A reinsurance company seeking the special tax treatment of Internal Revenue Code section 831(b) cannot receive more than $1.2 million of annual premium in 2016 or $2.2 million of annual premium beginning in 2017 (indexed for inflation). The $1.2 million limit through 2016 was first made effective in 1986 and was not changed for 30 years. Note that for any year that the annual premium exceeds this limit, the special tax treatment of section 831(b) is not available (meaning a tax on insurance profits for that year). IRC section 831(b)(2)(A) provides:
(b) Alternative tax for certain small companies
(1) In general
In lieu of the tax otherwise applicable under subsection (a), there is hereby imposed for each taxable year on the income of every insurance company to which this subsection applies a tax computed by multiplying the taxable investment income of such company for such taxable year by the rates provided in section 11(b).
(2) Companies to which this subsection applies
(A) In general. This subsection shall apply to every insurance company other than life if—
(i) the net written premiums (or, if greater, direct written premiums) for the taxable year do not exceed $2,200,000,
(ii) such company meets the diversification requirements of subparagraph (B), and
(iii) such company elects the application of this subsection for such taxable year. The election under clause (iii) shall apply to the taxable ear for which made and for all subsequent taxable years for which the requirements of clauses (i) and (ii) are met. Such an election, once made, may be revoked only with the consent of the Secretary.