PUBLIC LAW 104-188—AUG. 20, 1996 110 STAT. 1847 "(1) all or part of the amounts received under which are allocated to an account which, pursuant to State law or regulation, is segregated from the general asset accounts of the company and is valued from time to time with reference to market values, "(2) which— "(A) provides for the payment of annuities, "(B) is a life insurance contract, or "(C) is a pension plan contract which is not a life, accident, or health, property, casualty, or liability contract, "(3) for which reserves are valued at market for annual statement purposes, and "(4) which provides for a net surrender value or a policy- holder's fund (as defined in section 807(e)(1)). If only a portion of a contract is not described in section 817, such portion shall be treated for purposes of this section as a separate contract. "(e) REGULATIONS.—The Secretary may prescribe regulations— "(1) to provide for the treatment of market value adjustments under sections 72, 7702, 7702A, and 807(e)(1)(B), "(2) to determine the interest rates applicable under sections 807(c)(3), 807(d)(2)(B), and 812 with respect to a modified guaranteed contract annually, in a manner appropriate for modified guaranteed contracts and, to the extent appropriate for such a contract, to modify or waive the applicability of section 811(d), "(3) to provide rules to limit ordinary gain or loss treatment to assets constituting reserves for modified guaranteed contracts (and not other assets) of the company, "(4) to provide appropriate treatment of transfers of assets to and from the segregated account, and "(5) as may be necessary or appropriate to carry out the purposes of this section.". (b) CLERICAL AMENDMENT.— The table of sections for subpart E of part I of subchapter L of chapter 1 is amended by inserting after the item relating to section 817 the following new item: "Sec. 817A. Special rules for modified guaranteed contracts.". (c) EFFECTIVE DATE. — 26 USC 817A (1) IN GENERAL. —The amendments made by this section note. shall apply to taxable years beginning after December 31, 1995. (2) TREATMENT OF NET ADJUSTMENTS. —Except as provided in paragraph (3), in the case of any taxpayer required by the amendments made by this section to change its calculation of reserves to take into account market value adjustments and to mark segregated assets to market for any taxable year— (A) such changes shall be treated as a change in method of accounting initiated by the taxpayer, (B) such changes shall be treated as made with the consent of the Secretary, and (C) the adjustments required by reason of section 481 of the Internal Revenue Code of 1986, shall be taken into account as ordinary income by the taxpayer for the taxpayer's first taxable year beginning after December 31, 1995. (3) LIMITATION ON LOSS RECOGNITION AND ON DEDUCTION FOR RESERVE INCREASES.— (A) LIMITATION ON LOSS RECOGNITION.—
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