Source: http://taxalmanac.org/index.php/Notice_2010-79.html
Timestamp: 2020-06-06 14:39:11
Document Index: 240349547

Matched Legal Cases: ['§ 831', '§ 832', '§ 832', '§ 832', '§ 833', '§ 833', '§ 833', '§ 2718', '§ 833', '§ 833', '§ 833', '§ 833']

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Also see Notice 2011-4, Rev. Proc. 2011-14, and Notice 2011-51, which is further modified and superseded by Notice 2012-37.
3 SECTION 3. INTERIM GUIDANCE FOR 2010
4 SECTION 4. PROCEDURAL INFORMATION AND RELIANCE ON INTERIM GUIDANCE
5 SECTION 5. REQUEST FOR COMMENTS
.03 Section 832(a) provides that, for an insurance company subject to the tax imposed by § 831, the term “taxable income” means the company's gross income as defined in § 832(b)(1) less the deductions authorized in § 832(c). Under § 832(b)(1), gross income includes underwriting income.
.05 Section 832(b)(4) defines the term "premiums earned on insurance contracts during the taxable year" as the gross premiums written on insurance contracts during the taxable year, less return premiums and premiums paid for reinsurance. The result so obtained is further adjusted by adding 80 percent of the unearned premiums on outstanding business at the end of the preceding taxable year and deducting 80 percent of the unearned premiums on outstanding business at the end of the taxable year.
.06 Section 833 provides special rules for existing Blue Cross or Blue Shield organizations and other organizations that meet the requirements of § 833(c)(3)--
.07 Section 9016 of the Affordable Care Act added § 833(c)(5) to the Code, effective for taxable years beginning after December 31, 2009. Section 833(c)(5) provides that § 833 does not apply to an otherwise-eligible organization unless the organization's medical loss ratio, as defined, during the taxable year is not less than 85 percent. For this purpose, an organization's medical loss ratio is equal to the amount expended on reimbursement for clinical services provided to enrollees under its policies during the taxable year (as reported under § 2718 of the Public Health Service Act) ("Section 833 MLR Numerator") divided by the organization's total premium revenue ("Section 833 MLR Denominator").
.02 For purposes of determining whether a taxpayer's percentage of total premium revenue expended on reimbursement for clinical services provided to enrollees is not less than 85 percent (and thus satisfies the requirement of § 833(c)(5)), taxpayers must use the definition of "reimbursement for clinical services provided to enrollees" that is set forth in HHS interim final regulations. .03 For purposes of determining whether the 85-percent requirement of § 833(c)(5) is satisfied, the Service will not challenge the inclusion of "amounts expended for activities that improve health care quality" as defined in HHS interim final regulations.
.04 Section 833(c)(5) provides that § 833 does not apply to an organization unless the organization's percentage of total premium revenue expended on reimbursement for clinical services provided to enrollees is not less than 85 percent. Accordingly, the consequences for an organization for which this amount is less than 85 percent are as follows:
.05 Notwithstanding Section 3.04(a) of this Notice and solely for the first taxable year beginning after December 31, 2009, the Service will not treat a taxpayer as losing its status as a stock insurance company by reason of § 833(c)(5) provided the following conditions are met--
The principal author of this notice is Rebecca L. Baxter of the Office of Associate Chief Counsel (Financial Institutions & Products (CC:FIP:B04)). For further information regarding this notice contact Ms. Baxter on (202) 622-7117 (not a toll-free call).
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