Internal Revenue Bulletin:  2010-50 

December 13, 2010 

Rev. Proc. 2010-50


SECTION 1. PURPOSE

This revenue procedure prescribes the salvage discount factors for the 2010 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 2010 accident year. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 2010, which is 3.81 percent, and by assuming all estimated salvage is recovered in the middle of each calendar year. See Rev. Proc. 2008-11, 2008-1 C.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 annual statement approved by the National Association of Insurance Commissioners. 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 2010
(Interest rate: 3.81 percent)
Lines of Business
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 98.1478 percent to discount salvage recoverable with respect to losses incurred in this line of business in the 2010 accident year as of the end of the 2010 and later taxable years.
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount all salvage recoverable in this line of business as of the end of the 2010 taxable year.
Auto Physical Damage
Tax Year Discount Factors (%)
   
2010 97.3968
2011 96.3467
   
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 2010 accident year.
   
2012 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2012 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Commercial Auto/Truck Liability/Medical
Tax Year Discount Factors (%)
   
2010 92.7837
2011 92.7323
2012 93.0580
2013 93.3885
2014 94.0857
2015 93.8868
2016 92.4123
2017 93.2791
2018 96.4600
2019 98.1478
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Composite
Tax Year Discount Factors (%)
   
2010 92.7966
2011 92.5582
2012 92.3906
2013 92.2259
2014 91.6392
2015 90.7679
2016 91.5729
2017 92.8475
2018 94.7606
2019 96.4814
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1394 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Fidelity/Surety
Tax Year Discount Factors (%)
   
2010 94.0623
2011 96.3467
   
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 2010 accident year.
   
2012 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2012 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Financial Guaranty/Mortgage Guaranty
Tax Year Discount Factors (%)
   
2010 95.0489
2011 96.3467
   
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 2010 accident year.
   
2012 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2012 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
International (Composite)
Tax Year Discount Factors (%)
   
2010 92.7966
2011 92.5582
2012 92.3906
2013 92.2259
2014 91.6392
2015 90.7679
2016 91.5729
2017 92.8475
2018 94.7606
2019 96.4814
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1394 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Medical Malpractice — Claims-Made
Tax Year Discount Factors (%)
2010 93.0786
2011 94.0952
2012 92.5904
2013 93.1817
2014 92.5233
2015 88.3749
2016 85.2082
2017 90.8503
2018 96.6547
2019 98.1478
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Medical Malpractice — Occurrence
Tax Year Discount Factors (%)
   
2010 86.3162
2011 90.4919
2012 92.7220
2013 85.1582
2014 95.0887
2015 91.9139
2016 93.4195
2017 96.1175
2018 97.2711
2019 98.1478
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Miscellaneous Casualty
Tax Year Discount Factors (%)
   
2010 96.7847
2011 96.3467
   
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 2010 accident year.
   
2012 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2012 taxable year with respect to losses incurred in this line of business in 2010 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 (%)
   
2010 93.4004
2011 92.8257
2012 92.7508
2013 92.6906
2014 91.9254
2015 90.4434
2016 91.5362
2017 93.8270
2018 95.1497
2019 96.8145
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Other (Including Credit)
Tax Year Discount Factors (%)
   
2010 95.8998
2011 96.3467
   
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 2010 accident year.
   
2012 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2012 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Other Liability — Claims-Made
Tax Year Discount Factors (%)
   
2010 89.0574
2011 90.1163
2012 88.3414
2013 91.3936
2014 92.7947
2015 94.5684
2016 93.5605
2017 92.2516
2018 97.5182
2019 98.1478
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Other Liability — Occurrence
Tax Year Discount Factors (%)
   
2010 87.8282
2011 88.8138
2012 91.0169
2013 91.7356
2014 91.2069
2015 91.3193
2016 90.8227
2017 93.4080
2018 96.0113
2019 97.7168
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Private Passenger Auto Liability/Medical
Tax Year Discount Factors (%)
   
2010 94.8467
2011 94.8695
2012 94.6345
2013 93.8178
2014 93.2668
2015 92.5396
2016 93.3887
2017 94.8601
2018 94.9293
2019 96.6211
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Products Liability — Claims-Made
Tax Year Discount Factors (%)
   
2010 89.5111
2011 53.8777
2012 56.2338
2013 91.2109
2014 81.2016
2015 91.8947
2016 61.7067
2017 91.0293
2018 92.1071
2019 93.1849
   
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 2010 accident year.
   
2020 94.8773
2021 96.5773
2022 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 95.8305 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Products Liability — Occurrence
Tax Year Discount Factors (%)
   
2010 88.3200
2011 90.2935
2012 92.0747
2013 92.8492
2014 93.2720
2015 90.9592
2016 91.5621
2017 94.3528
2018 94.6093
2019 96.3618
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1145 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Reinsurance — Nonproportional Assumed Property
Tax Year Discount Factors (%)
   
2010 91.5967
2011 93.1520
2012 95.9361
2013 81.1923
2014 90.4025
2015 82.5156
2016 54.0401
2017 93.2324
2018 74.7782
2019 88.7685
   
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 2010 accident year.
   
2020 90.4287
2021 92.1524
2022 93.9603
2023 95.9026
2024 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 92.3206 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Reinsurance — Nonproportional Assumed Liability
Tax Year Discount Factors (%)
   
2010 87.4907
2011 90.5937
2012 91.9716
2013 89.2639
2014 91.2258
2015 92.0480
2016 91.9513
2017 93.6177
2018 95.4465
2019 97.0969
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.0840 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Reinsurance — Nonproportional Assumed Financial Lines
Tax Year Discount Factors (%)
   
2010 87.8550
2011 86.6634
2012 90.4544
2013 79.6749
2014 90.7909
2015 81.3855
2016 90.9640
2017 91.3553
2018 97.6631
2019 98.1478
   
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 2010 accident year.
   
2020 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary and Theft)
Tax Year Discount Factors (%)
   
2010 95.1830
2011 96.3467
   
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 2010 accident year.
   
2012 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 98.1478 percent to discount salvage recoverable as of the end of the 2012 taxable year with respect to losses incurred in this line of business in 2010 and prior years.
Workers’ Compensation
Tax Year Discount Factors (%)
   
2010 89.0169
2011 90.9477
2012 91.7039
2013 91.6235
2014 90.2053
2015 88.8704
2016 89.4375
2017 89.1742
2018 91.2385
2019 92.9096
   
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 2010 accident year.
   
2020 94.6208
2021 96.3708
2022 and later years 98.1478
   
Taxpayers that use the composite method of Notice 88-100 should use 95.6888 percent to discount salvage recoverable as of the end of the 2020 taxable year with respect to losses incurred in this line of business in 2010 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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