In recent years, the IRS increasingly has challenged the deductibility of property & casualty (P&C) loss reserves. With three credentialed actuaries now on its staff, the IRS has sharpened its focus to challenge not only margins, but also the reasonability of the assumptions used in developing actuarial estimates of unpaid loss. The accounting basis for IRS reserve challenges also has evolved -- Statement of Statutory Accounting Principles (SSAP) No. 101 replaced SSAP No. 10R and SSAP No. 10 -- increasing the likelihood that the IRS will find the insurer's tax position "more likely than not" to be unsustainable and require the insurer to establish a tax loss contingency.
PwC actuaries have helped many insurers navigate the uncertainties associated with IRS tax exams and procedures related to mandated reserve adjustments. We help insurers prepare documentation that supports carried reserve levels, respond to a document request by the IRS, and proactively mitigate risk areas before an IRS challenge.