Repeal of Special Estimated Tax Payments


Section 13516 of the Tax Cuts and Jobs Act (Pub. L. No. 115-97) repealed section 847 for taxable years beginning after December 31, 2017.  Under section 847, an insurance company that was required to discount its reserves could elect to take an additional deduction equal to the difference between the amount of unpaid loss reserves computed on a discounted basis and the amount computed on an undiscounted basis.  An insurance company that made this election was required to establish a special loss discount account to track the tax benefit associated with the additional deduction. The insurance company was also required to make special estimated tax payments on an annual basis equal to the tax benefit attributable to the deduction taken.  As the insurance company reduced its reserves in later taxable years to account for such payments, the insurance company took into income the corresponding amount in the special loss discount account. Any additional income tax associated with the income inclusion was offset by amounts paid to the special estimated tax payments. 

Because of the repeal of section 847 by the Tax Cuts and Jobs Act, an insurance company with an existing special loss discount account balance must include the entire existing special loss discount balance in income for the company’s first taxable year beginning after December 31, 2017.  The additional tax attributable to this income inclusion may be offset by the insurance company’s existing special estimated tax payments.  If the insurance company’s existing special estimated tax payments exceed the additional tax, the excess special estimated tax payments will be treated as estimated tax payments under section 6655 for the first quarter of the 2018 tax year.

This announcement will be posted at

Inquiries should be marked “Section 847 Inquiries,” and sent to:

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0012