Actuary/Accountant/Tax Attorney Dialogue on Internal Revenue Code Deference to the NAIC Part II: Policyholder Tax Issues

Peter Winslow [MODERATOR]: This is the second installment of our three-part dialogue on the issue of federal tax law’s deference to insurance regulation rules. This time we are shifting from tax reserves to policyholder tax issues. It seems to me that the role of state insurance regulation in the context of policyholder taxation may involve a two-part analysis. First, we need to see whether, and to what extent, the tax law defers to the NAIC or state regulators in classifying the types of contracts that are entitled to favorable (or unfavorable) policyholder tax treatment. And, second, to the extent the Internal Revenue Code imposes qualification requirements for specific tax treatment, to what extent do those tests rely on the meaning the NAIC or regulators give to the components in the tests? John, I would like you to set the stage for us. Could you give us a short beginner’s guide to the general rules of policyholder taxation for the various types of products offered by life insurance companies? 

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Taxing Times, Vol . 11, Issue 3 (October 2015)