101 STAT. 1330-420
PUBLIC LAW 100-203—DEC. 22, 1987 ,.,,
SPREAD NOT AVAILABLE.—Subsection
shall not apply to any adjustment required under this clause. (B) PREVAILING STATE ASSUMED INTEREST RATE.—
"(i) IN GENERAL.—The term 'prevailing State assumed interest rate' means, with respect to any contract, the highest assumed interest rate permitted to be used in computing life insurance reserves for insurance contracts or annuity contracts (as the case may be) under the insurance laws of at least 26 States. For purposes of the preceding sentence, the effect of nonforfeiture laws of a State on interest rates for reserves shall not be taken into account. "(ii) WHEN RATE DETERMINED.—The prevailing State assumed interest rate with respect to any contract shall be determined as of the beginning of the calendar year in which the contract was issued.'
(2) TECHNICAL AMENDMENTS.—
(A) The third to the last sentence of section 807(c) is amended by striking out "the higher o f and all that folbtiB lows and inserting in lieu thereof "whichever of the following rates is the highest as of the time such obligation first s.J did not involve life, accident, or health contingencies: the >// MU applicable Federal interest rate under subsection (d)(2)(B)(i), T^. the prevailing State assumed interest rate under subsection (d)(2)(B)(ii), or the rate of interest assumed by the company in determining the guaranteed benefit." , i , (B) Paragraph (2) of section 812(b) is amended— T (i) by striking out "at the prevailing State assumed "..^.'^ rate or, where such rate is not used, another appro'-• priate rate" and inserting in lieu thereof "at the greater of the prevailing State assumed rate or the • - 1' '•" applicable Federal interest rate", and (ii) by adding at the end thereof the following new "t'f sentence: f! "In any case where the prevailing State assumed rate is not used, another appropriate rate shall be treated as the prevailing State assumed rate for purposes of subparagraph (A)." 26 USC 807 note. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to contracts issued in taxable years beginning after December 31, 1987. SEC. 10242. TREATMENT OF FOREIGN INSURANCE COMPANIES. (a) IN GENERAL.—Section 842 (relating to foreign corporations carrying on insurance business) is amended to read as follows: 26 USC 842. "SEC. 842. FOREIGN COMPANIES CARRYING ON INSURANCE BUSINESS. "(a) TAXATION UNDER THIS SUBCHAPTER.—If a foreign company carrying on an insurance business within the United States would qualify under part I or II of this subchapter for the taxable year if (without regard to income not effectively connected with the conduct .• •. r, of any trade or business within the United States) it were a domestic corporation, such company shall be taxable under such part on its income effectively connected with its conduct of any trade or business within the United States. With respect to the remainder of its income which is from sources within the United States, such a foreign company shall be taxable as provided in section 881.