Internal Revenue Bulletin:  2008-49 

December 8, 2008 

Rev. Proc. 2008-71


SECTION 1. PURPOSE

This revenue procedure prescribes the salvage discount factors for the 2008 accident year. These factors must be used to compute discounted estimated salvage recoverable under § 832 of the Internal Revenue Code.

SECTION 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 to be 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.

SECTION. 3. SCOPE

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

SECTION 4. APPLICATION

.01 The following tables present separately for each line of business the discount factors under § 832 for the 2008 accident year. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 2008, which is 4.06 percent, and by assuming all estimated salvage is recovered in the middle of each calendar year. See Rev. Proc. 2008-11, 2008-3 I.R.B. 301, for background regarding the tables.

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

.03 Section V of Notice 88-100, 1988-2 C.B. 439, provides a composite discount factor to be used in determining the discounted unpaid losses for accident years that are not separately reported on the NAIC Annual Statement. The tables separately provide discount factors for taxpayers who elect to use the composite method. Rev. Proc. 2002-74, 2002-2 C.B. 980, clarifies that for certain insurance companies subject to tax under § 831 the composite method for discounting unpaid losses set forth in Notice 88-100, section V, 1988-2 C.B. 439, is permitted but not required. This revenue procedure further provides alternative methods for computing discounted unpaid losses that are permitted for insurance companies not using the composite method, and sets forth a procedure for insurance companies to obtain automatic consent of the Commissioner to change to one of the methods described in Rev. Proc. 2002-74.

.04 Tables.

Tables of Factors to be Used to Discount
Salvage Recoverable With Respect to Losses Incurred in
Accident Year 2008
(Interest rate: 4.06 percent)
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 98.0298 percent to discount salvage recoverable with respect to losses incurred in this line of business in the 2008 accident year as of the end of the 2008 and later taxable years.
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount all salvage recoverable in this line of business as of the end of the 2008 taxable year.
Auto Physical Damage
Tax Year Discount Factors (%)
   
2008 97.2331
2009 96.1174
   
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 2008 accident year.
   
2010 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2010 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Commercial Auto/Truck Liability/Medical
Tax Year Discount Factors (%)
   
2008 92.3526
2009 92.2970
2010 92.6408
2011 92.9897
2012 93.7281
2013 93.5170
2014 91.9508
2015 92.8642
2016 96.2378
2017 98.0298
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Composite
Tax Year Discount Factors (%)
   
2008 92.3690
2009 92.1172
2010 91.9402
2011 91.7659
2012 91.1438
2013 90.2174
2014 91.0647
2015 92.4105
2016 94.4361
2017 96.2605
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 96.8444 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Fidelity/Surety
Tax Year Discount Factors (%)
   
2008 93.6954
2009 96.1174
   
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 2008 accident year.
   
2010 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2010 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Financial Guaranty/Mortgage Guaranty
Tax Year Discount Factors (%)
   
2008 94.7421
2009 96.1174
   
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 2008 accident year.
   
2010 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2010 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
International (Composite)
Tax Year Discount Factors (%)
   
2008 92.3690
2009 92.1172
2010 91.9402
2011 91.7659
2012 91.1438
2013 90.2174
2014 91.0647
2015 92.4105
2016 94.4361
2017 96.2605
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 96.8444 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Medical Malpractice — Claims-Made
Tax Year Discount Factors (%)
   
2008 92.6642
2009 93.7424
2010 92.1505
2011 92.7778
2012 92.0831
2013 87.6889
2014 84.3189
2015 90.2868
2016 96.4445
2017 98.0298
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Medical Malpractice — Occurrence
Tax Year Discount Factors (%)
   
2008 85.5177
2009 89.9300
2010 92.2898
2011 84.2693
2012 94.7905
2013 91.4234
2014 93.0145
2015 95.8751
2016 97.0989
2017 98.0298
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Miscellaneous Casualty
Tax Year Discount Factors (%)
   
2008 96.5837
2009 96.1174
   
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 2008 accident year.
   
2010 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2010 taxable year with respect to losses incurred in this line of business in 2008 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 (%)
   
2008 93.0068
2009 92.3990
2010 92.3201
2011 92.2569
2012 91.4462
2013 89.8725
2014 91.0239
2015 93.4483
2016 94.8485
2017 96.6142
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Other (Including Credit)
Tax Year Discount Factors (%)
   
2008 95.6448
2009 96.1174
   
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 2008 accident year.
   
2010 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2010 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Other Liability — Claims-Made
Tax Year Discount Factors (%)
   
2008 88.4208
2009 89.5374
2010 87.6521
2011 90.8781
2012 92.3590
2013 94.2379
2014 93.1673
2015 91.7716
2016 97.3613
2017 98.0298
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0675 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Other Liability — Occurrence
Tax Year Discount Factors (%)
   
2008 87.1236
2009 88.1600
2010 90.4878
2011 91.2470
2012 90.6851
2013 90.8000
2014 90.2668
2015 93.0020
2016 95.7619
2017 97.5722
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Private Passenger Auto Liability/Medical
Tax Year Discount Factors (%)
   
2008 94.5329
2009 94.5579
2010 94.3102
2011 93.4459
2012 92.8620
2013 92.0891
2014 92.9858
2015 94.5440
2016 94.6149
2017 96.4088
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Products Liability — Claims-Made
Tax Year Discount Factors (%)
   
2008 88.9426
2009 51.3741
2010 53.7803
2011 90.7115
2012 80.1341
2013 91.4320
2014 59.5121
2015 90.5055
2016 91.6367
2017 92.7680
   
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 2008 accident year.
   
2018 94.5598
2019 96.3623
2020 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 95.2929 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Products Liability — Occurrence
Tax Year Discount Factors (%)
   
2008 87.6369
2009 89.7198
2010 91.6030
2011 92.4224
2012 92.8704
2013 90.4185
2014 91.0511
2015 94.0066
2016 94.2757
2017 96.1335
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 95.9730 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Reinsurance — Nonproportional Assumed Property
Tax Year Discount Factors (%)
   
2008 91.0976
2009 92.7443
2010 95.6984
2011 80.1417
2012 89.8643
2013 81.5378
2014 51.4095
2015 92.8399
2016 73.3181
2017 88.1043
   
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 2008 accident year.
   
2018 89.8547
2019 91.6751
2020 93.5877
2021 95.6459
2022 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 90.7540 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Reinsurance — Nonproportional Assumed Liability
Tax Year Discount Factors (%)
   
2008 86.7636
2009 90.0422
2010 91.4998
2011 88.6312
2012 90.7036
2013 91.5709
2014 91.4636
2015 93.2257
2016 95.1632
2017 96.9140
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 94.8390 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Reinsurance — Nonproportional Assumed Financial Lines
Tax Year Discount Factors (%)
   
2008 87.1652
2009 85.9016
2010 89.9069
2011 78.5011
2012 90.2511
2013 80.2802
2014 90.4154
2015 90.8197
2016 97.5152
2017 98.0298
   
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 2008 accident year.
   
2018 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary and Theft)
Tax Year Discount Factors (%)
   
2008 94.8844
2009 96.1174
   
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 2008 accident year.
   
2010 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent to discount salvage recoverable as of the end of the 2010 taxable year with respect to losses incurred in this line of business in 2008 and prior years.
Workers’ Compensation
Tax Year Discount Factors (%)
   
2008 88.3785
2009 90.4189
2010 91.2195
2011 91.1364
2012 89.6372
2013 88.2223
2014 88.8169
2015 88.5309
2016 90.7105
2017 92.4766
   
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 2008 accident year.
   
2018 94.2879
2019 96.1430
2020 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 95.7028 percent to discount salvage recoverable as of the end of the 2018 taxable year with respect to losses incurred in this line of business in 2008 and prior years.

DRAFTING INFORMATION

The principal author of this revenue procedure is Katherine A. Hossofsky of the Office of the 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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