Internal Revenue Bulletin:  2008-3 

January 22, 2008 

Rev. Proc. 2008-11


SECTION 1. PURPOSE

This revenue procedure prescribes the salvage discount factors for 2007. These factors must be used to compute discounted estimated salvage recoverable under § 832 of the Internal Revenue Code.

SEC. 2. BACKGROUND

Section 832(b)(5)(A) requires that all estimated salvage recoverable (including that which cannot be treated as an asset for state accounting purposes) be taken into account in computing the deduction for losses incurred. Under § 832(b)(5)(A), paid losses are reduced by salvage and reinsurance recovered during the taxable year. This amount is adjusted to reflect changes in discounted unpaid losses on nonlife insurance contracts and in unpaid losses on life insurance contracts. An adjustment is then made to reflect any changes in discounted estimated salvage recoverable and in reinsurance recoverable.

Pursuant to § 832(b), the amount of estimated salvage is determined on a discounted basis in accordance with procedures established by the Secretary.

SEC. 3. SCOPE

This revenue procedure applies to any taxpayer that is required to discount estimated salvage recoverable under § 832.

SEC. 4. APPLICATION

.01 The following tables present separately for each line of business the discount factors under § 832 for 2007. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 2007, which is 3.97 percent, and by assuming all estimated salvage is recovered in the middle of the calendar year

.02 Section V of Notice 88-100, 1988-2 C.B. 439, sets forth a composite method for computing discounted unpaid losses for accident years that are not separately reported on the annual statement. Rev. Proc. 2002-74, section 3.03, 2002-2 C.B. 980, provides that an insurance company that elects to use the composite method of Notice 88-100 must use the same method to compute discounted estimated salvage recoverable. Accordingly, the tables separately provide discount factors for taxpayers who elect to use the composite method of section V of Notice 88-100.

.02 These tables must be used by taxpayers irrespective of whether they elected to discount unpaid losses using their own experience under § 846(e).

.03 Tables.

Accident and Health (Other Than Disability Income or Credit Disability Insurance)
Taxpayers that do not use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable with respect to losses incurred in this line of business in the 2007 accident year as of the end of the 2007 and later taxable years.
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount all salvage recoverable in this line of business as of the end of the 2007 taxable year.
Auto Physical Damage
Tax Year Discount Factors (%)
   
2007 97.2919
2008 96.1998
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2009 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable as of the end of the 2009 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Commercial Auto/Truck Liability/Medical
Tax Year Discount Factors (%)
   
2007 92.5072
2008 92.4531
2009 92.7905
2010 93.1328
2011 93.8564
2012 93.6497
2013 92.1165
2014 93.0132
2015 96.3177
2016 98.0722
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Composite
Tax Year Discount Factors (%)
   
2007 92.5224
2008 92.2753
2009 92.1017
2010 91.9308
2011 91.3215
2012 90.4149
2013 91.2470
2014 92.5673
2015 94.5527
2016 96.3399
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 95.5806 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Fidelity/Surety
Tax Year Discount Factors (%)
   
2007 93.8272
2008 96.1998
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2009 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable as of the end of the 2009 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Financial Guaranty/Mortgage Guaranty
Tax Year Discount Factors (%)
   
2007 94.8523
2008 96.1998
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2009 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable as of the end of the 2009 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
International (Composite)
Tax Year Discount Factors (%)
   
2007 92.5224
2008 92.2753
2009 92.1017
2010 91.9308
2011 91.3215
2012 90.4149
2013 91.2470
2014 92.5673
2015 94.5527
2016 96.3399
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
2017 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 95.5806 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Medical Malpractice — Claims-Made
Tax Year Discount Factors (%)
   
2007 92.8129
2008 93.8690
2009 92.3083
2010 92.9226
2011 92.2409
2012 87.9349
2013 84.6380
2014 90.4891
2015 96.5200
2016 98.0722
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Medical Malpractice — Occurrence
Tax Year Discount Factors (%)
   
2007 85.8039
2008 90.1315
2009 92.4448
2010 84.5882
2011 94.8975
2012 91.5995
2013 93.1599
2014 95.9622
2015 97.1608
2016 98.0722
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Miscellaneous Casualty
Tax Year Discount Factors (%)
   
2007 96.6559
2008 96.1998
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2009 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable as of the end of the 2009 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Multiple Peril Lines (Homeowners/Farmowners, Commercial Multiple Peril, and Special Liability (Ocean Marine, Aircraft (All Perils), Boiler and Machinery))
Tax Year Discount Factors (%)
   
2007 93.1480
2008 92.5520
2009 92.4746
2010 92.4125
2011 91.6181
2012 90.0772
2013 91.2078
2014 93.5843
2015 94.9567
2016 96.6862
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0719 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Other (Including Credit)
Tax Year Discount Factors (%)
   
2007 95.7364
2008 96.1998
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2009 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable as of the end of the 2009 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Other Liability — Claims-Made
Tax Year Discount Factors (%)
   
2007 88.6489
2008 89.7449
2009 87.8992
2010 91.0630
2011 92.5154
2012 94.3565
2013 93.3084
2014 91.9440
2015 97.4177
2016 98.0722
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
2019 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 96.8697 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Other Liability — Occurrence
Tax Year Discount Factors (%)
   
2007 87.3760
2008 88.3943
2009 90.6775
2010 91.4222
2011 90.8722
2012 90.9863
2013 90.4663
2014 93.1478
2015 95.8515
2016 97.6241
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Private Passenger Auto Liability/Medical
Tax Year Discount Factors (%)
   
2007 94.6456
2008 94.6698
2009 94.4266
2010 93.5793
2011 93.0072
2012 92.2508
2013 93.1304
2014 94.6575
2015 94.7279
2016 96.4851
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0708 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Products Liability — Claims-Made
Tax Year Discount Factors (%)
   
2007 89.1458
2008 52.2690
2009 54.6584
2010 90.8903
2011 80.5163
2012 91.5977
2013 60.2981
2014 90.6932
2015 91.8054
2016 92.9177
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 94.6739
2018 96.4396
2019 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 94.6739 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Products Liability — Occurrence
Tax Year Discount Factors (%)
   
2007 87.8817
2008 89.9255
2009 91.7722
2010 92.5755
2011 93.0145
2012 90.6124
2013 91.2345
2014 94.1309
2015 94.3955
2016 96.2156
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
   
   
   
2017 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 94.6056 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Reinsurance — Nonproportional Assumed Property
Tax Year Discount Factors (%)
   
2007 91.2766
2008 92.8906
2009 95.7836
2010 80.5177
2011 90.0569
2012 81.8877
2013 52.3517
2014 92.9805
2015 73.8412
2016 88.3425
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 90.0606
2018 91.8464
2019 93.7215
2020 95.7382
2021 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 90.0606 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Reinsurance — Nonproportional Assumed Liability
Tax Year Discount Factors (%)
   
2007 87.0242
2008 90.2399
2009 91.6689
2010 88.8580
2011 90.8909
2012 91.7421
2013 91.6386
2014 93.3665
2015 95.2650
2016 96.9798
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 93.1607 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Reinsurance — Nonproportional Assumed Financial Lines
Tax Year Discount Factors (%)
   
2007 87.4122
2008 86.1745
2009 90.1030
2010 78.9216
2011 90.4446
2012 80.6766
2013 90.6123
2014 91.0121
2015 97.5684
2016 98.0722
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Glass, Burglary and Theft)
Tax Year Discount Factors (%)
   
2007 94.9917
2008 96.1998
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2009 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0722 percent to discount salvage recoverable as of the end of the 2009 taxable year with respect to losses incurred in this line of business in 2007 and prior years.
Workers’ Compensation
Tax Year Discount Factors (%)
   
2007 88.6073
2008 90.6085
2009 91.3932
2010 91.3110
2011 89.8407
2012 88.4546
2013 89.0394
2014 88.7616
2015 90.9000
2016 92.6321
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2007 accident year.
   
2017 94.4075
2018 96.2249
2019 and later years 98.0722
   
Taxpayers that use the composite method of Notice 88-100 should use 95.3569 percent to discount salvage recoverable as of the end of the 2017 taxable year with respect to losses incurred in this line of business in 2007 and prior years.

DRAFTING INFORMATION

The principal author of this revenue procedure is Katherine A. Hossofsky of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure, contact Ms. Hossofsky at (202) 622-8435 (not a toll-free call).


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