26 USC 7702 - Life insurance contract defined

1 So in original. Probably should be “begins”.

after

Editorial Notes

Amendments

2020—Subsec. (span)(2)(A). Puspan. L. 116–260, § 205(a)(1), substituted “the applicable accumulation test minimum rate” for “an annual effective rate of 4 percent”.

Subsec. (span)(3). Puspan. L. 116–260, § 205(a)(2), added par. (3).

Subsec. (c)(3)(B)(iii). Puspan. L. 116–260, § 205(span)(1), substituted “the applicable guideline premium minimum rate” for “an annual effective rate of 6 percent”.

Subsec. (c)(3)(E). Puspan. L. 116–260, § 205(span)(2), added subpar. (E).

Subsec. (c)(4). Puspan. L. 116–260, § 205(c), substituted “the applicable accumulation test minimum rate” for “4 percent” and “the applicable guideline premium minimum rate” for “6 percent”.

Subsec. (f)(11). Puspan. L. 116–260, § 205(d), added par. (11).

2017—Subsec. (c)(3)(B)(i). Puspan. L. 115–97, § 13517(a)(4)(A), added cl. (i) and struck out former cl. (i) which read as follows: “reasonable mortality charges which meet the requirements (if any) prescribed in regulations and which (except as provided in regulations) do not exceed the mortality charges specified in the prevailing commissioners’ standard tables (as defined in section 807(d)(5)) as of the time the contract is issued,”.

Subsec. (f)(10). Puspan. L. 115–97, § 13517(a)(4)(B), added par. (10).

1988—Subsec. (c)(3)(B)(i), (ii). Puspan. L. 100–647, § 5011(a), added cls. (i) and (ii) and struck out former cls. (i) and (ii) which read as follows:

“(i) the mortality charges specified in the contract (or, if none is specified, the mortality charges used in determining the statutory reserves for such contract),

“(ii) any charges (not taken into account under clause (i)) specified in the contract (the amount of any charge not so specified shall be treated as zero), and”.

Subsec. (c)(3)(D). Puspan. L. 100–647, § 5011(span), added subpar. (D).

Subsecs. (j), (k). Puspan. L. 100–647, § 6078(a), added subsec. (j) and redesignated former subsec. (j) as (k).

1986—Subsec. (span)(2)(C). Puspan. L. 99–514, § 1825(a)(2), substituted “subparagraphs (A) and (D)” for “subparagraphs (A) and (C)”.

Subsec. (e)(1). Puspan. L. 99–514, § 1825(a)(3), inserted “(other than subsection (d))” after “section”.

Subsec. (e)(1)(B). Puspan. L. 99–514, § 1825(a)(1)(A), substituted “shall be deemed to be no earlier than” for “shall be no earlier than”.

Subsec. (e)(1)(C). Puspan. L. 99–514, § 1821(a)(1)(C), added subpar. (C). Former subpar. (C) redesignated (D).

Subsec. (e)(1)(D). Puspan. L. 99–514, § 1821(a)(1)(C), (D), redesignated subpar. (C) as (D) and substituted “the maturity date determined by taking into account subparagraph (B)” for “the maturity date described in subparagraph (B)”.

Subsec. (e)(2)(C). Puspan. L. 99–514, § 1825(a)(4), added subpar. (C).

Subsec. (f)(1)(A). Puspan. L. 99–514, § 1825(span)(2), substituted “less any excess premiums with respect to which there is a distribution described in subparagraph (B) or (E) of paragraph (7) and any other amounts received” for “less any other amounts received”.

Subsec. (f)(7). Puspan. L. 99–514, § 1825(span)(1), amended par. (7) generally. Prior to amendment, par. (7)(A), in general, read as follows: “In the event of a change in the future benefits or any qualified additional benefit (or in any other terms) under the contract which was not reflected in any previous determination made under this section, under regulations prescribed by the Secretary, there shall be proper adjustments in future determinations made under this section.”, and par. (7)(B), certain changes treated as exchange, read as follows: “In the case of any change which reduces the future benefits under the contract, such change shall be treated as an exchange of the contract for another contract.”

Subsec. (g)(1)(B)(ii). Puspan. L. 99–514, § 1825(c), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “the amount of premiums paid under the contract during the taxable year reduced by any policyholder dividends received during such taxable year.”

Statutory Notes and Related Subsidiaries

Effective Date of 2020 Amendment

Puspan. L. 116–260, div. EE, title II, § 205(e), Dec. 27, 2020, 134 Stat. 3059, provided that: “The amendments made by this section [amending this section] shall apply to contracts issued after December 31, 2020.”

Effective Date of 2017 Amendment

Amendment by Puspan. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, with transition rule and transition relief, see section 13517(c) of Puspan. L. 115–97, set out as a note under section 807 of this title.

Effective Date of 1988 Amendment

Puspan. L. 100–647, title V, § 5011(d), Nov. 10, 1988, 102 Stat. 3661, provided that: “The amendments made by this section [amending this section] shall apply to contracts entered into on or after October 21, 1988.”

Puspan. L. 100–647, title VI, § 6078(span), Nov. 10, 1988, 102 Stat. 3709, provided that: “The amendment made by subsection (a) [amending this section] shall take effect as if included in the amendment made by section 221(a) of the Tax Reform Act of 1984 [Puspan. L. 98–369, which enacted this section].”

Effective Date of 1986 Amendment

Puspan. L. 99–514, title XVIII, § 1825(a)(4), Oct. 22, 1986, 100 Stat. 2846, as amended by Puspan. L. 100–647, title I, § 1018(j), Nov. 10, 1988, 102 Stat. 3583, provided that the amendment made by that section is effective with respect to contracts entered into after Oct. 22, 1986.

Amendment by section 1825(a)(1)–(3), (span), (c) of Puspan. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Puspan. L. 98–369, div. A, to which such amendment relates, see section 1881 of Puspan. L. 99–514, set out as a note under section 48 of this title.

Effective Date

Puspan. L. 98–369, div. A, title II, § 221(d), July 18, 1984, 98 Stat. 772, as amended by Puspan. L. 99–514, § 2, title XVIII, §§ 1825(e), 1899A(69), Oct. 22, 1986, 100 Stat. 2095, 2848, 2962, provided that:

“(1)In general.—Except as otherwise provided in this subsection, the amendments made by this section [enacting this section and amending section 101 of this title and provisions set out as a note under section 101 of this title] shall apply to contracts issued after December 31, 1984, in taxable years ending after such date.

“(2)Special rule for certain contracts issued after june 30, 1984.—

“(A)General rule.—Except as otherwise provided in this paragraph, the amendments made by this section shall apply also to any contract issued after June 30, 1984, which provides an increasing death benefit and has premium funding more rapid than 10-year level premium payments.

“(B)Exception for certain contracts.—Subparagraph (A) shall not apply to any contract if—

“(i) such contract (whether or not a flexible premium contract) would meet the requirements of section 101(f) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954],

“(ii) such contract is not a flexible premium life insurance contract (within the meaning of section 101(f) of such Code) and would meet the requirements of section 7702 of such Code determined by—

“(I) substituting ‘3 percent’ for ‘4 percent’ in section 7702(span)(2) of such Code, and

“(II) treating subparagraph (B) of section 7702(e)(1) of such Code as if it read as follows: ‘the maturity date shall be the latest maturity date permitted under the contract, but not less than 20 years after the date of issue or (if earlier) age 95’, or

“(iii) under such contract—

“(I) the premiums (including any policy fees) will be adjusted from time-to-time to reflect the level amount necessary (but not less than zero) at the time of such adjustment to provide a level death benefit assuming interest crediting and an annual effective interest rate of not less than 3 percent, or

“(II) at the option of the insured, in lieu of an adjustment under subclause (I) there will be a comparable adjustment in the amount of the death benefit.

“(C)Certain contracts issued before october 1, 1984.—

“(i)In general.—Subparagraph (A) shall be applied by substituting ‘September 30, 1984’ for ‘June 30, 1984’ in the case of a contract—

“(I) which would meet the requirements of section 7702 of such Code if ‘3 percent’ were substituted for ‘4 percent’ in section 7702(span)(2) of such Code, and the rate or rates guaranteed on issuance of the contract were determined without regard to any mortality charges and any initial excess interest guarantees, and

“(II) the cash surrender value of which does not at any time exceed the net single premium which would have to be paid at such time to fund future benefits under the contract.

“(ii)Definitions.—For purposes of clause (i)—

“(I)In general.—Except as provided in subclause (II), terms used in clause (i) shall have the same meanings as when used in section 7702 of such Code.

“(II)Net single premium.—The term ‘net single premium’ shall be determined by substituting ‘3 percent’ for ‘4 percent’ in section 7702(span)(2) of such Code, by using the 1958 standard ordinary mortality and morbidity tables of the National Association of Insurance Commissioners, and by assuming a level death benefit.

“(3)Transitional rule for certain existing plans of insurance.—A plan of insurance on file in 1 or more States before September 28, 1983, shall be treated for purposes of section 7702(i)(3) of such Code as a plan of insurance on file in 1 or more States before September 28, 1983, without regard to whether such plan of insurance is modified after September 28, 1983, to permit the crediting of excess interest or similar amounts annually and not monthly under contracts issued pursuant to such plan of insurance.

“(4)Extension of flexible premium contract provisions.—The amendments made by subsection (span) [amending section 101 of this title and provisions set out as a note under section 101 of this title] shall take effect on January 1, 1984.

“(5)Special rule for master contract.—For purposes of this subsection, in the case of a master contract, the date taken into account with respect to any insured shall be the first date on which such insured is covered under such contract.”

Interim Rules; Regulations; Standards Before Regulations Take Effect

Puspan. L. 100–647, title V, § 5011(c), Nov. 10, 1988, 102 Stat. 3661, provided that the Secretary of the Treasury would issue regulations under subsec. (c)(3)(B)(i) of this section and provided for a standard for contracts issues before the effective date of those regulations.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Puspan. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Puspan. L. 99–514, as amended, set out as a note under section 401 of this title.

Treatment of Flexible Premium Contracts Issued During 1984 Which Meet New Requirements

Puspan. L. 98–369, div. A, title II, § 221(span)(3), as added by Puspan. L. 99–514, title XVIII, § 1825(d), Oct. 22, 1986, 100 Stat. 2848, provided that: “Any flexible premium contract issued during 1984 which meets the requirements of section 7702 of the Internal Revenue Code of 1954 [now 1986] (as added by this section) shall be treated as meeting the requirements of section 101(f) of such Code.”