‘‘(9) LIMITATION ON DEDUCTION FOR EXCESS 
NON-TAXED REINSURANCE PREMIUMS PAID TO AF-
FILIATES.— 
‘‘(A) IN GENERAL.—No deduction shall be 
allowed under paragraph (4) for so much of the 
affiliated non-taxed reinsurance premiums paid 
by a covered insurance company during the tax-
able year as exceeds the sum of— 
‘‘(i) the premium limitation for such 
taxable year, plus 
‘‘(ii) the qualified ceding commissions 
with respect to such premiums. 
‘‘(B) AFFILIATED
NON-TAXED
REINSUR-
ANCE PREMIUMS.—For purposes of this para-
graph— 
‘‘(i) IN GENERAL.—The term ‘affili-
ated 
non-taxed 
reinsurance 
premium’ 
means any reinsurance premium paid di-
rectly or indirectly to an affiliated corpora-
tion (other than a controlled foreign cor-
poration (as defined in section 957)) if no 
tax is imposed by this subtitle with respect 
to such premium. 
‘‘(ii) NETTING OF PREMIUMS PAID TO 
COVERED INSURANCE COMPANY BY AFFILI-
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ATES.—The amount of premiums which 
would (but for this clause) be treated as 
affiliated non-taxed reinsurance premiums 
with respect to any affiliated corporation 
for any taxable year shall be reduced (but 
not below zero) by any reinsurance pre-
miums paid directly or indirectly to the 
covered insurance company by such affili-
ated corporation during such taxable year. 
‘‘(iii) PREMIUMS
TREATED
AS
NON- 
TAXED
TO
EXTENT
OF
TREATY
REDUC-
TION.—Rules similar to the rules of section 
163(j)(5)(B) shall apply for purposes of 
determining the extent to which tax is im-
posed by this subtitle with respect to any 
premium. 
‘‘(C) PREMIUM
LIMITATION.—For pur-
poses of this paragraph— 
‘‘(i) IN
GENERAL.—The term ‘pre-
mium limitation’ means, with respect to 
any covered insurance company for any 
taxable year, the excess of— 
‘‘(I) the product of the gross pre-
miums written by such covered insur-
ance company on insurance contracts 
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during the taxable year multiplied by 
the industry fraction for such taxable 
year, over 
‘‘(II) the aggregate reinsurance 
premiums paid by such covered insur-
ance company during the taxable year 
which are not affiliated non-taxed re-
insurance premiums. 
Such limitation shall not be less than zero. 
‘‘(ii) INDUSTRY
FRACTION.—In the 
case of any taxable year beginning in a cal-
endar year, the term ‘industry fraction’ 
means the fraction, determined by the Sec-
retary on the basis of published aggregate 
data from annual statements of insurance 
companies— 
‘‘(I) the numerator of which is 
the aggregate reinsurance premiums 
paid by covered insurance companies 
to non-affiliated corporations during 
the second preceding calendar year, 
and 
‘‘(II) the denominator of which is 
the aggregate gross premiums written 
by covered insurance companies dur-
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ing such second preceding calendar 
year. 
‘‘(iii) SEPARATE
APPLICATION
TO 
EACH LINE OF BUSINESS.—With respect to 
each line of business— 
‘‘(I) the Secretary shall deter-
mine a separate industry fraction with 
respect to each such line of business, 
and 
‘‘(II) subparagraph (A) shall be 
applied separately to each such line of 
business by taking into account the 
industry fraction determined with re-
spect to such line of business. 
‘‘(D) QUALIFIED
CEDING
COMMISSION.— 
For purposes of this paragraph, the term 
‘qualified ceding commission’ means, with re-
spect to the affiliated non-taxed reinsurance 
premiums paid by a covered insurance company 
during any taxable year, the product of— 
‘‘(i) the ceding commissions which are 
paid to such company with respect to such 
premiums and which are included in in-
come of such company, multiplied by 
‘‘(ii) a fraction— 
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‘‘(I) the numerator of which is so 
much of such premiums as exceeds 
the premium limitation for such tax-
able year, and 
‘‘(II) the denominator of which is 
the aggregate amount of such pre-
miums. 
‘‘(E) ELECTION
BY
FOREIGN
CORPORA-
TION TO BE TREATED AS DOMESTIC CORPORA-
TION.— 
‘‘(i) IN GENERAL.—If a foreign cor-
poration is paid a premium by a covered 
insurance company which would (but for 
this subparagraph) be a affiliated non- 
taxed reinsurance premium, then such for-
eign corporation may make an election to 
be treated as a domestic corporation for 
purposes of this subtitle. 
‘‘(ii) REVOCATION
ONLY
WITH
CON-
SENT.—Any election under clause (i), once 
made, may be revoked only with the con-
sent of the Secretary. 
‘‘(iii) TREATMENT
OF
LOSSES.—Ex-
cept as otherwise provided by the Sec-
retary, rules similar to the rules of sections 
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953(d)(3) and 362(e) shall apply in the 
case of a corporation making an election 
under clause (i). 
‘‘(F) OTHER
DEFINITIONS
AND
SPECIAL 
RULES.—For purposes of this paragraph— 
‘‘(i) 
COVERED
INSURANCE
COM-
PANY.—The term ‘covered insurance com-
pany’ means any insurance company sub-
ject to the tax imposed by section 831. 
‘‘(ii) TREATMENT
OF
CONTROLLED 
GROUP.—All domestic members of a con-
trolled group of corporations (as defined in 
section 1563) of which a covered insurance 
company is a member shall be treated as 
one corporation. 
‘‘(iii) AFFILIATED CORPORATIONS.—A 
corporation shall be treated as affiliated 
with a covered insurance company if both 
corporations are members of the same con-
trolled group of corporations, as defined in 
section 1563(a) except that— 
‘‘(I) ‘more than 25 percent’ shall 
be substituted for ‘at least 80 percent’ 
each place it appears in section 
1563(a)(1), and 
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