Rev. Proc. 2020-41: Foreign insurance companies; effectively connected net investment income (2019)

Rev. Proc. 2020-41: Foreign insurance companies

The IRS today released an advance version of Rev. Proc. 2020-41 that provides the domestic asset / liability percentages and domestic investment yields needed by foreign life insurance companies and by foreign property and liability insurance companies to compute their minimum effectively connected net investment income under section 842(b) for tax years beginning after December 31, 2018.

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Rev. Proc. 2020-41 [PDF 14 KB] providing the following:

Domestic asset / liability percentages for 2019 (first tax year beginning after December 31, 2018) 

124.8%

For foreign insurance companies under Part I of subchapter L

197.9%

For foreign insurance companies under Part II of subchapter L

 

Domestic investment yields for 2019 (first tax year beginning after December 31, 2018)  
4.5% For foreign insurance companies under Part I of subchapter L
3.4% For foreign insurance companies under Part II of subchapter L


To compute estimated tax and the installment payments of estimated tax, a foreign insurance company must compute its estimated tax payments by adding to its income (other than net investment income) the greater of: 

  • Its net investment income as determined under section 842(b)(5), that is actually effectively connected with the conduct of a trade or business within the United States for the relevant period, or 
  • The minimum effectively connected net investment income under section 842(b) that would result from using the most recently available domestic asset/liability percentage and domestic investment yield.

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