64386 Federal Register / Vol. 85, No. 198 / Tuesday, 13, 2020 / Rules and Regulations

(b) Applicability date. This section DEPARTMENT OF THE TREASURY The Department of the Treasury applies to taxable years beginning on or (Treasury Department) and the IRS after October 13, 2020. Internal Revenue Service published proposed regulations (REG– 132529–17) in the Federal Register (85 ■ Par. 3. Section 1.152–2, is amended 26 CFR Parts 1 and 301 FR 18496) on 2, 2020 (proposed by: regulations). A correction to the ■ 1. Revising paragraph (b); and [TD 9911] proposed regulations was published in ■ 2. Adding paragraph (e). RIN 1545–BO13 the Federal Register (85 FR 21129) on , 2020. The Treasury The revision and addition read as Computation and Reporting of Department and the IRS received six follows: Reserves for Life Insurance public comments on the proposed § 1.152–2 Rules relating to general Companies regulations. Copies of the comments definition of dependent. received are available for public AGENCY: Internal Revenue Service (IRS), inspection at https:// * * * * * Treasury. www.regulations.gov or upon request. (b)(1) A payment to a spouse (payee ACTION: Final regulations. No public hearing was requested, and spouse) of alimony or separate none was held. SUMMARY: maintenance is not treated as a payment This document contains final After consideration of all of the regulations that provide guidance on the by the payor spouse for the support of comments received on the proposed computation of life insurance reserves any dependent. Similarly, the regulations, the proposed regulations and the change in basis of computing distribution of income of an estate or are adopted as amended by this certain reserves of insurance companies. Treasury decision (final regulations). trust to a divorced or legally separated These final regulations implement payee spouse is not treated as a payment recent legislative changes to the Internal Summary of Comments and by the payor spouse for the support of Revenue Code. This document affects Explanation of Revisions any dependent. The preceding sentence entities taxable as insurance companies. This section discusses the public will not apply, however, to the extent DATES: comments received on the proposed that such a distribution is in satisfaction Effective date: These regulations are regulations, explains the revisions of the amount or portion of income that, effective October 13, 2020. adopted in the final regulations in by the terms of a divorce decree, a Applicability dates: For dates of response to those comments, and written separation agreement, or the applicability, see §§ 1.338–11(d)(7)(iii), describes guidance the Treasury trust instrument is fixed as payable for 1.807–1(c), 1.807–3(b), 1.807–4(e), Department and the IRS are providing the support of the minor children of the 1.816–1(b), 1.817A–1(c), and 1.6012– contemporaneously with publication of payor spouse. 2(l). the final regulations in the Federal Register. (2) Paragraph (b)(1) of this section FOR FURTHER INFORMATION CONTACT: Ian applies to taxable years beginning on or Follansbee at (202) 317–4453 (not a toll- 1. Comments and Changes Relating to after October 13, 2020. free number). § 1.807–1 of the Proposed Regulations * * * * * SUPPLEMENTARY INFORMATION: Section 807(d) of the Code provides the method of computing life insurance (e)(1) In defining a qualifying relative Background for taxable year 2018, the exemption reserves for purposes of determining the amount in section 152(d)(1)(B) is This document contains amendments income of an insurance company to 26 CFR part 1 under sections 807 and $4,150. For taxable years 2019 through subject to Federal income tax under 816 of the Internal Revenue Code 2025, the exemption amount, as subchapter L of chapter 1 of the Code (Code). Sections 807 and 816 were (subchapter L). Section 807(d)(1)(A) adjusted for inflation, is set forth in added to the Code by section 211(a) of provides generally that the amount of annual guidance published in the the Deficit Reduction Act of 1984, life insurance reserves for a life Internal Revenue Bulletin. See Public Law 98–369, 98 Stat. 494. insurance contract (other than a variable § 601.601(d)(2) of this chapter. Section 807 was amended by sections contract subject to section 807(d)(1)(B)) (2) Paragraph (e)(1) of this section 13513 and 13517 of Public Law 115–97, is the greater of (i) the net surrender applies to taxable years ending after 131 Stat. 2054, 2143, 2144 (2017), value of such contract, or (ii) 92.81 28, 2018. commonly referred to as the Tax Cuts percent of the reserve determined under and Jobs Act (TCJA). These amendments the tax-reserve method applicable to the Sunita Lough, by the TCJA apply to taxable years contract under section 807(d)(3). Deputy Commissioner for Services and beginning after 31, 2017. Section 1.807–1(a) of the proposed Enforcement. This document also amends or regulations (proposed § 1.807–1(a)) Approved: 8, 2020. removes the following regulations in 26 provides that no asset adequacy reserve David J. Kautter, CFR: §§ 1.338–11, 1.381(c)(22)–1, 1.801– be included in the amount of life Assistant Secretary of the Treasury (Tax 2, 1.801–5, 1.801–7, 1.801–8, 1.806–4, insurance reserves under section 807(d). Policy). 1.807–1, 1.809–2, 1.809–5, 1.810–3, Proposed § 1.807–1(a) describes an asset [FR Doc. 2020–20746 Filed 10–9–20; 8:45 am] 1.817A–0, 1.817A–1, 1.818–2, 1.818–4, adequacy reserve as ‘‘includ[ing] any 1.848–1, 1.6012–2, and 301.9100–6T. reserve that is established as an BILLING CODE 4830–01–P These changes are conforming changes additional reserve based upon an to regulations that (i) relate to repealed analysis of the adequacy of reserves that or amended law, (ii) reference would otherwise be established or any regulations that are being removed, (iii) reserve that is not held with respect to have no future application, or (iv) relate a particular contract.’’ Further, proposed to other regulations made final by this § 1.807–1(a) provides that an asset document. adequacy reserve is ‘‘any reserve or

VerDate Sep<11>2014 15:52 Oct 09, 2020 Jkt 253001 PO 00000 Frm 00012 Fmt 4700 Sfmt 4700 E:\FR\FM\13OCR1.SGM 13OCR1 khammond on DSKJM1Z7X2PROD with RULES Federal Register / Vol. 85, No. 198 / Tuesday, October 13, 2020 / Rules and Regulations 64387

portion of a reserve that would have principle-based reserve methodology in of computing an item referred to in been established pursuant to an asset effect at the time of the enactment of the section 807(c) and a nonlife insurance adequacy analysis required by the provision, principle-base[d] reserves for company changing the basis of National Association of Insurance any contract do not include any asset computing life insurance reserves must Commissioner’s Valuation Manual 30 as adequacy reserve component.’’) (citation follow the administrative procedures it existed on , 2017, the omitted). On the other hand, any prescribed by the Commissioner of date of enactment of Public Law additional reserve required to be set Internal Revenue or his delegate 115–97 . . . .’’ aside under Valuation Manual 30, as it (Commissioner) to obtain the consent of Two commenters requested that the existed when the TCJA was enacted, the Commissioner to such a change. first quoted provision be changed to based on an analysis of the adequacy of provide that asset adequacy reserves are the reserves otherwise determined, A. Relationship Between Section 446 those reserves established pursuant to constitutes an asset adequacy reserve and Subchapter L an analysis of the adequacy of reserves under § 1.807–1 of