherwise be subject to the wholly owned foreign subsidiaries that are dividends-received deduction under eligible for the 100% deduction under Lines 1 through 25 section 243(a)(1), 243(c), or 245(a). section 245(b). For purposes of the 20% ownership test Generally, debt-financed stock is stock In general, the deduction under section on lines 1 through 7, the percentage of that the corporation acquired by incurring 245(b) applies to dividends paid out of the stock owned by the corporation is based a debt (for example, it borrowed money to earnings and profits of a foreign on voting power and value of the stock. buy the stock). corporation for a tax year during which: Preferred stock described in section • Dividends received from a regulated • All of its outstanding stock is directly or 1504(a)(4) is not taken into account. investment company (RIC) on certain indirectly owned by the domestic debt-financed stock. The amount of corporation receiving the dividends, and Consolidated returns. Corporations dividends eligible for the • All of its gross income from all sources filing a consolidated return should see dividends-received deduction is limited by is effectively connected with the conduct Regulations sections 1.1502-13, section 854(b). The corporation should of a trade or business within the United 1.1502-26, and 1.1502-27 before receive a notice from the RIC specifying States. completing Schedule C. the amount of dividends that qualify for the Also, include on line 8 dividends from Lines 1 through 9, column (a). Enter in deduction. FSCs that are attributable to foreign trade column (a) of the appropriate line those Line 4. Enter dividends received on income and that are eligible for the 100% dividends that are subject to the preferred stock of a less-than-20%-owned deduction provided in section 245(c)(1) provisions of section 832(b)(5)(B).This will public utility that is subject to income tax (A). include: and is allowed the deduction provided in Line 9. Enter only those dividends that 1. All dividends (other than 100% section 247 (as affected by P.L. 113-295, qualify under section 243(b) for the 100% dividends) received on stock acquired Div. A, section 221(a)(41)(A), December dividends-received deduction described in after August 7, 1986; and 19, 2014, 128 Stat. 4043) for dividends section 243(a)(3). paid. 2. 100% dividends received on stock The 100% deduction does not apply to acquired after August 7, 1986, to the Line 5. Enter dividends received on affiliated group members that are joining in extent that such dividends are attributable preferred stock of a 20%-or-more-owned the filing of a consolidated return. to prorated amounts (see definition public utility that is subject to income tax earlier). and is allowed the deduction provided in Line 10, column (b). Enter the section 247 (as affected by P.L. 113-295, foreign-source portion of dividends that: In the case of an insurance company Div. A, section 221(a)(41)(A), December • Are received from specified 10% owned that files a consolidated return, the 19, 2014, 128 Stat. 4043) for dividends foreign corporations (as defined in section determination with respect to any dividend paid. 245A(b)), including gain from the sale of paid by a member to another member of stock of a foreign corporation that is the affiliated group is made as if no Line 6. Enter the U.S.-source portion of treated as a dividend for purposes of consolidated return was filed. See section dividends that: applying section 245A under section 832(g). • Are received from 1248(a) and (i); and less-than-20%-owned foreign Qualify for the 100% deduction under Line 1. Enter dividends (except those • corporations, and section 245A(a) (excluding any hybrid received on certain debt-financed stock • Qualify for the 50% deduction under dividends; see instructions for Line 11). acquired after July 18, 1984 (see section section 245(a). To qualify for the 50% 246A)) that are: deduction, the corporation must own at Line 11, column (b). Enter the foreign • Received from less-than-20%-owned least 10% of the stock of the foreign dividends not reportable on line 3, 6, 7, 8, domestic corporations subject to income corporation by vote and value. or 10 of column (b). tax, and

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Include on line 11 the foreign-source portion of any dividend that does not qualify for the section 245A deduction (for Worksheet for Schedule C, line 26 Keep for Your Records example, hybrid dividends within the meaning of section 245A(e), ineligible 1. Refigure the amount from Schedule A, line 35 or Schedule B, amounts of dividends within the meaning line 19, whichever applies, without any adjustment under of Regulations section 1.245A-5(b), section 1059, and without any capital loss carryback to the tax dividends that fail to meet the holding year under section 1212(a)(1) ...... period requirement under section 246(c) 2. Enter the sum of the amounts from line 25, column (b) (without (5), etc.). regard to wholly owned foreign subsidiary dividends) and line 9, Also, include on line 11 the column (b) ...... corporation's share of distributions from a 3. Subtract line 2 from line 1 ...... section 1291 fund from Form 8621, to the extent that the amounts are taxed as 4. Multiply line 3 by 65% ...... dividends under section 301. See Form 5. Add lines 19, 22, 24, and 25, column (b) (without regard to FSC 8621 and its instructions. dividends), and the portion of the deduction on line 20, column Attach a statement identifying the (b), that is attributable to dividends received from amount of each dividend reported on 20%-or-more-owned corporations ...... line 11 and the provision pursuant to 6. Enter the smaller of line 4 or line 5. If line 5 is greater than line 4, which a deduction is not allowed with stop here; enter the amount from line 6 on line 26, column (b), respect to such dividend. and do not complete the rest of this worksheet ...... Line 12a, column (b). Enter the 7. Enter the total amount of dividends received from foreign-source portion of any subpart F 20%-or-more-owned corporations that are included on lines 2, inclusions attributable to the sale or 3, 5, 7, and 8, column (b) (without regard to FSC exchange by a controlled foreign dividends), ...... corporation (CFC) of stock in another 8. Subtract line 7 from line 3 ...... foreign corporation described in section 964(e)(4). This should equal the U.S. 9. Multiply line 8 by 50% ...... shareholder's pro rata share of the amount 10. Subtract line 5 from line 26, column (b) (without regard to FSC reported on Form(s) 5471, Schedule I, dividends) ...... line 1a. (Do not include on line 12a any 11. Enter the smaller of line 9 or line 10 ...... portion of such subpart F inclusion that is not eligible for the section 245A deduction 12. Dividends-received deduction after limitation (section pursuant to Regulation section 246(b)). Add lines 6 and 11. Enter the result here and on 1.245A-5(g)(2). Include such amounts on line 26, column (b) ...... line 12c.) Line 12b, column (b). Enter the total subpart F inclusions attributable to tiered schedules. Also, complete and attach and Regulations section 1.246-5 for more hybrid dividends. This should equal the Form 965-B. details. sum of the amounts reported by the U.S. Line 16, column (b). Include the b. Dividends received on any share of shareholder on Form(s) 5471, Schedule I, following. preferred stock which are attributable to line 1b. periods totaling more than 366 days, if 1. Dividends (other than capital gain such stock was held for less than 91 days Line 12c, column (b). Enter all other distributions reported on Schedule D during the 181-day period that began 90 amounts included in income under section (Form 1120) and exempt-interest days before the ex-dividend date. When 951, other than amounts on line 15. This dividends) that are received from RICs counting the number of days the should equal the U.S. shareholder's pro and that are not subject to the 50% corporation held the stock, you cannot rata share of the sum of the amounts deduction. reported on Form 5471, Schedule I, lines count certain days during which the 2. Dividends from tax-exempt 1(c) - 1(h), 2, and 4. corporation's risk of loss was diminished. organizations. See section 246(c)(4) and Regulations Line 13, column (b). Enter amounts 3. Dividends (other than capital gain section 1.246-5 for more details. Preferred included in income under the section 951A distributions) received from a REIT that, dividends attributable to periods totaling GILTI provision. See Form 8992, Part II, for the tax year of the trust in which the less than 367 days are subject to the line 5, and Form 8992 instructions. Also, dividends are paid, qualifies under 46-day holding period rule above. consider the applicability of section 951A sections 856 through 860. c. Dividends on any share of stock to with respect to controlled foreign the extent the corporation is under an corporations owned by domestic 4. Dividends not eligible for a obligation (including a short sale) to make partnerships in which the filer has an dividends-received deduction, which related payments with respect to positions interest. If you also have a Form 5471 include the following. in substantially similar or related property. reporting requirement, please attach Form a. Dividends received on any share of 5471. stock held for less than 46 days during the 5. Any other taxable dividend income 91-day period beginning 45 days before not properly reported elsewhere on Line 15, column (b). Enter the section the ex-dividend date. When counting the Schedule C. 965(a) inclusions from Form 965, line 3. number of days the corporation held the You must also complete and attach Form stock, you cannot count certain days Line 20. Dividends received on certain 965, Inclusion of Deferred Foreign Income during which the corporation's risk of loss debt-financed stock acquired after July 18, Upon Transition to Participation was diminished. See section 246(c)(4) 1984, are not entitled to the full 50% or Exemption System, and applicable 65% dividends-received deduction. The

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50% or 65% deduction is reduced by a year beginning after December 31, 2013, recovered during the tax year. Attach a percentage that is related to the amount of and December 31, 2014. statement that reconciles the amount debt incurred to acquire the stock. See entered on line 1 to the amount reported Line 1. Enter gross premiums written on section 246A. Also, see section 245(a) on the corporation's annual statement. insurance contracts during the tax year, before making this computation for an less return premiums and premiums paid Lines 2a and 4a. Unpaid losses on life additional limitation that applies to for reinsurance. See Regulations section insurance contracts. Unpaid losses dividends received from foreign 1.832-4. must be adjusted for recoveries of corporations. Attach a statement showing reinsurance. The amounts of expected how the amount on line 20 was figured. Lines 2a and 4a. Include on lines 2a and recoveries should be estimated based on 4a the following. Line 26, column (b). Generally, line 26, the facts in each case and the column (b), cannot exceed the amount 1. All life insurance reserves, as corporation's experience with similar from the Worksheet for Schedule C, defined in section 816(b) (but determined cases. See Regulations section line 26, above. However, in a year in under section 807). 1.832-4(b). which a NOL occurs, this limitation does 2. Generally, all section 833 Lines 2b and 4b. Discounted unpaid not apply even if the loss is created by the organizations with an MLR of 85% or more losses outstanding. Enter all discounted dividends-received deduction. See (discussed earlier) are permitted to enter unpaid losses, as defined in section 846. sections 172(d) and 246(b). 100% of unearned premiums on lines 2a and 4a. Section 833 organizations with an Section 846 provides that the amount Line 28, column (b). Enter the section of discounted unpaid losses must be 250 deduction claimed for FDII and GILTI. MLR of less than 85% must change to an 80% Unearned Premium Reserve. For figured separately by each line of business This should equal the sum of Form 8993, (multiple peril lines must be treated as a Part IV, line 8 and line 9. more information, see Accounting Methods, earlier. single line of business) and by each Line 29. Enter the section 965(c) accident year and must be equal to the deduction from Form 965, line 17. Lines 2b and 4b. Include on lines 2b and present value of those losses determined 4b 90% of unearned premiums for by using the: insurance against default in the payment 1. Amount of the undiscounted unpaid Schedule E—Premiums of principal or interest on securities losses, Earned described in section 165(g)(2)(C) (relating 2. Applicable interest rate, and to worthless securities) with maturities of Definitions more than 5 years. See section 832(b)(7) 3. Applicable loss payment pattern. (B). Undiscounted unearned premiums. Section 846(e)(6) provides that any Undiscounted unearned premiums means Lines 2c and 4c. The amount of determination under section 846(a) the unearned premiums shown in the discounted unearned premiums at the end (discounted losses determined) with annual statement filed for the year ending of any tax year must be the present value respect to unpaid losses relating to with or in the tax year. of those premiums (as of such time and accident and health insurance lines of separately with respect to premiums businesses (other than credit disability Applicable interest rate. Applicable received in each calendar year) insurance) must be made (A) in the case interest rate means the annual rate determined by using: of unpaid losses relating to disability determined under section 846(c)(2) for the income, by using the general rules 1. The amount of the undiscounted calendar year the premiums are received. prescribed under section 807(d) unearned premiums at such time, Applicable statutory premium recogni- applicable to noncancellable accident and tion pattern. Applicable statutory 2. The applicable interest rate, and health insurance contracts and using a premium recognition pattern means the 3. The applicable statutory premium mortality or morbidity table reflecting the statutory premium recognition pattern in recognition pattern. taxpayer’s experience; except that the effect for the calendar year the premiums limitation of section 846(a)(3) (Limitation are received, and is based on the statutory Lines 2d and 4d. Include on lines 2d and on amount of discounted losses) will premium recognition pattern which applies 4d 80% of the total of all unearned apply, and (B) in all other cases, by using to premiums received by the corporation premiums not reported on lines 2a through an assumption (in lieu of a loss payment in that calendar year. For purposes of the 2c, or 4a through 4c, respectively. pattern) that unpaid losses are paid in the preceding sentence, premiums received A reciprocal or interinsurer required middle of the year following the accident during any calendar year will be treated as under state law to reflect unearned year. received in the middle of such year. premiums on its annual statement net of A separate series of discount factors premium acquisition expenses should Medical loss ratio. Section 833(c)(5) are computed for, and applied, to increase its unearned premiums by the limits the 100% deduction of unearned undiscounted unpaid losses attributable to amount of such acquisition expenses prior premiums by Blue Cross and Blue Shield each accident year of each line of to making the computation on lines 2d and organizations described in section 833(c) business shown on the annual statement 4d. See section 832(b)(7)(E). (2), and other organizations described in (as defined by section 846(e)(3)) filed for the calendar year ending with or within the section 833(c)(3), to those with an MLR of Line 6. Transitional adjustments apply to tax year. See section 1.832-4(b) relating to 85% or more. Organizations with an MLR companies which become taxable under the determination of unpaid losses. less than 85% are allowed to deduct only section 831(a). See section 832(b)(7)(D). 80% of unearned premiums. See section Section 832(b)(5)(A) provides rules for 833(c)(5), Regulations section 1.833-1, figuring losses incurred. Section 832(b)(5) Notice 2010-79, and Notice 2011-4 for Schedule F—Losses (B) provides rules for reducing the more information. Also, see Notice Incurred deduction figured in section 832(b)(5)(A). 2012-37 applicable to the first tax year Rev. Proc. 2020-48 prescribes beginning after December 31, 2012. See Line 1. Losses paid. Enter the total discount factors for the 2020 accident year Regulations section 1.833-1(c)(2) for losses paid on insurance contracts during for use by insurance companies in transition rules applicable to the first tax the tax year less salvage and reinsurance computing discounted unpaid losses

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under section 846 of the Internal Revenue Line 13. Reduction of deduction under see section 833(c)(3)(C) to determine the Code and discounted estimated salvage section 832(b)(5)(B). Multiply line 12 by adjusted surplus as of the beginning of the recoverable under section 832. The the applicable percentage, which is 25% 2020 tax year. discount factors for accident years before for 2020 (5.25% divided by the highest For purposes of the computation of the 2020 were prescribed in Rev. Proc. corporate tax rate). See section 832(b)(5) adjusted surplus, the terms “adjusted 2019-31, 2019-33 I.R.B. 643. See Rev. (B). taxable income” and “adjusted net Proc. 2019-31 and Rev. Proc. 2019-06, operating loss” mean the taxable income 2019-02 I.R.B. 284, for background or the net operating loss, respectively, concerning the loss payment patterns and Schedule G—Other Capital determined with the following application of the discount factors. The modifications. discount factors prescribed in Rev. Proc. Losses 2020-48 are determined under section Capital assets are considered sold or 1. Without regard to the deduction 846, as amended by section 13523 of the exchanged to provide funds to meet determined under section 833(b)(1); Tax Cuts and Jobs Act, P.L. 115-97, and abnormal insurance losses and to pay 2. Without regard to any carryover or final regulations under section 846 dividends and make similar distributions to carryback to that tax year; and policyholders to the extent that the gross published in the Federal Register (84 FR 3. By increasing gross income by an receipts from their sale or exchange are 27947) on June 17, 2019. amount equal to the net exempt income not more than the amount by which the for the tax year. Note. P.L. 115-97, December 22, 2017, sum of dividends and similar distributions section 13523, modified discounting rules paid to policyholders, losses paid, and Line 6. Special deduction. The special for property and casualty insurance expenses paid for the tax year is more deduction under section 833(b) cannot be companies. Section 13523(a) modified the than the total on Schedule G, line 9. taken if the MLR is less than 85%. If the rate of interest used to discount unpaid Total gross receipts from sales of MLR is less than 85%, enter zero on line 6 losses. Section 13523(b) modified capital assets (line 12, column (c)) must and Schedule A, line 34a. computational rules for loss payment not be more than line 10. If necessary, the patterns. Section 13523(c) repealed the corporation may report part of the gross Note. The deduction for any tax year is historical payment pattern election. receipts from a particular sale of a capital limited to taxable income for that tax year Section 13523(d) provides that the asset on this schedule and the rest on determined without regard to this amendments apply to tax years beginning Schedule D (Form 1120). Otherwise, do deduction. after 2017. Section 13523(e) provides for not include on Schedule D (Form 1120) Note. Under section 833(b)(4), any an 8-year transition rule. See section 846 any sales reported on this schedule. of the Internal Revenue Code, as modified determination under section 833(b) must by PL 115-97. be made by only taking into account items Schedule H—Special from the health-related business of the Note. There is a special application of the corporation. “fresh start” provision for an insurance Deduction and Ending Line 8a. Adjusted tax-exempt income. company that is not subject to tax under Adjusted Surplus for Reduce the total tax-exempt interest section 831(a) for its first tax year received or accrued during the tax year by beginning after December 31, 1986, Section 833 Organizations any amount (not otherwise deductible) because (1) it is described in section Section 833(c)(5) provides that section which would have been allowable as a 501(c) or (2) it is subject to tax under 833(a)(2) and section 833(a)(3) do not deduction for the tax year if such interest section 831(b) on its investment income. apply to any organization with an MLR of less than 85%. See section 833(c)(5), were not tax exempt. Enter the result on If the insurance company later Regulations section 1.833-1, and Notice line 8a. becomes subject to tax under section 2010-79 for more information. Also, see 831(a), the rules relating to the fresh start Line 8b. Adjusted dividends-received Notice 2012-37 applicable to the first tax deduction. Reduce the total amount under the discounting provisions are year beginning after December 31, 2012. applied by treating the last tax year before allowed as a deduction under sections See Regulations section 1.833-1(c)(2) for 243, 244 (as affected by P.L. 113-295, the year in which the insurance company transition rules applicable to the first tax becomes subject to tax under section Div. A, section 221(a)(41)(A), December year beginning after December 31, 2013, 19, 2014, 128 Stat. 4043), and 245 by the 831(a) as the insurance company's last and December 31, 2014. tax year beginning before 1987. See amount of any decrease in deductions section 1010(e) of the Technical and Line 5. Beginning adjusted surplus. If allowable for the tax year because of Miscellaneous Revenue Act of 1988 and the corporation was a section 833 section 832(b)(5)(B) when the decrease is Notice 88-100, 1988-2 C.B. 439. organization in 2019, it should enter the caused by the deductions under sections amount from its 2019 Form 1120-PC, 243, 244 (as affected by P.L. 113-295, Lines 6 and 7. Estimated salvage and Schedule H, line 10. Div. A, section 221(a)(41)(A), December reinsurance recoverable. Enter on lines Generally, the adjusted surplus as of 19, 2014, 128 Stat. 4043), and 245. Enter 6 and 7 the amount of estimated salvage the result on line 8b. and reinsurance recoverable. See Rev. the beginning of any tax year is an amount Proc. 2019-06, TD 9863, Rev. Proc. equal to the adjusted surplus as of the 2019-30, and Rev. Proc. 2020-48 for the beginning of the preceding tax year: Schedule I—Other latest information and guidance. 1. Increased by the amount of any adjusted taxable income for the preceding Information Line 9. Tax-exempt interest subject to tax year, or The following instructions apply to Form section 832(b)(5)(B). Enter the amount 1120-PC, page 7. Complete all items that of tax-exempt interest received or accrued 2. Decreased by the amount of any apply to the corporation. during the tax year on investments made adjusted net operating loss for the after August 7, 1986. For information preceding tax year. regarding the determination of the If 2020 is the first tax year the taxpayer acquisition date of an investment, see the qualifies as a section 833 organization, instructions for Schedule C.

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Question 4 6. On line 6b, enter the name of the the due date of the loss year return owner's country. (excluding extensions). Attach the election Check the “Yes” box if: to the amended return and write "Filed • The corporation is a subsidiary in an Note. If there is more than one pursuant to section 301.9100-2" on the affiliated group (defined later), but is not 25%-or-more foreign owner, complete election statement. See the Instructions filing a consolidated return for the tax year lines 6a and 6b for the foreign person with for Form 1139. with that group, or the highest percentage of ownership. • The corporation is a subsidiary in a Corporations filing a consolidated parent-subsidiary controlled group. For a Foreign person. The term “foreign return that elect to waive the entire definition of parent-subsidiary controlled person” means: carryback period for the group must also group, see the Instructions for Schedule O • An individual who is not a citizen or attach the statement required by (Form 1120). resident of the United States; Regulations section 1.1502-21(b)(3) or the An individual who is a citizen or resident Any corporation that meets either of the • election will not be valid. of a U.S. possession who is not otherwise requirements above should check the a citizen or resident of the United States; “Yes” box. This applies even if the Item 11 Any partnership, association, company, corporation is a subsidiary member of one • Enter the amount of the NOL carryover to or corporation that is not created or group and the parent corporation of this tax year from prior years, even if some organized in the United States; another. of the loss is used to offset income on this • Any foreign estate or trust within the return. The amount to enter is the total of Note. If the corporation is an “excluded meaning of section 7701(a)(31); or all NOLs generated in prior years but not member” of a controlled group (see • A foreign government (or one of its used to offset income (either as a definition in the Instructions for agencies or instrumentalities) to the extent carryback or carryover) in a tax year prior Schedule O (Form 1120)), it is still that it is engaged in the conduct of a to 2020. Do not reduce the amount by any considered a member of a controlled commercial activity, as described in NOL deduction reported on Schedule A, group for this purpose. section 892. line 36b. However, the term “foreign person” Affiliated group. An affiliated group is does not include any foreign person who Question 12 one or more chains of includible consents to the filing of a joint income tax Schedule UTP (Form 1120) asks for corporations (section 1504(a)) connected return. information about tax positions that affect through stock ownership with a common the U.S. federal income tax liabilities of Owner's country. For individuals, the parent corporation. The common parent certain corporations that issue or are term “owner's country” means the country must be an includible corporation and the included in audited financial statements of residence. For all others, it is the following requirements must be met. and have assets that equal or exceed $10 country where incorporated, organized, 1. The common parent must own million. For details, see the Instructions for created, or administered. directly stock that represents at least 80% Schedule UTP. of the total voting power and at least 80% Requirement to file Form 5472. If the of the total value of the stock of at least corporation checked “Yes,” it may have to Attach Schedule UTP to the one of the other includible corporations. file Form 5472, Information Return of a corporation's income tax return. Do not file 2. Stock that represents at least 80% 25% Foreign-Owned U.S. Corporation or it separately. A taxpayer that files a of the total voting power and at least 80% a Foreign Corporation Engaged in a U.S. protective Form 1120-PC must also file of the total value of the stock of each of Trade or Business. Generally, a 25% Schedule UTP if it satisfies the the other corporations (except for the foreign-owned corporation that had a requirements set forth above. common parent) must be owned directly reportable transaction with a foreign or Question 13 by one or more of the other includible domestic related party during the tax year Section 833(c)(5) provides that section corporations. must file Form 5472. See the Instructions for Form 5472 for filing instructions and 833(a)(2) and section 833(a)(3) do not For this purpose, the term “stock” penalties for failure to file. apply to a Blue Cross or Blue Shield generally does not include any stock that organization described in section 833(c) (a) is nonvoting, (b) is nonconvertible, (c) Item 9 (2), or other organization described in is limited and preferred as to dividends Show any tax-exempt interest received or section 833(c)(3), unless it has an MLR of and does not participate significantly in accrued. Include any exempt-interest 85% or more for the tax year. corporate growth, and (d) has redemption dividends received as a shareholder in a For purposes of section 833(c)(5), the and liquidation rights that do not exceed mutual fund or other RIC. the issue price of the stock (except for a MLR is equal to the amount expended on reasonable redemption or liquidation Item 10 reimbursement for clinical services premium). See section 1504(a)(4). Generally, if the corporation has an NOL provided to enrollees (as defined in 45 for 2020, it can generally elect to waive the C.F.R. 158.140) and for activities that Question 6 entire carryback period for the NOL and improve health care quality (as defined in Check the “Yes” box if one foreign person instead carry the NOL forward to future tax 45 C.F.R. 158.150) under its policies owned at least 25% of (a) the total voting years. To do so, check the box on line 10 during the tax year (section 833(c)(5) MLR power of all classes of stock of the and file the tax return by its due date, numerator) divided by the total premium corporation entitled to vote, or (b) the total including extensions. Do not attach the revenue (section 833(c)(5) MLR value of all classes of stock of the statement described in Temporary denominator). See section 833(c)(5), corporation. Regulations section 301.9100-12T. Regulations section 1.833-1, and Notice 2010-79 for more information. Also, see The constructive ownership rules of Generally, once made, the election is irrevocable. Notice 2012-37 applicable to the first tax section 318 apply in determining if a year beginning after December 31, 2012. corporation is foreign owned. See section If the corporation timely filed its return See Regulations section 1.833-1(c)(2) for 6038A(c)(5) and the related regulations. for the loss year without making the transition rules applicable to the first tax Enter on line 6a the percentage owned election, it can make the election on an year beginning after December 31, 2013, by the foreign person specified in question amended return filed within 6 months of and December 31, 2014.

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Check the “Yes” box if the corporation make the section 831(b)(2)(A)(iii) election broadly. For additional information about is a Blue Cross or Blue Shield organization to be taxed on taxable investment income. arrangements subject to section 267A, described in section 833(c)(2), or other If the corporation satisfies the specified see Regulations sections 1.267A-2 and organization described in section 833(c) holder/specified asset test in section 1.267A-4. Also, see the anti-avoidance (3), that has satisfied the MLR 831(b)(2)(B)(i)(II), the corporation should rule under Regulations section requirements of section 833(c)(5). answer “Yes” on Question 14(b). If the 1.267A-5(b)(6). corporation does not satisfy either the If you checked “Yes,” you must enter Extent to which deduction is disal- diversification requirements of section the following. lowed. When section 267A applies to 831(b)(2)(B)(i)(I) or section 831(b)(2)(B)(i) The section 833(c)(5) MLR numerator interest or royalties paid or accrued • (II) for the tax year (answering “No” for on line 13(a), pursuant to a hybrid arrangement, it both 14(a) and 14(b)), the corporation is The section 833(c)(5) MLR generally disallows a deduction for the • not a small company and, therefore, is not denominator on line 13(b), and amount to the extent that, under the eligible to be taxed on taxable investment The section 833(c)(5) percentage on foreign tax law, there is not a • income under section 831(b) in lieu of the line 13(c). corresponding income inclusion (including tax otherwise applicable under section long-term deferral). However, the 831(a). If you checked “No,” enter zero on deduction is not disallowed to the extent Schedule H, line 6, and Schedule A, the amount is directly or indirectly included line 34a. You cannot take the special Question 15 If the corporation had gross receipts of at in income in the United States, such as if deduction. See the instructions for the amount is taken into account with Schedule H. least $500 million in any one of the 3 preceding tax years, complete Form 8991 respect to a U.S. shareholder under Also, if you checked “No,” your and attach it to this return. For this section 951(a) or section 951A. For deduction of unearned premiums is purpose, the corporation's gross receipts additional information, see Regulations limited. See the instructions for include the gross receipts of all persons sections 1.267A-2 through 1.267A-4. For Schedule E for more information. aggregated with the corporation, as examples illustrating the application of section 267A, see Regulations section Question 14 specified in section 59A(e)(3). See the Instructions for Form 8991 to determine if 1.267A-7. Only a corporation that qualifies as a small the corporation is subject to the base Question 17 company under section 831(b)(2) is erosion minimum tax. eligible to elect to be taxed on taxable Check “Yes” if the taxpayer has an investment income under section 831(b) in Question 16 election in effect to exclude a real property lieu of the tax otherwise applicable under If the corporation paid or accrued any trade or business or a farming business section 831(a). See section 831(b)(2)(A) interest or royalty for which a deduction is from section 163(j). For more information, (iii). Section 831(b)(2)(A)(ii) provides that not allowed under section 267A, check see section 163(j) and the Instructions for a corporation must meet the diversification "Yes" for question 16 and enter the total Form 8990. requirements in section 831(b)(2)(B) to amount of interest and royalty paid or Question 18 qualify as a small company. A corporation accrued by the corporation (including the Generally, a taxpayer with a trade or meets the diversification requirements if corporation's allocable share through a business must file Form 8990 to claim a under section 831(b)(2)(B)(i)(I) no more partnership) for which a deduction is not deduction for business interest. In than 20% of the net written premiums (or, allowed. if greater, direct written premiums) of such addition, Form 8990 must be filed by any corporation for the tax year is attributable Payments to which section 267A ap- taxpayer that owns an interest in a to any one policyholder. However, a plies. Interest or royalty paid or accrued partnership with current year, or prior year corporation that does not meet this 20% by a domestic corporation (including, in carryover, excess business interest test can meet the diversification the case of a domestic corporation that is expense allocated from the partnership. a partner in a partnership, the domestic requirement under section 831(b)(2)(B) if Exclusions from filing. A taxpayer is corporation's allocable share of interest or no person who holds (directly or indirectly) not required to file Form 8990 if the royalty paid or accrued by the partnership) an interest in such insurance company is a taxpayer is a small business taxpayer and is subject to section 267A. Section 267A specified holder who holds (directly or does not have excess business interest generally applies to interest or royalty paid indirectly) aggregate interest in such expense from a partnership. A taxpayer is or accrued according to a hybrid insurance company which constitutes a also not required to file Form 8990 if the arrangement (such as, for example, a percentage of the entire interests in such taxpayer only has business interest payment according to a hybrid instrument, insurance company which is more than expense from these excepted trades or or a payment to a reverse hybrid), 2% higher than the percentage of interests businesses. provided that the payment or accrual is to in the specified assets with respect to An electing real property trade or a related party (or according to a • such insurance company held (directly or business, structured arrangement). In addition, indirectly) by such specified holder under An electing farming business, or under an imported mismatch rule, section • section 831(b)(2)(B)(i)(II). Certain utility businesses. 267A generally applies to interest or • A corporation making an election under royalties paid or accrued according to a Small business taxpayer. A small section 831(b)(2)(A)(iii) must complete non-hybrid arrangement where the income business taxpayer is not subject to the Question 14 to indicate whether it qualifies attributable to that payment or accrual is business interest expense limitation and is as a small company, and, therefore, is directly or indirectly offset by certain not required to file Form 8990. A small eligible to make the election to be taxed deductions involving hybridity incurred by business taxpayer is a taxpayer that (a) is on taxable investment income because it a related party or according to a structured not a tax shelter (as defined in section meets the diversification requirements of arrangement. However, section 267A 448(d)(3)) and (b) meets the gross the 20% test in section 831(b)(2)(B)(i)(I). If does not apply if a de minimis exception is receipts test of section 448(c), discussed the corporation answers “No” on Question satisfied. See Regulations section next. 14(a), then the corporation must satisfy 1.267A-1(c). For purposes of section Gross receipts test. For taxable years the specified holder/specified asset test in 267A, interest and royalties are defined section 831(b)(2)(B)(i)(II) to qualify to beginning in 2020, a corporation or

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partnership meets the gross receipts test • Stock in a mutual fund or other RIC that file Schedule M-3 (Form 1120-PC) instead of § 448(c) for any taxable year if the distributed exempt-interest dividends of Schedule M-1. See Schedule M-3 average annual gross receipts of such during the tax year of the corporation. (Form 1120-PC), earlier. A corporation entity for the 3-taxable-year period ending filing Form 1120-PC that is not required to Line 18. Insurance liabilities. Include with the taxable year which precedes such file Schedule M-3 (Form 1120-PC) may on this line: taxable year does not exceed voluntarily file Schedule M-3 (Form Undiscounted unpaid losses, $26,000,000. • 1120-PC) instead of Schedule M-1. See Loss adjustment expenses, and • the Instructions for Schedule M-3 (Form Unearned premiums. • 1120-PC) for more information. Schedule L—Balance See section 846 for more information. Line 5c. Travel and entertainment. Sheets per Books Line 27. Adjustments to shareholders' Include on line 5c any of the following. equity. Some examples of adjustments to • Entertainment expenses not deductible Note. All insurance companies required report on this line include: under section 274(a). to file Form 1120-PC must complete • Unrealized gains and losses on • Meal expenses not deductible under Schedule L. securities held “available for sale,” section 274(n). The balance sheets should agree with • Foreign currency translation • Expenses for the use of an the corporation's books and records. adjustments, entertainment facility. If filing a consolidated return, report • The excess of additional pension • The part of business gifts over $25. total consolidated assets, liabilities, and liability over unrecognized prior service • Expenses of an individual over $2,000, shareholder's equity for all corporations cost, allocable to conventions on cruise ships. joining in the return. See Consolidated • Guarantees of employee stock • Employee achievement awards of Returns, earlier. ownership plan (ESOP) debt, and nontangible or tangible property over $400 • Compensation related to employee ($1,600 if part of a qualified plan). Corporations with total assets stock award plans. (non-consolidated or consolidated for all • The cost of skyboxes. corporations included within the tax If the total adjustment to be entered on • Nondeductible club dues. consolidation group) of $10 million or line 27 is a negative amount, enter the • The part of luxury water travel expenses more on the last day of the tax year must amount in parentheses. not deductible under section 274(m). file Schedule M-3 (Form 1120-PC) instead • Expenses for travel as a form of of Schedule M-1. See the separate education. Instructions for Schedule M-3 (Form Schedule M-1— • Other nondeductible travel and 1120-PC) for provisions that also affect Reconciliation of Income entertainment expenses. Schedule L. (Loss) per Books With For more information, see Pub. 535. Line 1. Cash. Include certificates of Income (Loss) per Return Line 7a. Tax-exempt interest. Report any tax-exempt interest received or deposit as cash on this line. All insurance companies required to file accrued, including any exempt-interest Form 1120-PC with total assets (non Line 5. Tax-exempt securities. Include dividends received as a shareholder in a consolidated or consolidated for all on this line: mutual fund or other RIC. Also, report this corporations included within the tax • State and local government obligations, same amount on Schedule I, item 10. the interest on which is excludable from consolidation group) of $10 million or gross income under section 103(a); and more on the last day of the tax year must

Paperwork Reduction Act Notice. We ask for the information on these forms to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103. The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for business taxpayers filing this form is approved under OMB control number 1545-0123 and is included in the estimates shown in the instructions for their business income tax return. If you have comments or suggestions for making this form and related schedules simpler, we would be happy to hear from you. You can send us comments through IRS.gov/FormComments. Or you can write to:

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Index

Undiscounted unearned A premiums 18 L S Accounting methods 4 Depository methods of tax Limitation on Schedule: Accounting methods, change payment 3 dividends-received A 9 in 4 Disclosure statement 5 deduction 18 B, Part I 15 Accounting period (tax year) 5 Limitations on deductions 10 B, Part II 15 Address change 7 Lobbying expenses 14 C 16 Adjustments to shareholders' E E 18 equity 22 Electronic deposit of tax refund F 18 Affiliated group 20 of $1 million or more 9 M G 19 Amended return 7 Electronic federal tax payment Medical loss ratio 4, 18–20 H 19 Amortization 10 system (EFTPS) 3 Minimum tax: I 19 Assembling the return 3 Electronic filing 2 Prior year, credit for 7 L 22 Employer identification number M-1 22 (EIN) 6 M-3 6 B Estimated tax: N Section 953 election 6 Backup withholding 8 Payments 4, 8 NAIC annual statement 3 Base erosion minimum tax Penalty 4, 9 Name change 7 (BEAT) 7 Extension of time to file 2 Net operating loss 14 T Blue Cross or Blue Shield 18, Tax and payments 7 20 Tax-exempt securities 22 Business start-up F O Tax issues, unresolved 1 expenses 10 Final return 7 Other deductions 13 Tax rate 7 Foreign corporations 8 Owner's country 20 Travel, meals, and Foreign person 20 entertainment 13 C Foreign tax credit 7 Charitable contributions 12 Forms and publications, how to get 2 P Consolidated return 6 Paid preparer authorization 3 U Controlled group: Penalties 4, 9 Uncertain tax positions 20 Member of 7 Pension, profit-sharing, etc. Parent-subsidiary 7 G plans 13 General business credit 7 Period covered 5 W Golden parachute Personal holding company When to file, extension 2 D payments 10 tax 8 Where to file 2 Deductions 10 Private delivery services 2 Who must file: Definitions 16 Exceptions 2 100% dividend 16 I Life insurance Applicable interest rate 18 Insurance liabilities 22 R companies 2 Applicable statutory Interest due on late payment of Recordkeeping 5 Who must sign 2 premium recognition tax 4 Related party transactions 10 Worksheet for Schedule C 17 pattern 18 Prorated amounts 16

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