PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2407
policyholder to a mutual fire insurance company described in subparagraph (C) or (D) of paragraph (1)." (4) Paragraph (5) of section 832(c) is amended by striking out "section 822(b)" and inserting in lieu thereof "section 834(b)". (5) Paragraph (11) of section 832(c) is amended— (A) by striking out "section 831(a)(3)(A)" and inserting in lieu thereof "subsection (b)(l)(C)", and (B) by striking out "section 831(a)(3)(B)" and inserting in lieu thereof "subsection (b)(l)(D)". (6) Section 832 is amended by adding at the end thereof the following new subsection: "(f) INTERINSURERS.—In the case of a mutual insurance company which is an interinsurer or reciprocal underwriter— "(1) there shall be allowed as a deduction the increase for the taxable year in savings credited to subscriber accounts, or "(2) there shall be included as an item of gross income the decrease for the taxable year in savings credited to subscriber accounts. For purposes of the preceding sentence, the term 'savings credited to subscriber accounts' means such portion of the surplus as is credited to the individual accounts of subscribers before the 16th day of the 3rd month following the close of the taxable year, but only if the company would be obligated to pay such amount promptly to such subscriber if he terminated his contract at the close of the company's taxable year. For purposes of determining his taxable income, the subscriber shall treat any such savings credited to his account as a dividend paid or declared.' (7) Subsection (a) of section 834 (as redesignated by subsection (a)) is amended to read as follows: "(a) GENERAL RULE.—For purposes of section 831(b), the term 'taxable investment income' means the gross investment income, minus the deductions provided in subsection (c)." (8) Subsection (d) of section 834 (as so redesignated) is amended— (A) by striking out "section 821" each place it appears and inserting in lieu thereof "section 831", and (B) by inserting before the period at the end of the last sentence of paragraph (2) the following: "except in the case of discount which is original issue discount (as defined in section 1273)". (9) Section 835 (as redesignated by subsection (a)) is amended— (A) by striking out subsection (d) and by redesignating subsections (e), (f), (g), and (h) as subsections (d), (e), (0, and (g), respectively, and (B) by amending subsection (e) (as so redesignated) to read as follows: "(e) BENEFITS OF GRADUATED RATES DENIED.—Any increase in the taxable income of a reciprocal attributable to the limits provided in subsection (b) shall be taxed at the highest rate of tax specified in section 11(b)." (10) Section 841 is amended— (A) by striking out "section 801, 821, or 831" and inserting in lieu thereof "section 801 or 831", (B) by inserting "and" at the end of paragraph (1), (C) by striking out paragraph (2), and (D) by redesignating paragraph (3) as paragraph (2).
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