---
kind: "section"
citation: "26 U.S.C. § 953"
title: "26"
title_heading: "Internal Revenue Code"
number: "953"
heading: "Insurance income"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/953"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter N — Tax Based on Income From Sources Within or Without the United States"
  - "Part III — Income from Sources Without the United States"
  - "Subpart F — Controlled Foreign Corporations"
---

# §953. Insurance income

- (a) **Insurance income—**
  - (1) **In general—** For purposes of [section 952(a)(1)](/usc/26/952.md?p=a-1), the term “insurance income” means any income which—
    - (A) is attributable to the issuing (or reinsuring) of an [insurance or annuity contract](/usc/26/818.md?p=d), and
    - (B) would (subject to the [modifications](/usc/26/424.md?p=h-3) provided by [subsection (b)](#b)) be taxed under subchapter L of this chapter if such income were the income of a domestic insurance [company](/usc/26/812.md?p=a).
  - (2) **Exception—** Such term shall not include any exempt insurance income (as defined in [subsection (e)](#e)).
- (b) **Special rules—** For purposes of [subsection (a)](#a)—
  - (1) The following provisions of subchapter L shall not apply:
    - (A) So much of [section 805(a)(8)](/usc/26/805.md?p=a-8) as relates to the deduction allowed under section 172.
    - (B) [Section 832(c)(5)](/usc/26/832.md?p=c-5) (relating to certain capital losses).
  - (2) The items referred to in—
    - (A) [section 803(a)(1)](/usc/26/803.md?p=a-1) (relating to gross amount of premiums and other considerations),
    - (B) [section 803(a)(2)](/usc/26/803.md?p=a-2) (relating to net decrease in reserves),
    - (C) [section 805(a)(2)](/usc/26/805.md?p=a-2) (relating to net increase in reserves), and
    - (D) [section 832(b)(4)](/usc/26/832.md?p=b-4) (relating to premiums earned on insurance [contracts](/usc/26/101.md?p=f-3-A)),

    shall be taken into account only to the extent they are in respect of any reinsurance or the issuing of any [insurance or annuity contract](/usc/26/818.md?p=d) described in [subsection (a)(1)](#a-1).

  - (3) Reserves for any [insurance or annuity contract](/usc/26/818.md?p=d) shall be determined in the same manner as under [section 954(i)](/usc/26/954.md?p=i).
  - (4) All items of income, expenses, losses, and deductions shall be properly allocated or apportioned under regulations prescribed by the Secretary.
- (c) **Special rule for certain captive insurance companies—**
  - (1) **In general—** For purposes only of taking into account [related person](/usc/26/864.md?p=d-4) insurance income—
    - (A) the term “[United States](/usc/26/993.md?p=g) shareholder” means, with respect to any foreign corporation, a [United States](/usc/26/993.md?p=g) person (as defined in [section 957(c)](/usc/26/957.md?p=c)) who owns (within the meaning of [section 958(a)](/usc/26/958.md?p=a)) any [stock](/usc/26/1504.md?p=a-4) of the foreign corporation,
    - (B) the term “controlled foreign corporation” has the meaning given to such term by [section 957(a)](/usc/26/957.md?p=a) determined by substituting “25 percent or more” for “more than 50 percent”, and
    - (C) the pro rata share referred to in [section 951(a)(1)(A)](/usc/26/951.md?p=a-1-A) shall be determined under paragraph (5) of this subsection.
  - (2) **Related person insurance income—** For purposes of this subsection, the term “[related person](/usc/26/864.md?p=d-4) insurance income” means any insurance income (within the meaning of [subsection (a)](#a)) attributable to a policy of insurance or reinsurance with respect to which the person (directly or [indirectly](/usc/26/101.md?p=a-3-B)) [insured](/usc/26/101.md?p=j-5-B) is a [United States](/usc/26/993.md?p=g) shareholder in the foreign corporation or a [related person](/usc/26/864.md?p=d-4) to such a shareholder.
  - (3) **Exceptions—**
    - (A) **Corporations not held by insureds—** [Paragraph (1)](#c-1) shall not apply to any foreign corporation if at all times during the taxable year of such foreign corporation—
      - (i) less than 20 percent of the total combined voting power of all classes of [stock](/usc/26/1504.md?p=a-4) of such corporation entitled to vote, and
      - (ii) less than 20 percent of the total [value](/usc/26/851.md?p=c-4) of such corporation,

      is owned (directly or [indirectly](/usc/26/101.md?p=a-3-B) under the principles of [section 883(c)(4)](/usc/26/883.md?p=c-4)) by persons who are (directly or [indirectly](/usc/26/101.md?p=a-3-B)) [insured](/usc/26/101.md?p=j-5-B) under any policy of insurance or reinsurance issued by such corporation or who are [related persons](/usc/26/414.md?p=n-6-A) to any such person.

    - (B) **De minimis exception—** [Paragraph (1)](#c-1) shall not apply to any foreign corporation for a taxable year of such corporation if the [related person](/usc/26/864.md?p=d-4) insurance income (determined on a gross basis) of such corporation for such taxable year is less than 20 percent of its insurance income (as so determined) for such taxable year determined without regard to those provisions of [subsection (a)(1)](#a-1) which limit insurance income to income from countries other than the country in which the corporation was created or organized.
    - (C) **Election to treat income as effectively connected—** [Paragraph (1)](#c-1) shall not apply to any foreign corporation for any taxable year if—
      - (i) such corporation elects (at such time and in such manner as the Secretary may prescribe)—
        - (I) to treat its [related person](/usc/26/864.md?p=d-4) insurance income for such taxable year as income effectively connected with the conduct of a [trade or business](/usc/26/1402.md?p=c) in the [United States](/usc/26/993.md?p=g), and
        - (II) to waive all benefits (other than with respect to [section 884](/usc/26/884.md)) with respect to [related person](/usc/26/864.md?p=d-4) insurance income granted by the [United States](/usc/26/993.md?p=g) under any treaty between the [United States](/usc/26/993.md?p=g) and any foreign country, and
      - (ii) such corporation meets such requirements as the Secretary shall prescribe to ensure that the tax imposed by this chapter on such income is paid.

      An election under this subparagraph made for any taxable year shall not be effective if the corporation (or any predecessor thereof) was a disqualified corporation for the taxable year for which the election was made or for any prior taxable year beginning after 1986.

    - (D) **Special rules for subparagraph (C)—**
      - (i) **Period during which election in effect—**
        - (I) **In general—** Except as provided in [subclause (II)](#c-3-D-i-II), any election under [subparagraph (C)](#c-3-C) shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.
        - (II) **Termination—** If a foreign corporation which made an election under [subparagraph (C)](#c-3-C) for any taxable year is a disqualified corporation for any subsequent taxable year, such election shall not apply to any taxable year beginning after such subsequent taxable year.
      - (ii) **Exemption from tax imposed by section 4371—** The tax imposed by [section 4371](/usc/26/4371.md) shall not apply with respect to any [related person](/usc/26/864.md?p=d-4) insurance income treated as effectively connected with the conduct of a [trade or business within the United States](/usc/26/864.md?p=b) under [subparagraph (C)](#c-3-C).
    - (E) **Disqualified corporation—** For purposes of this paragraph the term “disqualified corporation” means, with respect to any taxable year, any foreign corporation which is a controlled foreign corporation for an uninterrupted period of 30 days or more during such taxable year (determined without regard to this subsection) but only if a [United States](/usc/26/993.md?p=g) shareholder (determined without regard to this subsection) owns (within the meaning of [section 958(a)](/usc/26/958.md?p=a)) [stock](/usc/26/1504.md?p=a-4) in such corporation at some time during such taxable year.
  - (4) **Treatment of mutual insurance companies—** In the case of a mutual insurance [company](/usc/26/812.md?p=a)—
    - (A) this subsection shall apply,
    - (B) [policyholders](/usc/26/812.md?p=b) of such [company](/usc/26/812.md?p=a) shall be treated as shareholders, and
    - (C) appropriate adjustments in the application of this subpart shall be made under regulations prescribed by the Secretary.
  - (5) **Determination of pro rata share—**
    - (A) **In general—** The pro rata share determined under this paragraph for any [United States](/usc/26/993.md?p=g) shareholder is the lesser of—
      - (i) the amount which would be determined under [paragraph (2)](/usc/26/951.md?p=a-2) of section 951(a) if—
        - (I) only [related person](/usc/26/864.md?p=d-4) insurance income were taken into account,
        - (II) [stock](/usc/26/1504.md?p=a-4) owned (within the meaning of [section 958(a)](/usc/26/958.md?p=a)) by [United States](/usc/26/993.md?p=g) shareholders on the last day of the taxable year were the only [stock](/usc/26/1504.md?p=a-4) in the foreign corporation, and
        - (III) only distributions received by [United States](/usc/26/993.md?p=g) shareholders were taken into account under [subparagraph (B)](#c-5-B) of such [paragraph (2)](#c-2), or
      - (ii) the amount which would be determined under [paragraph (2)](/usc/26/951.md?p=a-2) of section 951(a) if the entire earnings and profits of the foreign corporation for the taxable year were [subpart F income](/usc/26/952.md?p=a).
    - (B) **Coordination with other provisions—** The Secretary shall prescribe regulations providing for such [modifications](/usc/26/424.md?p=h-3) to the provisions of this subpart as may be necessary or appropriate by reason of [subparagraph (A)](#c-5-A).
  - (6) **Related person—** For purposes of this subsection—
    - (A) **In general—** Except as provided in [subparagraph (B)](#c-6-B), the term “[related person](/usc/26/864.md?p=d-4)” has the meaning given such term by [section 954(d)(3)](/usc/26/954.md?p=d-3).
    - (B) **Treatment of certain liability insurance policies—** In the case of any policy of insurance covering liability arising from services performed as a director, officer, or [employee](/usc/26/430.md?p=c-7-D-vi) of a corporation or as a [partner](/usc/26/761.md?p=b) or [employee](/usc/26/430.md?p=c-7-D-vi) of a [partnership](/usc/26/761.md?p=a), the person performing such services and the entity for which such services are performed shall be treated as [related persons](/usc/26/414.md?p=n-6-A).
  - (7) **Coordination with section 1248—** For purposes of [section 1248](/usc/26/1248.md), if any person is (or would be but for [paragraph (3)](#c-3)) treated under [paragraph (1)](#c-1) as a [United States](/usc/26/993.md?p=g) shareholder with respect to any foreign corporation which would be taxed under subchapter L if it were a domestic corporation and which is (or would be but for [paragraph (3)](#c-3)) treated under [paragraph (1)](#c-1) as a controlled foreign corporation—
    - (A) such person shall be treated as meeting the [stock](/usc/26/1504.md?p=a-4) ownership requirements of [section 1248(a)(2)](/usc/26/1248.md?p=a-2) with respect to such foreign corporation, and
    - (B) such foreign corporation shall be treated as a controlled foreign corporation.
  - (8) **Regulations—** The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including—
    - (A) regulations preventing the avoidance of this subsection through cross insurance arrangements or otherwise, and
    - (B) regulations which may provide that a person will not be treated as a [United States](/usc/26/993.md?p=g) shareholder under [paragraph (1)](#c-1) with respect to any foreign corporation if neither such person (nor any [related person](/usc/26/864.md?p=d-4) to such person) is (directly or [indirectly](/usc/26/101.md?p=a-3-B)) [insured](/usc/26/101.md?p=j-5-B) under any policy of insurance or reinsurance issued by such foreign corporation.
- (d) **Election by foreign insurance company to be treated as domestic corporation—**
  - (1) **In general—** If—
    - (A) a foreign corporation is a controlled foreign corporation (as defined in [section 957(a)](/usc/26/957.md?p=a) by substituting “25 percent or more” for “more than 50 percent” and by using the definition of [United States](/usc/26/993.md?p=g) shareholder under 953(c)(1)(A)),
    - (B) such foreign corporation would qualify under part I or II of subchapter L for the taxable year if it were a domestic corporation,
    - (C) such foreign corporation meets such requirements as the Secretary shall prescribe to ensure that the taxes imposed by this chapter on such foreign corporation are paid, and
    - (D) such foreign corporation makes an election to have this paragraph apply and waives all benefits to such corporation granted by the [United States](/usc/26/993.md?p=g) under any treaty,

    for purposes of this title, such corporation shall be treated as a domestic corporation.

  - (2) **Period during which election is in effect—**
    - (A) **In general—** Except as provided in [subparagraph (B)](#d-2-B), an election under [paragraph (1)](#d-1) shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.
    - (B) **Termination—** If a corporation which made an election under [paragraph (1)](#d-1) for any taxable year fails to meet the requirements of subparagraphs [(A)](#d-1-A), [(B)](#d-1-B), and [(C)](#d-1-C), of paragraph (1) for any subsequent taxable year, such election shall not apply to any taxable year beginning after such subsequent taxable year.
  - (3) **Treatment of losses—** If any corporation treated as a domestic corporation under this subsection is treated as a member of an [affiliated group](/usc/26/864.md?p=e-5-A) for purposes of [chapter 6](/usc/26/chstA/ch6.md) (relating to consolidated returns), any loss of such corporation shall be treated as a dual consolidated loss for purposes of [section 1503(d)](/usc/26/1503.md?p=d) without regard to [paragraph (2)(B)](#d-2-B) thereof.
  - (4) **Effect of election—**
    - (A) **In general—** For purposes of [section 367](/usc/26/367.md), any foreign corporation making an election under [paragraph (1)](#d-1) shall be treated as transferring (as of the 1st day of the 1st taxable year to which such election applies) all of its assets to a domestic corporation in connection with an exchange to which [section 354](/usc/26/354.md) applies.
    - (B) **Exception for pre-1988 earnings and profit—**
      - (i) **In general—** Earnings and profits of the foreign corporation accumulated in taxable years beginning before January 1, 1988, shall not be included in the gross income of the persons holding [stock](/usc/26/1504.md?p=a-4) in such corporation by reason of [subparagraph (A)](#d-4-A).
      - (ii) **Treatment of distributions—** For purposes of this title, any distribution made by a corporation to which an election under [paragraph (1)](#d-1) applies out of earnings and profits accumulated in taxable years beginning before January 1, 1988, shall be treated as a distribution made by a foreign corporation.
      - (iii) **Certain rules to continue to apply to pre-1988 earnings—** The provisions specified in [clause (iv)](#d-4-B-iv) shall be applied without regard to [paragraph (1)](#d-1), except that, in the case of a corporation to which an election under [paragraph (1)](#d-1) applies, only earnings and profits accumulated in taxable years beginning before January 1, 1988, shall be taken into account.
      - (iv) **Specified provisions—** The provisions specified in this clause are:
        - (I) [Section 1248](/usc/26/1248.md) (relating to gain from certain sales or exchanges of [stock](/usc/26/1504.md?p=a-4) in certain foreign corporations).
        - (II) Subpart F of part III of subchapter N to the extent such subpart relates to earnings invested in [United States](/usc/26/993.md?p=g) [property](/usc/26/317.md?p=a).
        - (III) [Section 884](/usc/26/884.md) to the extent the foreign corporation reinvested 1987 earnings and profits in [United States](/usc/26/993.md?p=g) assets.
  - (5) **Effect of termination—** For purposes of [section 367](/usc/26/367.md), if—
    - (A) an election is made by a corporation under [paragraph (1)](#d-1) for any taxable year, and
    - (B) such election ceases to apply for any subsequent taxable year,

    such corporation shall be treated as a domestic corporation transferring (as of the 1st day of such subsequent taxable year) all of its [property](/usc/26/317.md?p=a) to a foreign corporation in connection with an exchange to which [section 354](/usc/26/354.md) applies.

  - (6) **Additional tax on corporation making election—**
    - (A) **In general—** If a corporation makes an election under [paragraph (1)](#d-1), the amount of tax imposed by this chapter for the 1st taxable year to which such election applies shall be increased by the amount determined under [subparagraph (B)](#d-6-B).
    - (B) **Amount of tax—** The amount of tax determined under this paragraph shall be equal to the lesser of—
      - (i) ¾ of 1 percent of the aggregate amount of capital and accumulated surplus of the corporation as of December 31, 1987, or
      - (ii) $1,500,000.
- (e) **Exempt insurance income—** For purposes of this section—
  - (1) **Exempt insurance income defined—**
    - (A) **In general—** The term “exempt insurance income” means income derived by a qualifying insurance [company](/usc/26/812.md?p=a) which—
      - (i) is attributable to the issuing (or reinsuring) of an exempt [contract](/usc/26/101.md?p=f-3-A) by such [company](/usc/26/812.md?p=a) or a qualifying insurance [company](/usc/26/812.md?p=a) branch of such [company](/usc/26/812.md?p=a), and
      - (ii) is treated as earned by such [company](/usc/26/812.md?p=a) or branch in its home country for purposes of such country’s tax laws.
    - (B) **Exception for certain arrangements—** Such term shall not include income attributable to the issuing (or reinsuring) of an exempt [contract](/usc/26/101.md?p=f-3-A) as the result of any arrangement whereby another corporation receives a substantially equal amount of premiums or other consideration in respect of issuing (or reinsuring) a [contract](/usc/26/101.md?p=f-3-A) which is not an exempt [contract](/usc/26/101.md?p=f-3-A).
    - (C) **Determinations made separately—** For purposes of this subsection and [section 954(i)](/usc/26/954.md?p=i), the exempt insurance income and exempt [contracts](/usc/26/101.md?p=f-3-A) of a qualifying insurance [company](/usc/26/812.md?p=a) or any qualifying insurance [company](/usc/26/812.md?p=a) branch of such [company](/usc/26/812.md?p=a) shall be determined separately for such [company](/usc/26/812.md?p=a) and each such branch by taking into account—
      - (i) in the case of the qualifying insurance [company](/usc/26/812.md?p=a), only items of income, deduction, gain, or loss, and activities of such [company](/usc/26/812.md?p=a) not properly allocable or attributable to any qualifying insurance [company](/usc/26/812.md?p=a) branch of such [company](/usc/26/812.md?p=a), and
      - (ii) in the case of a qualifying insurance [company](/usc/26/812.md?p=a) branch, only items of income, deduction, gain, or loss and activities properly allocable or attributable to such branch.
  - (2) **Exempt contract—**
    - (A) **In general—** The term “exempt [contract](/usc/26/101.md?p=f-3-A)” means an [insurance or annuity contract](/usc/26/818.md?p=d) issued or reinsured by a qualifying insurance [company](/usc/26/812.md?p=a) or qualifying insurance [company](/usc/26/812.md?p=a) branch in connection with [property](/usc/26/317.md?p=a) in, liability arising out of activity in, or the lives or health of residents of, a country other than the [United States](/usc/26/993.md?p=g).
    - (B) **Minimum home country income required—**
      - (i) **In general—** No [contract](/usc/26/101.md?p=f-3-A) of a qualifying insurance [company](/usc/26/812.md?p=a) or of a qualifying insurance [company](/usc/26/812.md?p=a) branch shall be treated as an exempt [contract](/usc/26/101.md?p=f-3-A) unless such [company](/usc/26/812.md?p=a) or branch derives more than 30 percent of its net written premiums from exempt [contracts](/usc/26/101.md?p=f-3-A) (determined without regard to this subparagraph)—
        - (I) which cover applicable home country risks, and
        - (II) with respect to which no [policyholder](/usc/26/812.md?p=b), [insured](/usc/26/101.md?p=j-5-B), annuitant, or beneficiary is a [related person](/usc/26/864.md?p=d-4) (as defined in [section 954(d)(3)](/usc/26/954.md?p=d-3)).
      - (ii) **Applicable home country risks—** The term “applicable home country risks” means risks in connection with [property](/usc/26/317.md?p=a) in, liability arising out of activity in, or the lives or health of residents of, the home country of the qualifying insurance [company](/usc/26/812.md?p=a) or qualifying insurance [company](/usc/26/812.md?p=a) branch, as the case may be, issuing or reinsuring the [contract](/usc/26/101.md?p=f-3-A) covering the risks.
    - (C) **Substantial activity requirements for cross border risks—** A [contract](/usc/26/101.md?p=f-3-A) issued by a qualifying insurance [company](/usc/26/812.md?p=a) or qualifying insurance [company](/usc/26/812.md?p=a) branch which covers risks other than applicable home country risks (as defined in [subparagraph (B)(ii)](#e-2-B-ii)) shall not be treated as an exempt [contract](/usc/26/101.md?p=f-3-A) unless such [company](/usc/26/812.md?p=a) or branch, as the case may be—
      - (i) conducts substantial activity with respect to an insurance business in its home country, and
      - (ii) performs in its home country substantially all of the activities necessary to give rise to the income generated by such [contract](/usc/26/101.md?p=f-3-A).
  - (3) **Qualifying insurance company—** The term “qualifying insurance [company](/usc/26/812.md?p=a)” means any controlled foreign corporation which—
    - (A) is subject to regulation as an insurance (or reinsurance) [company](/usc/26/812.md?p=a) by its home country, and is licensed, authorized, or regulated by the applicable insurance regulatory body for its home country to sell insurance, reinsurance, or [annuity contracts](/usc/26/414.md?p=z-4-B) to persons other than [related persons](/usc/26/414.md?p=n-6-A) (within the meaning of [section 954(d)(3)](/usc/26/954.md?p=d-3)) in such home country,
    - (B) derives more than 50 percent of its aggregate net written premiums from the issuance or reinsurance by such controlled foreign corporation and each of its qualifying insurance [company](/usc/26/812.md?p=a) branches of [contracts](/usc/26/101.md?p=f-3-A)—
      - (i) covering applicable home country risks (as defined in [paragraph (2)](#e-2)) of such corporation or branch, as the case may be, and
      - (ii) with respect to which no [policyholder](/usc/26/812.md?p=b), [insured](/usc/26/101.md?p=j-5-B), annuitant, or beneficiary is a [related person](/usc/26/864.md?p=d-4) (as defined in [section 954(d)(3)](/usc/26/954.md?p=d-3)),

      except that in the case of a branch, such premiums shall only be taken into account to the extent such premiums are treated as earned by such branch in its home country for purposes of such country’s tax laws, and

    - (C) is engaged in the insurance business and would be subject to tax under subchapter L if it were a domestic corporation.
  - (4) **Qualifying insurance company branch—** The term “qualifying insurance [company](/usc/26/812.md?p=a) branch” means a [qualified business unit](/usc/26/989.md?p=a) (within the meaning of [section 989(a)](/usc/26/989.md?p=a)) of a controlled foreign corporation if—
    - (A) such unit is licensed, authorized, or regulated by the applicable insurance regulatory body for its home country to sell insurance, reinsurance, or [annuity contracts](/usc/26/414.md?p=z-4-B) to persons other than [related persons](/usc/26/414.md?p=n-6-A) (within the meaning of [section 954(d)(3)](/usc/26/954.md?p=d-3)) in such home country, and
    - (B) such controlled foreign corporation is a qualifying insurance [company](/usc/26/812.md?p=a), determined under [paragraph (3)](#e-3) as if such unit were a qualifying insurance [company](/usc/26/812.md?p=a) branch.
  - (5) **Life insurance or annuity contract—** For purposes of this section and [section 954](/usc/26/954.md), the [determination](/usc/26/1313.md?p=a) of whether a [contract](/usc/26/101.md?p=f-3-A) issued by a controlled foreign corporation or a [qualified business unit](/usc/26/989.md?p=a) (within the meaning of [section 989(a)](/usc/26/989.md?p=a)) is a life insurance [contract](/usc/26/101.md?p=f-3-A) or an [annuity contract](/usc/26/414.md?p=z-4-B) shall be made without regard to sections [72(s)](/usc/26/72.md?p=s), [101(f)](/usc/26/101.md?p=f), [817(h)](/usc/26/817.md?p=h), and [7702](/usc/26/7702.md) if—
    - (A) such [contract](/usc/26/101.md?p=f-3-A) is regulated as a life [insurance or annuity contract](/usc/26/818.md?p=d) by the corporation’s or unit’s home country, and
    - (B) no [policyholder](/usc/26/812.md?p=b), [insured](/usc/26/101.md?p=j-5-B), annuitant, or beneficiary with respect to the [contract](/usc/26/101.md?p=f-3-A) is a [United States](/usc/26/993.md?p=g) person.
  - (6) **Home country—** For purposes of this subsection, except as provided in regulations—
    - (A) **Controlled foreign corporation—** The term “home country” means, with respect to a controlled foreign corporation, the country in which such corporation is created or organized.
    - (B) **Qualified business unit—** The term “home country” means, with respect to a [qualified business unit](/usc/26/989.md?p=a) (as defined in [section 989(a)](/usc/26/989.md?p=a)), the country in which the principal office of such unit is located and in which such unit is licensed, authorized, or regulated by the applicable insurance regulatory body to sell insurance, reinsurance, or [annuity contracts](/usc/26/414.md?p=z-4-B) to persons other than [related persons](/usc/26/414.md?p=n-6-A) (as defined in [section 954(d)(3)](/usc/26/954.md?p=d-3)) in such country.
  - (7) **Anti-abuse rules—** For purposes of applying this subsection and [section 954(i)](/usc/26/954.md?p=i)—
    - (A) the rules of [section 954(h)(7)](/usc/26/954.md?p=h-7) (other than [subparagraph (B)](#e-7-B) thereof) shall apply,
    - (B) there shall be disregarded any item of income, gain, loss, or deduction of, or derived from, an entity which is not engaged in regular and continuous transactions with persons which are not [related persons](/usc/26/414.md?p=n-6-A),
    - (C) there shall be disregarded any change in the method of computing reserves a principal purpose of which is the acceleration or deferral of any item in order to claim the benefits of this subsection or [section 954(i)](/usc/26/954.md?p=i),
    - (D) a [contract](/usc/26/101.md?p=f-3-A) of insurance or reinsurance shall not be treated as an exempt [contract](/usc/26/101.md?p=f-3-A) (and premiums from such [contract](/usc/26/101.md?p=f-3-A) shall not be taken into account for purposes of paragraph [(2)(B)](#e-2-B) or [(3)](#e-3)) if—
      - (i) any [policyholder](/usc/26/812.md?p=b), [insured](/usc/26/101.md?p=j-5-B), annuitant, or beneficiary is a resident of the [United States](/usc/26/993.md?p=g) and such [contract](/usc/26/101.md?p=f-3-A) was marketed to such resident and was written to cover a risk outside the [United States](/usc/26/993.md?p=g), or
      - (ii) the [contract](/usc/26/101.md?p=f-3-A) covers risks located within and without the [United States](/usc/26/993.md?p=g) and the qualifying insurance [company](/usc/26/812.md?p=a) or qualifying insurance [company](/usc/26/812.md?p=a) branch does not maintain such contemporaneous records, and file such reports, with respect to such [contract](/usc/26/101.md?p=f-3-A) as the Secretary may require,
    - (E) the Secretary may prescribe rules for the allocation of [contracts](/usc/26/101.md?p=f-3-A) (and income from [contracts](/usc/26/101.md?p=f-3-A)) among 2 or more qualifying insurance [company](/usc/26/812.md?p=a) branches of a qualifying insurance [company](/usc/26/812.md?p=a) in order to clearly reflect the income of such branches, and
    - (F) premiums from a [contract](/usc/26/101.md?p=f-3-A) shall not be taken into account for purposes of paragraph [(2)(B)](#e-2-B) or [(3)](#e-3) if such [contract](/usc/26/101.md?p=f-3-A) reinsures a [contract](/usc/26/101.md?p=f-3-A) issued or reinsured by a [related person](/usc/26/864.md?p=d-4) (as defined in [section 954(d)(3)](/usc/26/954.md?p=d-3)).

    For purposes of [subparagraph (D)](#e-7-D), the [determination](/usc/26/1313.md?p=a) of where risks are located shall be made under the principles of section 953.

  - (8) **Coordination with subsection (c)—** In determining insurance income for purposes of [subsection (c)](#c), exempt insurance income shall not include income derived from exempt [contracts](/usc/26/101.md?p=f-3-A) which cover risks other than applicable home country risks.
  - (9) **Regulations—** The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection and [section 954(i)](/usc/26/954.md?p=i).
  - (10) **Cross reference—** For income exempt from foreign [personal holding company](/usc/26/542.md?p=a) income, see [section 954(i)](/usc/26/954.md?p=i).

## Source credit

(Added Pub. L. 87–834, § 12(a), Oct. 16, 1962, 76 Stat. 1008; amended Pub. L. 89–809, title I, § 104(m)(2), Nov. 13, 1966, 80 Stat. 1563; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98–369, div. A, title II, § 211(b)(13), July 18, 1984, 98 Stat. 755; Pub. L. 99–514, title XII, § 1221(b)(1), (2), (3)(D), Oct. 22, 1986, 100 Stat. 2551, 2553; Pub. L. 100–647, title I, § 1012(i)(1)–(3)(B), (4), (5), (7)–(9), (21), title VI, § 6135(a), Nov. 10, 1988, 102 Stat. 3507–3509, 3511, 3721; Pub. L. 101–239, title VII, § 7816(p), Dec. 19, 1989, 103 Stat. 2423; Pub. L. 105–277, div. J, title I, § 1005(b)(1), (3), Oct. 21, 1998, 112 Stat. 2681–893, 2681–899; Pub. L. 106–170, title V, § 503(a), (b), Dec. 17, 1999, 113 Stat. 1921; Pub. L. 107–147, title VI, § 614(a)(1), Mar. 9, 2002, 116 Stat. 61; Pub. L. 109–222, title I, § 103(a)(1), May 17, 2006, 120 Stat. 346; Pub. L. 110–343, div. C, title III, § 303(a), Oct. 3, 2008, 122 Stat. 3866; Pub. L. 111–312, title VII, § 750(a), (b), Dec. 17, 2010, 124 Stat. 3320; Pub. L. 112–240, title III, § 322(a), Jan. 2, 2013, 126 Stat. 2332; Pub. L. 113–295, div. A, title I, § 134(a), Dec. 19, 2014, 128 Stat. 4019; Pub. L. 114–113, div. Q, title I, § 128(a), Dec. 18, 2015, 129 Stat. 3054; Pub. L. 115–97, title I, §§ 13511(b)(7), 13512(b)(8), 14212(b)(1)(D), (3), Dec. 22, 2017, 131 Stat. 2142, 2143, 2217.)

## Notes

### Editorial Notes

### Amendments

2017—Subsec. (b)(1)(A). Pub. L. 115–97, § 13512(b)(8), redesignated subpar. (B) as (A) and struck out former subpar. (A) which read as follows: “The small life insurance company deduction.”

Subsec. (b)(1)(B). Pub. L. 115–97, § 13512(b)(8), redesignated subpar. (C) as (B). Former subpar. (B) redesignated (A).

Pub. L. 115–97, § 13511(b)(7), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “Section 805(a)(5) (relating to operations loss deduction).”

Subsec. (b)(1)(C). Pub. L. 115–97, § 13512(b)(8), redesignated subpar. (C) as (B).

Subsec. (c)(1)(C). Pub. L. 115–97, § 14212(b)(1)(D), substituted “section 951(a)(1)(A)” for “section 951(a)(1)(A)(i)”.

Subsec. (d)(4)(B)(iv)(II). Pub. L. 115–97, § 14212(b)(3), struck out before period at end “or amounts referred to in clause (ii) or (iii) of section 951(a)(1)(A)”.

2015—Subsec. (e)(10), (11). Pub. L. 114–113 redesignated par. (11) as (10) and struck out former par. (10). Prior to amendment, text of par. (10) read as follows: “This subsection and section 954(i) shall apply only to taxable years of a foreign corporation beginning after December 31, 1998, and before January 1, 2015, and to taxable years of United States shareholders with or within which any such taxable year of such foreign corporation ends. If this subsection does not apply to a taxable year of a foreign corporation beginning after December 31, 2014 (and taxable years of United States shareholders ending with or within such taxable year), then, notwithstanding the preceding sentence, subsection (a) shall be applied to such taxable years in the same manner as it would if the taxable year of the foreign corporation began in 1998.”

2014—Subsec. (e)(10). Pub. L. 113–295 substituted “January 1, 2015” for “January 1, 2014” and “December 31, 2014” for “December 31, 2013”.

2013—Subsec. (e)(10). Pub. L. 112–240 substituted “January 1, 2014” for “January 1, 2012” and “December 31, 2013” for “December 31, 2011”.

2010—Subsec. (e)(10). Pub. L. 111–312 substituted “January 1, 2012” for “January 1, 2010” and “December 31, 2011” for “December 31, 2009”.

2008—Subsec. (e)(10). Pub. L. 110–343 substituted “January 1, 2010” for “January 1, 2009” and “December 31, 2009” for “December 31, 2008”.

2006—Subsec. (e)(10). Pub. L. 109–222 substituted “January 1, 2009” for “January 1, 2007” and “December 31, 2008” for “December 31, 2006”.

2002—Subsec. (e)(10). Pub. L. 107–147 substituted “January 1, 2007” for “January 1, 2002” and “December 31, 2006” for “December 31, 2001”.

1999—Subsec. (e)(10). Pub. L. 106–170 substituted “taxable years” for “the first taxable year”, “January 1, 2002” for “January 1, 2000”, and “within which any such” for “within which such”, and inserted at end “If this subsection does not apply to a taxable year of a foreign corporation beginning after December 31, 2001 (and taxable years of United States shareholders ending with or within such taxable year), then, notwithstanding the preceding sentence, subsection (a) shall be applied to such taxable years in the same manner as it would if the taxable year of the foreign corporation began in 1998.”

1998—Subsec. (a). Pub. L. 105–277, § 1005(b)(1)(A), amended heading and text of subsec. (a) generally. Prior to amendment, text read as follows: “For purposes of section 952(a)(1), the term ‘insurance income’ means any income which—

“(1) is attributable to the issuing (or reinsuring) of any insurance or annuity contract—

“(A) in connection with property in, liability arising out of activity in, or in connection with the lives or health of residents of, a country other than the country under the laws of which the controlled foreign corporation is created or organized, or

“(B) in connection with risks not described in subparagraph (A) as the result of any arrangement whereby another corporation receives a substantially equal amount of premiums or other consideration in respect of issuing (or reinsuring) a contract described in subparagraph (A), and

“(2) would (subject to the modifications provided by paragraphs (1) and (2) of subsection (b)) be taxed under subchapter L of this chapter if such income were the income of a domestic insurance company.”

Subsec. (b)(3), (4). Pub. L. 105–277, § 1005(b)(3), added par. (3) and redesignated former par. (3) as (4).

Subsec. (e). Pub. L. 105–277, § 1005(b)(1)(B), added subsec. (e).

1989—Subsec. (d)(3). Pub. L. 101–239 substituted “for purposes of section 1503(d) without regard to paragraph (2)(B) thereof” for “(as defined in section 1503(d))”.

1988—Subsec. (b)(1). Pub. L. 100–647, § 1012(i)(7)(A), redesignated par. (2) as (1) and struck out former par. (1) which read as follows: “A corporation which would, if it were a domestic insurance corporation, be taxable under part II of subchapter L shall apply subsection (a) as if it were taxable under part III of subchapter L.”

Subsec. (b)(1)(A). Pub. L. 100–647, § 1012(i)(7)(B), added subpar. (A) and struck out former subpar. (A) which read as follows: “The special life insurance company deduction and the small life insurance company deduction.”

Subsec. (b)(2) to (4). Pub. L. 100–647, § 1012(i)(7)(A), (C), redesignated pars. (3) and (4) as (2) and (3), respectively, and struck out “(other than those taken into account under paragraph (3))” after “and deductions” in par. (3). Former par. (2) redesignated (1).

Subsec. (c)(1)(C). Pub. L. 100–647, § 1012(i)(2)(A), added subpar. (C).

Subsec. (c)(2). Pub. L. 100–647, § 1012(i)(3)(A), (4)(B), (5), substituted “insurance income (within the meaning of subsection (a)) attributable” for “insurance income attributable”, “with respect to which the person (directly or indirectly) insured is” for “with respect to which the primary insured is”, and “related person” for “related person (within the meaning of section 954(d)(3))”.

Subsec. (c)(3)(A). Pub. L. 100–647, § 1012(i)(3)(B), (4)(B), substituted “persons who are (directly or indirectly) insured” for “persons who are the primary insured” and “to any such person” for “(within the meaning of section 954(d)(3)) to any such primary insured”.

Subsec. (c)(3)(B). Pub. L. 100–647, § 1012(i)(8), substituted “related person insurance income (determined on a gross basis)” for “related person insurance income” and “its insurance income (as so determined)” for “its insurance income”.

Subsec. (c)(3)(C). Pub. L. 100–647, § 1012(i)(1)(A), (9), substituted “all benefits (other than with respect to section 884)” for “all benefits” and “granted by the United States under any treaty” for “under any income tax treaty” in cl. (i)(II) and inserted at end “An election under this subparagraph made for any taxable year shall not be effective if the corporation (or any predecessor thereof) was a disqualified corporation for the taxable year for which the election was made or for any prior taxable year beginning after 1986.”

Subsec. (c)(3)(D)(i). Pub. L. 100–647, § 1012(i)(1)(B), substituted “Period during which election in effect” for “Election irrevocable” in heading and amended text generally. Prior to amendment, text read as follows: “Any election under subparagraph (C) shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.”

Subsec. (c)(3)(E). Pub. L. 100–647, § 1012(i)(1)(C), added subpar. (E).

Subsec. (c)(5). Pub. L. 100–647, § 1012(i)(2)(B), added par. (5) and redesignated former par. (5) as (6).

Subsec. (c)(6). Pub. L. 100–647, § 1012(i)(4)(A), added par. (6) and redesignated former par. (6) as (7).

Pub. L. 100–647, § 1012(i)(2)(B), redesignated former par. (5) as (6).

Subsec. (c)(7). Pub. L. 100–647, § 1012(i)(21), added par. (7) and struck out former par. (7) “Regulations”, which read as follows: “The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including regulations preventing the avoidance of this subsection through cross insurance arrangements or otherwise.”

Pub. L. 100–647, § 1012(i)(4)(A), redesignated former par. (6) as (7).

Subsec. (c)(8). Pub. L. 100–647, § 1012(i)(21), added par. (8).

Subsec. (d). Pub. L. 100–647, § 6135(a), added subsec. (d).

1986—Pub. L. 99–514, § 1221(b)(3)(D), substituted “Insurance income” for “Income from insurance of United States risks” in section catchline.

Subsec. (a). Pub. L. 99–514, § 1221(b)(1), amended subsec. (a) generally, substituting provisions defining “insurance income” for former provisions defining “income derived from the insurance of United States risks”.

Subsec. (c). Pub. L. 99–514, § 1221(b)(2), added subsec. (c).

1984—Subsec. (a)(2). Pub. L. 98–369, § 211(b)(13)(D), substituted “and (2)” for “, (2), and (3)”.

Subsec. (b)(1). Pub. L. 98–369, § 211(b)(13)(A), redesignated par. (2) as (1). Former par. (1), which provided that the application of part I of subchapter L of this chapter, life insurance company taxable income was the gain from operations as defined in section 809(b), was struck out.

Subsec. (b)(2). Pub. L. 98–369, § 211(b)(13)(B), in amending par. (2) generally, substituted

“(A) The special life insurance company deduction and the small life insurance company deduction.

“(B) Section 805(a)(5) (relating to operations loss deduction).

“(C) Section 832(c)(5) (relating to certain capital losses).”

for

“(A) Section 809(d)(4) (operations loss deduction).

“(B) Section 809(d)(5) (certain nonparticipating contracts).

“(C) Section 809(d)(6) (group life, accident, and health insurance).”

and struck out

“(D) Section 809(d)(10) (small business deduction).

“(E) Section 817(b) (gain on property held on December 31, 1958, and certain substituted property acquired after 1958).

“(F) Section 832(c)(5) (certain capital losses).”

Pub. L. 98–369, § 211(b)(13)(A), redesignated par. (3) as (2). Former par. (2) redesignated (1).

Subsec. (b)(3). Pub. L. 98–369, § 211(b)(13)(A), redesignated par. (4) as (3). Former par. (3) redesignated (2).

Subsec. (b)(3)(A). Pub. L. 98–369, § 211(b)(13)(C)(i), substituted “section 803(a)(1)” for “section 809(c)(1)”.

Subsec. (b)(3)(B). Pub. L. 98–369, § 211(b)(13)(C)(ii), substituted “section 803(a)(2)” for “section 809(c)(2)”.

Subsec. (b)(3)(C). Pub. L. 98–369, § 211(b)(13)(C)(iii), substituted “section 805(a)(2)” for “section 809(d)(2)”.

Subsec. (b)(4), (5). Pub. L. 98–369, § 211(b)(13)(A), (E), redesignated par. (5) as (4) and substituted “paragraph (3)” for “paragraph (4)”. Former par. (4) redesignated (3).

1976—Subsec. (b)(5). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

1966—Subsec. (b)(3)(F). Pub. L. 89–809 substituted “832(c)(5)” for “832(b)(5)”.

### Statutory Notes and Related Subsidiaries

### Effective Date of 2017 Amendment

Amendment by section 13511(b)(7) of Pub. L. 115–97 applicable to losses arising in taxable years beginning after Dec. 31, 2017, see section 13511(c) of Pub. L. 115–97, set out as a note under section 381 of this title.

Amendment by section 13512(b)(8) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 13512(c) of Pub. L. 115–97, set out as a note under section 453B of this title.

Amendment by section 14212(b)(1)(D), (3) of Pub. L. 115–97 applicable to taxable years of foreign corporations beginning after Dec. 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 14212(c) of Pub. L. 115–97, set out as a note under section 851 of this title.

### Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title I, § 128(c), Dec. 18, 2015, 129 Stat. 3054, provided that: “The amendments made by this section [amending this section and section 954 of this title] shall apply to taxable years of foreign corporations beginning after December 31, 2014, and to taxable years of United States shareholders with or within which any such taxable year of such foreign corporation ends.”

### Effective Date of 2014 Amendment

Pub. L. 113–295, div. A, title I, § 134(c), Dec. 19, 2014, 128 Stat. 4019, provided that: “The amendments made by this section [amending this section and section 954 of this title] shall apply to taxable years of foreign corporations beginning after December 31, 2013, and to taxable years of United States shareholders with or within which any such taxable year of such foreign corporation ends.”

### Effective Date of 2013 Amendment

Pub. L. 112–240, title III, § 322(c), Jan. 2, 2013, 126 Stat. 2332, provided that: “The amendments made by this section [amending this section and section 954 of this title] shall apply to taxable years of foreign corporations beginning after December 31, 2011, and to taxable years of United States shareholders with or within which any such taxable year of such foreign corporation ends.”

### Effective Date of 2010 Amendment

Pub. L. 111–312, title VII, § 750(c), Dec. 17, 2010, 124 Stat. 3320, provided that: “The amendments made by this section [amending this section and section 954 of this title] shall apply to taxable years of foreign corporations beginning after December 31, 2009, and to taxable years of United States shareholders with or within which any such taxable year of such foreign corporation ends.”

### Effective Date of 2002 Amendment

Pub. L. 107–147, title VI, § 614(c), Mar. 9, 2002, 116 Stat. 62, provided that: “The amendments made by this section [amending this section and section 954 of this title] shall apply to taxable years beginning after December 31, 2001.”

### Effective Date of 1999 Amendment

Pub. L. 106–170, title V, § 503(c), Dec. 17, 1999, 113 Stat. 1921, provided that: “The amendments made by this section [amending this section and section 954 of this title] shall apply to taxable years beginning after December 31, 1999.”

### Effective Date of 1989 Amendment

Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.

### Effective Date of 1988 Amendment

Pub. L. 100–647, title I, § 1012(i)(3)(C), Nov. 10, 1988, 102 Stat. 3508, provided that: “The amendments made by this paragraph [amending this section] to the extent such amendments add the phrase ‘(directly or indirectly)’ shall apply only to taxable years beginning after December 31, 1987.”

Amendment by section 1012(i)(1), (2), (4), (5), (7)–(9), (21) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Pub. L. 100–647, title VI, § 6135(b), Nov. 10, 1988, 102 Stat. 3723, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1987.”

### Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to taxable years of foreign corporations beginning after Dec. 31, 1986, except as otherwise provided, see section 1221(g) of Pub. L. 99–514, set out as a note under section 954 of this title.

### Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, see section 215 of Pub. L. 98–369, set out as an Effective Date note under section 801 of this title.

### Effective Date of 1966 Amendment

Amendment by Pub. L. 89–809 applicable with respect to taxable years beginning after Dec. 31, 1966, see section 104(n) of Pub. L. 89–809, set out as a note under section 11 of this title.