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IRS guidance on insurance accounting methods and discount factors

July 2019


The IRS and Treasury on July 21 released two revenue procedures that implement changes made to Section 846 by the 2017 tax reform act (the Act).  Rev. Proc. 2019-30 provides simplified procedures for an insurance company to obtain automatic consent to change its methods of accounting for computing discounted unpaid losses and estimated salvage recoverable to comply with Section 846.  Rev. Proc. 2019-31 provides revised discount factors for the 2018 accident year, consistent with recently issued final regulations.

The takeaway

Rev. Proc. 2019-30 and Rev. Proc. 2019-31 complete the initial round of guidance to implement the Act's amendments to Section 846.

The option of using either the proposed discount factors or the revised discount factors should minimize the amount of additional work that is required either for tax reporting purposes or for financial and statutory accounting purposes.

The publication of discount factors for the current accident year in July, rather than in November or later, is particularly welcome and should assist companies in their continued implementation of the Act's changes to Section 846.

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Julie Goosman

Insurance Tax Services Leader, PwC US

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