Internal Revenue Bulletin:  2009-52 

December 28, 2009 

Rev. Proc. 2009-56


SECTION 1. PURPOSE

This revenue procedure prescribes the salvage discount factors for the 2009 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 2009 accident year. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 2009, 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, 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 2009
(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 2009 accident year as of the end of the 2009 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 2009 taxable year.
Auto Physical Damage
Tax Year Discount Factors (%)
   
2009 97.2331
2010 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 2009 accident year.
   
2011 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 2011 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Commercial Auto/Truck Liability/Medical
Tax Year Discount Factors (%)
   
2009 92.3526
2010 92.2970
2011 92.6408
2012 92.9897
2013 93.7281
2014 93.5170
2015 91.9508
2016 92.8642
2017 96.2378
2018 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 2009 accident year.
   
2019 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 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Composite
Tax Year Discount Factors (%)
   
2009 92.3690
2010 92.1172
2011 91.9402
2012 91.7659
2013 91.1438
2014 90.2174
2015 91.0647
2016 92.4105
2017 94.4361
2018 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 2009 accident year.
   
2019 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 97.8009 percent to discount salvage recoverable as of the end of the 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Fidelity/Surety
Tax Year Discount Factors (%)
   
2009 93.6954
2010 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 2009 accident year.
   
2011 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 2011 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Financial Guaranty/Mortgage Guaranty
Tax Year Discount Factors (%)
   
2009 94.7421
2010 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 2009 accident year.
   
2011 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 2011 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
International (Composite)
Tax Year Discount Factors (%)
   
2009 92.3690
2010 92.1172
2011 91.9402
2012 91.7659
2013 91.1438
2014 90.2174
2015 91.0647
2016 92.4105
2017 94.4361
2018 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 2009 accident year.
   
2019 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 97.8009 percent to discount salvage recoverable as of the end of the 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Medical Malpractice — Claims-Made
Tax Year Discount Factors (%)
2009 92.6642
2010 93.7424
2011 92.1505
2012 92.7778
2013 92.0831
2014 87.6889
2015 84.3189
2016 90.2868
2017 96.4445
2018 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 2009 accident year.
   
2019 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 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Medical Malpractice — Occurrence
Tax Year Discount Factors (%)
   
2009 85.5177
2010 89.9300
2011 92.2898
2012 84.2693
2013 94.7905
2014 91.4234
2015 93.0145
2016 95.8751
2017 97.0989
2018 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 2009 accident year.
   
2019 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 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Miscellaneous Casualty
Tax Year Discount Factors (%)
   
2009 96.5837
2010 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 2009 accident year.
   
2011 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 2011 taxable year with respect to losses incurred in this line of business in 2009 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 (%)
   
2009 93.0068
2010 92.3990
2011 92.3201
2012 92.2569
2013 91.4462
2014 89.8725
2015 91.0239
2016 93.4483
2017 94.8485
2018 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 2009 accident year.
   
2019 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 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Other (Including Credit)
Tax Year Discount Factors (%)
   
2009 95.6448
2010 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 2009 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 2011 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Other Liability — Claims-Made
Tax Year Discount Factors (%)
   
2009 88.4208
2010 89.5374
2011 87.6521
2012 90.8781
2013 92.3590
2014 94.2379
2015 93.1673
2016 91.7716
2017 97.3613
2018 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 2009 accident year.
   
2019 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 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Other Liability — Occurrence
Tax Year Discount Factors (%)
   
2009 87.1236
2010 88.1600
2011 90.4878
2012 91.2470
2013 90.6851
2014 90.8000
2015 90.2668
2016 93.0020
2017 95.7619
2018 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 2009 accident year.
   
2019 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 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Private Passenger Auto Liability/Medical
Tax Year Discount Factors (%)
   
2009 94.5329
2010 94.5579
2011 94.3102
2012 93.4459
2013 92.8620
2014 92.0891
2015 92.9858
2016 94.5440
2017 94.6149
2018 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 2009 accident year.
   
2019 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 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Products Liability — Claims-Made
Tax Year Discount Factors (%)
   
2009 88.9426
2010 51.3741
2011 53.7803
2012 90.7115
2013 80.1341
2014 91.4320
2015 59.5121
2016 90.5055
2017 91.6367
2018 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 2009 accident year.
   
2019 94.5598
2020 96.3623
2021 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 95.6711 percent to discount salvage recoverable as of the end of the 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Products Liability — Occurrence
Tax Year Discount Factors (%)
   
2009 87.6369
2010 89.7198
2011 91.6030
2012 92.4224
2013 92.8704
2014 90.4185
2015 91.0511
2016 94.0066
2017 94.2757
2018 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 2009 accident year.
   
2019 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 97.2089 percent to discount salvage recoverable as of the end of the 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Reinsurance — Nonproportional Assumed Property
Tax Year Discount Factors (%)
   
2009 91.0976
2010 92.7443
2011 95.6984
2012 80.1417
2013 89.8643
2014 81.5378
2015 51.4095
2016 92.8399
2017 73.3181
2018 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 2009 accident year.
   
2019 89.8547
2020 91.6751
2021 93.5877
2022 95.6459
2023 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 91.4735 percent to discount salvage recoverable as of the end of the 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Reinsurance — Nonproportional Assumed Liability
Tax Year Discount Factors (%)
   
2009 86.7636
2010 90.0422
2011 91.4998
2012 88.6312
2013 90.7036
2014 91.5709
2015 91.4636
2016 93.2257
2017 95.1632
2018 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 2009 accident year.
   
2019 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 96.5025 percent to discount salvage recoverable as of the end of the 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Reinsurance — Nonproportional Assumed Financial Lines
Tax Year Discount Factors (%)
   
2009 87.1652
2010 85.9016
2011 89.9069
2012 78.5011
2013 90.2511
2014 80.2802
2015 90.4154
2016 90.8197
2017 97.5152
2018 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 2009 accident year.
   
2019 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 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary and Theft)
Tax Year Discount Factors (%)
   
2009 94.8844
2010 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 2009 accident year.
   
2011 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 2011 taxable year with respect to losses incurred in this line of business in 2009 and prior years.
Workers’ Compensation
Tax Year Discount Factors (%)
   
2009 88.3785
2010 90.4189
2011 91.2195
2012 91.1364
2013 89.6372
2014 88.2223
2015 88.8169
2016 88.5309
2017 90.7105
2018 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 2009 accident year.
   
2019 94.2879
2020 96.1430
2021 and later years 98.0298
   
Taxpayers that use the composite method of Notice 88-100 should use 95.7330 percent to discount salvage recoverable as of the end of the 2019 taxable year with respect to losses incurred in this line of business in 2009 and prior years.

DRAFTING INFORMATION

The principal author of this revenue procedure is Sarah E. Swan of the Office of the Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure, contact Ms. Swan at (202)622-8443 (not a toll-free call).


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