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Insurance companies, automatic consent for accounting method change

Automatic consent for accounting method change

The IRS today released an advance version of Rev. Proc. 2019-30 that provides simplified procedures for an insurance company to obtain automatic consent to change its methods of accounting for discounting unpaid losses and expenses unpaid, estimated salvage recoverable, and unearned premiums attributable to title insurance to comply with section 846.

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Section 846 was amended by the 2017 U.S. tax law (Pub. L. No. 115-97)—the legislation that is commonly referred to as the “Tax Cuts and Jobs Act” (TCJA). 

Rev. Proc. 2019-30 [PDF 103 KB] provides simplified procedures for an insurance company to obtain automatic consent of the Commissioner of Internal Revenue to change its methods of accounting for (1) discounting unpaid losses and expenses unpaid, (2) estimated salvage recoverable, and (3) unearned premiums attributable to title insurance to comply with section 846, as amended by the TCJA.

Rev. Proc. 2019-30 provides—for tax years beginning after December 31, 2017, and ending on or before December 31, 2019—the simplified procedures as the exclusive procedures for certain eligible taxpayer insurance companies (e.g., property and casualty insurance companies).

The IRS also today released an advance version of Rev. Proc. 2019-31 [PDF 368 KB] concerning the revised unpaid loss discount factors for the 2018 accident year and earlier accident years for use by insurance companies in computing discounted unpaid losses under section 846. Rev. Proc. 2019-31 applies to any insurance company that is required to discount unpaid losses under section 846 for a line of business using the discount factors published by the Treasury Secretary, and also applies to any insurance company that is required to discount estimated salvage recoverable under section 832. 

The purpose of this report is to provide text of the revenue procedures.

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