26 U.S.C. § 848: Capitalization of certain policy acquisition expenses

specified policy acquisition expenses for any taxable year shall be capitalized, and such expenses shall be allowed as a deduction ratably over the 180-month period beginning with the first month in the second half of such taxable year. Paragraph (2) of subsection (a) shall be applied with respect to so much of the specified policy acquisition expenses of an insurance company for any taxable year as does not exceed $5,000,000 by substituting “60-month” for “180-month”. If the specified policy acquisition expenses of an insurance company exceed $10,000,000 for any taxable year, the $5,000,000 amount under paragraph (1) shall be reduced (but not below zero) by the amount of such excess. all insurance companies which are members of such group shall be treated as 1 company for purposes of this subsection, and the amount to which paragraph (1) applies shall be allocated among such companies in such manner as the Secretary may prescribe. Paragraph (1) shall not apply to any specified policy acquisition expenses for any taxable year which are attributable to premiums or other consideration under any reinsurance contract. 2.09 percent of the net premiums for such taxable year on specified insurance contracts which are annuity contracts, 2.45 percent of the net premiums for such taxable year on specified insurance contracts which are group life insurance contracts, and 9.2 percent of the net premiums for such taxable year on specified insurance contracts not described in subparagraph (A) or (B). The term “general deductions” means the deductions provided in part VI of subchapter B (sec. 161 and following, relating to itemized deductions) and in part I of subchapter D (sec. 401 and following, relating to pension, profit sharing, stock bonus plans, etc.). the gross amount of premiums and other consideration on such contracts, over return premiums on such contracts and premiums and other consideration incurred for reinsurance of such contracts. In the case of an insurance company subject to tax under part II of this subchapter, all computations entering into determinations of net premiums for any taxable year shall be made in the manner required under section 811(a) for life insurance companies. Net premiums shall be determined without regard to section 808(e) and without regard to other similar amounts treated as paid to, and returned by, the policyholder. Premiums and other consideration incurred for reinsurance shall be taken into account under paragraph (1)(B) only to the extent such premiums and other consideration are includible in the gross income of an insurance company taxable under this subchapter or are subject to tax under this chapter by reason of subpart F of part III of subchapter N. The Secretary shall prescribe such regulations as may be necessary to ensure that premiums and other consideration with respect to reinsurance are treated consistently by the ceding company and the reinsurer. Except as otherwise provided in this paragraph, the term “specified insurance contract” means any life insurance, annuity, or noncancellable accident and health insurance contract (or any combination thereof). any pension plan contract (as defined in section 818(a)), any flight insurance or similar contract, any qualified foreign contract (as defined in section 807(e)(3) without regard to paragraph (5) of this subsection), any contract which is an Archer MSA (as defined in section 220(d)), and any contract which is a health savings account (as defined in section 223(d)). which covers a group of individuals defined by reference to employment relationship, membership in an organization, or similar factor, the premiums for which are determined on a group basis, and the proceeds of which are payable to (or for the benefit of) persons other than the employer of the insured, an organization to which the insured belongs, or other similar person. Any annuity contract combined with noncancellable accident and health insurance shall be treated as a noncancellable accident and health insurance contract and not as an annuity contract. The rules of section 816(e) shall apply for purposes of this section. A contract which reinsures another contract shall be treated in the same manner as the reinsured contract. An annuity or life insurance contract which includes a qualified long-term care insurance contract as a part of or a rider on such annuity or life insurance contract shall be treated as a specified insurance contract not described in subparagraph (A) or (B) of subsection (c)(1). the amount otherwise required to be capitalized under this section for such taxable year with respect to any other category of specified insurance contracts shall be reduced (but not below zero) by such negative capitalization amount, and shall reduce (but not below zero) the unamortized balance (as of the beginning of such taxable year) of the amounts previously capitalized under subsection (a) (beginning with the amount capitalized for the most recent taxable year), and to the extent taken into account as such a reduction, shall be allowed as a deduction for such taxable year. the amount determined under subparagraph (B) of subsection (d)(1) with respect to such category, exceeds the amount determined under subparagraph (A) of subsection (d)(1) with respect to such category. Nothing in any provision of law (other than this section or section 197) shall require the capitalization of any ceding commission incurred on or after September 30, 1990 , under any contract which reinsures a specified insurance contract. Except as provided in paragraph (2), the Secretary may provide that a type of insurance contract will be treated as a separate category for purposes of this section (and prescribe a percentage applicable to such category) if the Secretary determines that the deferral of acquisition expenses for such type of contract which would otherwise result under this section is substantially greater than the deferral of acquisition expenses which would have resulted if actual acquisition expenses (including indirect expenses) and the actual useful life for such type of contract had been used. If the Secretary exercises his authority with respect to any type of contract under paragraph (1), the Secretary shall adjust the percentage which would otherwise have applied under subsection (c)(1) to the category which includes such type of contract so that the exercise of such authority does not result in a decrease in the amount of revenue received under this chapter by reason of this section for any fiscal year. The amendments made by this section [amending this section] shall apply to net premiums for taxable years beginning after December 31, 2017 . Specified policy acquisition expenses first required to be capitalized in a taxable year beginning before January 1, 2018 , will continue to be allowed as a deduction ratably over the 120-month period beginning with the first month in the second half of such taxable year.”