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1120-L

1120-L insurance returns

IRS Form 1120-L, the U.S. Life Insurance Company Income Tax Return, is used by life insurance companies to report their financial activity, including income, gains, losses, deductions, and credits, and to calculate their income tax liability. This form is mandatory for all domestic life insurance companies and any foreign corporation that meets the criteria of a U.S. life insurance company. Other insurance companies, such as property and casualty insurers, should file Form 1120-PC.
Insurance Company
 A corporation qualifies as an insurance company if over half of its annual business involves issuing insurance or annuity contracts, or reinsuring risks from other insurance companies.
Life Insurance Company
 A life insurance company is an insurance company primarily engaged in issuing life insurance and annuity contracts. This may include health and accident insurance, either separately or combined. Additionally, it covers companies issuing non-cancellable health and accident insurance contracts that meet the reserve requirements of Section 816(a). "Non-cancellable" also includes guaranteed renewable policies where the corporation can adjust premium rates by class, based on policy experience, but can't cancel the policy itself.

Life insurance reserves test for life insurance companies

To qualify as a life insurance company, a "reserves test" needs to be met. This test requires that over 50% of a company's total reserves (as defined in Section 816(c)) consist of:
  • Life insurance reserves (as defined in Section 816(b)).
  • Unearned premiums and unpaid losses (even if unascertained) from non-cancellable life, health, or accident policies not already included in life insurance reserves.
Important Considerations for the Reserves Test:
 When determining if the reserves test is met, consider the following:
  • Policy Loans:
     Both life insurance reserves and total reserves need to be reduced. This reduction is equal to the average of outstanding policy loans at the beginning and end of the tax year, specifically for contracts maintaining life insurance reserves.
  • Non-Guaranteed Contracts:
     Amounts set aside to fulfill obligations for contracts lacking permanent guarantees related to life, accident, or health contingencies should not be included in life insurance reserves (Section 816(c)(1)) or other legally required reserves (Section 816(c)(3)).
  • Deficiency Reserves:
     Deficiency reserves are excluded from both life insurance reserves and total reserves.

1120-L unique items

The following items are unique to 1120-L returns:
  • Deferred Acquisition Costs (DAC)
  • Annual Statement Schedule T

This article applies to:

  • PRODUCT: ONESOURCE Income Tax
  • Return type: 1120 Corporation
  • Subject: Insurance

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