81 STAT.]
PUBLIC LAW 90^240-JAN. 2, 1968
777
(c) Section 832 of such Code (relating to insurance company taxSSA Stat. 264; able income) is amended by adding at the end thereof the following ^°26 USC 8^32'. new subsection: "(e) SPECIAL DEDUCTION AND INCOME ACCOUNT.—In the case of taxable years beginning after December 31, 1966, of a company which writes mortgage guaranty insurance— "(1) ADDITIONAL DEDUCTION.—There shall be allowed as a deduction for the taxable year, if bonds are purchased as required by paragraph (2), the sum of— " (A) an amount representing the amount required by State law or regulation to be set aside in a reserve for mortgage guaranty insurance losses resulting from adverse economic cycles; and " (B) an amount representing the aggregate of amounts so set aside in such reserve for the 8 preceding taxable years to the extent such amounts were not deducted under this paragraph in such preceding taxable years, except that the deduction allowable for the taxable year under this paragraph shall not exceed the taxable income for the taxable year computed without regard to this paragraph or to any carryback of a net operating loss. For purposes of this paragraph, the amount required by State law or regulation to be so set aside in any taxable year shall not exceed 50 percent of premiums earned on insurance contracts (as defined in subsection (b)(4)) with respect to mortgage guaranty insurance for such year. For purposes of this subsection, all amounts shall be taken into account on a first-in-time basis. The computation and deduction under this section of losses incurred (including losses resulting from adverse economic cycles) shall not be affected by the provisions of this subsection. For purposes of this subsection, the terms 'preceding taxable years' and 'preceding taxable year' shall not include taxable years which began before January 1, 1967. " (2) PURCHASE OF BONDS.—The deduction under paragraph (1) shall be allowed only to the extent that tax and loss bonds are purchased in an amount equal to the tax benefit attributable to such deduction, as determined under regulations prescribed by the Secretary or his delegate, on or before the date that any taxes (determined without regard to this subsection) due for the taxable year for which the deduction is allowed are due to be paid, as if no election to make installment payments under section 6152 is ^SA Stat. 757. made. If a deduction would be allowed but for the fact that tax 26 USC 615 2. and loss bonds were not timely purchased, such deduction shall be allowed to the extent such purchases are made within a reasonable time, as determined by the Secretary or his delegate, if all interest and penalties, computed as if this sentence did not apply, are paid. "(3) MORTGAGE GUARANTY ACCOUNT.—Each company which writes mortgage guaranty insurance shall, for purposes of this part, establish ana maintain a mortgage guaranty account. " (4) ADDITIONS TO ACCOUNT.—There shall be added to the mortgage guaranty account for each taxable year an amount equal to the amount allowed as a deduction for the taxable year under paragraph (1). "(5)
SUBTRACTIONS FROM ACCOUNT AND INCLUSION I N GROSS I N -
COME.—After applying paragraph (4), there shall be subtracted for the taxable year from the mortgage guaranty account and included in gross income—
�
