PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2391
"(B) incidental health insurance provided by a health maintenance organization of a kind customarily provided by such organizations, "(C) property or casualty insurance provided (directly or through an organization described in section 414(e)(3)(B)(ii)) by a church or convention or association of churches for such church or convention or association of churches, and "(D) providing retirement or welfare benefits (or both) by a church or a convention or association of churches (directly or through an organization described in section 414(e)(3)(A) or 414(e)(3)(B)(ii)) for the employees (including employees described in section 414(e)(3)(B)) of such church or convention or association of churches or the beneficiaries of such employees. "(4) INSURANCE INCLUDES ANNUITIES.—For purposes of this subsection, the issuance of annuity contracts shall be treated as providing insurance." (b) TREATMENT OF BLUE CROSS AND BLUE SHIELD ORGANIZATIONS AND SIMILAR ORGANIZATIONS.—
(1) IN GENERAL.—Part III of subchapter L of chapter 1 is amended by adding at the end thereof the following new section: "SEC. 833. TREATMENT OF BLUE CROSS AND BLUE SHIELD ORGANIZATIONS. ETC.
"(a) GENERAL RULE.—In the case of any organization to which this section applies— "(1) TREATED AS STOCK COMPANY.—Such organization shall be taxable under this part in the same manner as if it were a stock insurance company. "(2) SPECIAL DEDUCTION ALLOWED.—The deduction determined under subsection (b) for any taxable year shall be allowed. "(3)
REDUCTIONS IN UNEARNED PREMIUM RESERVES NOT TO
APPLY.—Subparagraph (B) of paragraph (4) of section 832(b) shall be applied by substituting '100 percent' for '80 percent', and subparagraph (C) of such paragraph (4) shall not apply. "(b) AMOUNT OF DEDUCTION.—
"(1) IN GENERAL.—Except as provided in paragraph (2), the deduction determined under this subsection for any taxable year is the excess (if any) of— "(A) 25 percent of the sum of— "(i) the claims incurred during the taxable year, and "(ii) the expenses incurred during the taxable year in connection with the administration, adjustment, or settlement of claims, over "(B) the adjusted surplus as of the beginning of the taxable year. "(2) LIMITATION.—The deduction determined under paragraph (1) for any taxable year shall not exceed taxable income for such taxable year (determined without regard to such deduction). "(3) ADJUSTED SURPLUS.—For purposes of this subsection— "(A) IN GENERAL.—The adjusted surplus as of the beginning of any taxable year is an amount equal to the adjusted surplus as of the beginning of the preceding taxable year— "(i) increased by the amount of any adjusted taxable income for such preceding taxable year, or "(ii) decreased by the amount of any adjusted net operating loss for such preceding taxable year.
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