This revenue procedure prescribes unpaid loss discount factors for the 2018 accident year for use in computing discounted unpaid losses under § 846 of the Internal Revenue Code. The unpaid loss discount factors also serve as salvage discount factors for the 2018 accident year for use in computing discounted estimated salvage recoverable under § 832. The discount factors prescribed herein were determined under § 846, as amended by section 13523 of the Tax Cuts and Jobs Act, Pub. L. No. 115–97 (December 22, 2017) (“TCJA”), and proposed regulations under § 846 (REG–103163–18) published in the Federal Register (83 FR 55646) on November 7, 2018 (the “proposed regulations”). If necessary after the proposed regulations are published as final regulations, the Department of the Treasury (the “Treasury Department”) and Internal Revenue Service (“IRS”) intend to publish for each property and casualty line of business revised unpaid loss discount factors for the 2018 accident year for use in taxable years ending on or after the date the final regulations are published.
(1) Section 13523 of the TCJA amended § 846 for taxable years beginning after December 31, 2017. Section 13523(a) and (b) of the TCJA amended the definition of annual rate under § 846(c) and the computational rules for loss payment patterns under § 846(d), respectively. Section 13523(c) of the TCJA repealed the election that was previously set forth in § 846(e) to use the taxpayer’s own historical loss payment pattern instead of the pattern published by the Secretary.
(2) Section 13523(e) of the TCJA provides the transitional rule for the application of the amendments in the first taxable year beginning after December 31, 2017, and for subsequent taxable years (the “TCJA transition rule”). Specifically, section 13523(e) provides that, for the first taxable year beginning after December 31, 2017, the unpaid losses and expenses unpaid (as defined in § 832(b)(5) and (6)) at the end of the preceding taxable year, and the unpaid losses (as defined in §§ 805(a)(1) and 807(c)(2)) at the end of the preceding taxable year, are determined as if the amendments made by section 13523 of the TCJA had applied to the unpaid losses and expenses unpaid in the preceding taxable year and by using the interest rate and loss payment patterns applicable to accident years ending with calendar year 2018. The resulting adjustment (the “TCJA adjustment”), if any, is included in the taxpayer’s gross income ratably over an eight year period (the “TCJA period of adjustment,” which is the first taxable year beginning after December 31, 2017, and the seven succeeding taxable years). Section 13523(e) also provides that, for subsequent taxable years, the amendments made by section 13523 are applied with respect to unpaid losses and expenses unpaid for accident years ending with or before calendar year 2018 by using the interest rate and loss payment patterns applicable to accident years ending with calendar year 2018. Loss payment patterns for the 2017 determination year were previously prescribed in Rev. Proc. 2018–13, 2018–7 I.R.B. 356. In Rev. Proc. 2018–13, the Treasury Department and IRS also announced the intention to publish revised loss payment patterns for the 2017 determination year in accordance with the TCJA transition rule.
(1) Section 1.846–1(c) of the proposed regulations provides that the annual rate for any calendar year is the average of the monthly spot interest rates on corporate bonds with times to maturity of not more than seventeen and one-half years based on a yield curve that reflects the average, for the most recent 60-month period ending before the beginning of the calendar year, of monthly yields on corporate bonds described in § 430(h)(2)(D)(i).
(2) Section 1.846–1(d)(1) of the proposed regulations provides that, in general, the loss payment pattern determined by the Secretary for each line of business is determined by reference to the historical loss payment pattern applicable to such line of business determined in accordance with the method of determination set forth in § 846(d)(2) and the computational rules prescribed in § 846(d)(3) on the basis of data from annual statements described in § 846(d)(2)(A) and (B). However, under § 1.846–1(d)(2) of the proposed regulations, the Secretary may adjust the loss payment pattern for any line of business using a methodology described by the Secretary in other published guidance if necessary to avoid negative payment amounts and otherwise produce a stable pattern of positive discount factors less than one.
(1) The discount factors prescribed in this revenue procedure are determined by using the applicable interest rate for accident year 2018 under § 846(c) and the proposed regulations and revised loss payment patterns determined by the Secretary for the 2017 determination year under § 846(d) and the proposed regulations.
(2) Pursuant to § 846(c) and the proposed regulations, the Secretary has determined that the annual rate for the 2018 calendar year is 3.12 percent, compounded semiannually. This annual rate is the average of the monthly spot rates on corporate bonds with times to maturity of not more than seventeen and one-half years based on a yield curve that reflects the average of monthly yields on corporate bonds described in § 430(h)(2)(D)(i) for the period from January 2013 through December 2017 (that is, the most recent 60-month period ending before the beginning of the 2018 calendar year).[3]
(3) Pursuant to § 846(d) and the proposed regulations, the Secretary has determined a revised loss payment pattern for each property and casualty line of business for the 2017 determination year for use with respect to unpaid losses incurred in accident year 2018 and prior accident years. The revised loss payment patterns for the 2017 determination year are based, initially, on the aggregate loss payment information reported on the 2015 annual statements of property and casualty insurance companies and compiled by A.M. Best and Co. The lines of business for the 2017 determination year are the same as the lines of business for the 2012 determination year. See Rev. Proc. 2012–44, 2012–49 I.R.B. 645. Losses are reported on the annual statement net of losses on reinsurance ceded, but include losses on assumed proportional reinsurance. Losses with respect to assumed non-proportional reinsurance are reported in three separate lines of business (for property, liability, and financial reinsurance). The loss data include defense, cost containment, adjusting, and other loss expenses, but are not reduced for salvage and subrogation receipts.
(4) Pursuant to § 1.846–1(d)(2) of the proposed regulations, the Secretary may adjust the loss payment pattern for any line of business using a methodology described by the Secretary in other published guidance if necessary to avoid negative payment amounts and otherwise produce a stable pattern of positive discount factors less than one. For the 2017 determination year, only one line of business requires adjustments under the proposed regulations. That line of business is Products Liability – Claims Made. The initial payment pattern results in negative payment amounts for the fifth, seventh, and ninth years after the accident year. Therefore, the payment amounts for the fourth through the ninth year after the accident year are adjusted following the steps listed in the preamble to the proposed regulations. See 83 FR 55646.
This revenue procedure applies to any taxpayer that is required to discount unpaid losses under § 846 for a line of business using the discount factors published by the Secretary, and also applies to any taxpayer that is required to discount estimated salvage recoverable under § 832. This revenue procedure applies to taxable years beginning after December 31, 2017.
.01 The tables in this section 4 present separately for each line of business the unpaid loss discount factors under § 846 for use in the first taxable year beginning after December 31, 2017, and for use in calculating the TCJA adjustment. All of the discount factors presented in these tables are determined by using the applicable interest rate for 2018 under § 846(c) and the proposed regulations, which is 3.12 percent, compounded semiannually, and the revised payment patterns for the 2017 determination year determined by the Secretary under § 846(d) and the proposed regulations. All of the discount factors presented in these tables are determined by assuming all loss payments occur in the middle of the calendar year.
.02 Tables 1 and 2 present separately for each line of business the unpaid loss discount factors under § 846 for use in the first taxable year beginning after December 31, 2017. Any taxpayer using discount factors prescribed in Tables 1 and 2 to compute discounted unpaid losses under § 846 for its first taxable year beginning after December 31, 2017, must use the discount factors prescribed in Tables 1 and 2 with respect to all of its property and casualty lines of business and, consistent with the TCJA transition rule, must use the discount factors prescribed in Tables 1 and 2 for all accident years ending with or before calendar year 2018. The taxpayer also must use the discount factors prescribed in Tables 1 and 2 as the salvage discount factors for the 2018 accident year and all prior accident years for purposes of determining estimated salvage recoverable under § 832 with respect to all of its property and casualty lines of business for its first taxable year beginning after December 31, 2017.
.03 Consistent with the TCJA transition rule, any taxpayer using the discount factors prescribed in Tables 1 and 2 for its first taxable year beginning after December 31, 2017, must, for that taxable year, use the discount factors prescribed in Tables 3 and 4 for purposes of determining the unpaid losses and expenses unpaid (as defined in § 832(b)(5) and (6)) at the end of the preceding taxable year, and the unpaid losses (as defined in §§ 805(a)(1) and 807(c)(2)) at the end of the preceding taxable year. The taxpayer also must, for its first taxable year beginning after December 31, 2017, use the unpaid loss discount factors prescribed in Tables 3 and 4 to determine the amount of the TCJA adjustment to be taken into account in that taxable year and, unless revised discount factors have been published, the amount of the TCJA adjustment to be taken into account in subsequent taxable years.
.04 Section V of Notice 88–100, 1988–2 C.B. 439, sets forth a composite method for computing discounted unpaid losses for accident years that are not separately reported on the annual statement. Tables 1 through 4 separately provide discount factors for taxpayers who have elected to use the composite method of Notice 88–100. See Rev. Proc. 2002–74, 2002–2 C.B. 980.
| Table 1 (part A) | |||||
|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | |||||
| For the First Taxable Year Beginning After December 31, 2017, in Short-Tail Lines of Business | |||||
| Accident Year | Auto Physical Damage | Fidelity/Surety | Financial Guaranty/Mortgage Guaranty | International | Other* |
| 2018 | 98.2924 | 95.7528 | 95.5027 | 96.0825 | 96.9295 |
| 2017 | 96.9631 | 96.9631 | 96.9631 | 96.9631 | 96.9631 |
| Years before 2017 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| * For Accident and Health lines of business (other than disability income or credit disability insurance), the discount factor for taxable year 2018 is 98.4640 percent. |
| Table 1 (part B) | ||||||
|---|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | ||||||
| For the First Taxable Year Beginning After December 31, 2017, in Short-Tail Lines of Business | ||||||
| Accident Year | Reinsurance –Nonproportional Assumed Financial Lines | Reinsurance –Nonproportional Assumed Liability | Reinsurance –Nonproportional Assumed Property | Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary & Theft) | Warranty | Short-Tail Composite |
| 2018 | 95.3460 | 94.5342 | 96.0638 | 97.3657 | 98.0866 | 96.8171 |
| 2017 | 96.9631 | 96.9631 | 96.9631 | 96.9631 | 96.9631 | 96.9631 |
| Years before 2017 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Table 2 (part A) | ||||||
|---|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | ||||||
| For the First Taxable Year Beginning After December 31, 2017, in Long-Tail Lines of Business | ||||||
| Accident Year | Commercial Auto/Truck Liability/Medical | Medical Professional Liability –Claims-Made | Medical Professional Liability –Occurrence | Multiple Peril Lines | Other Liability –Claims-Made | Other Liability –Occurrence |
| 2018 | 93.7136 | 91.1847 | 86.1703 | 95.0382 | 90.3833 | 88.7841 |
| 2017 | 94.4581 | 92.2226 | 88.3371 | 93.3147 | 91.2289 | 89.6647 |
| 2016 | 95.0089 | 92.4524 | 89.9455 | 93.6251 | 91.7605 | 90.2415 |
| 2015 | 95.0495 | 92.7481 | 91.3552 | 92.8232 | 91.8038 | 90.4153 |
| 2014 | 94.9245 | 92.8961 | 92.3529 | 90.9251 | 91.6496 | 90.1639 |
| 2013 | 94.7625 | 92.9180 | 93.1329 | 91.1314 | 92.1818 | 90.2353 |
| 2012 | 95.0535 | 93.9081 | 93.9891 | 90.8234 | 92.6788 | 90.2570 |
| 2011 | 94.6859 | 94.8439 | 94.7064 | 90.5036 | 93.4801 | 91.5250 |
| 2010 | 96.1971 | 95.7805 | 95.8926 | 93.1447 | 94.6287 | 92.1970 |
| 2009 | 98.2598 | 97.6158 | 97.6580 | 94.5519 | 96.4911 | 94.1762 |
| Taxpayer Not Using the Composite Method | ||||||
| 2008 | 98.4640 | 98.4640 | 98.4640 | 95.9642 | 97.8837 | 95.6063 |
| 2007 | 98.4640 | 98.4640 | 98.4640 | 97.3555 | 98.4640 | 97.0517 |
| Years before 2007 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Taxpayer Using the Composite Method | ||||||
| Years before 2009 | 98.4640 | 98.4640 | 98.4640 | 96.7357 | 97.9777 | 96.5363 |
| Table 2 (part B) | |||||
|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | |||||
| For the First Taxable Year Beginning After December 31, 2017, in Long-Tail Lines of Business | |||||
| Accident Year | Private Passenger Auto Liability/Medical | Products Liability –Claims-Made | Products Liability –Occurrence | Workers’ Compensation | Long-Tail Composite |
| 2018 | 95.4241 | 85.1518 | 87.1543 | 87.4184 | 92.3564 |
| 2017 | 95.0203 | 85.6347 | 88.5453 | 85.8424 | 91.2748 |
| 2016 | 94.9784 | 87.5083 | 89.3276 | 84.6991 | 90.9788 |
| 2015 | 94.5984 | 82.9398 | 90.7045 | 83.1346 | 89.7633 |
| 2014 | 93.9009 | 84.2812 | 89.3185 | 82.5478 | 88.1393 |
| 2013 | 93.9524 | 85.6749 | 89.3669 | 81.9913 | 88.0168 |
| 2012 | 94.2025 | 87.1293 | 90.3357 | 82.3684 | 87.9945 |
| 2011 | 94.7658 | 88.4262 | 91.3398 | 83.2518 | 88.5587 |
| 2010 | 95.3902 | 89.7489 | 91.7494 | 83.8871 | 89.8408 |
| 2009 | 97.5924 | 91.0980 | 94.0873 | 85.8606 | 91.6956 |
| Taxpayer Not Using the Composite Method | |||||
| 2008 | 98.4640 | 92.4736 | 95.5247 | 87.1320 | 93.0752 |
| 2007 | 98.4640 | 93.8753 | 96.9877 | 88.4289 | 94.4760 |
| 2006 | 98.4640 | 95.3017 | 98.4640 | 89.7517 | 95.8902 |
| 2005 | 98.4640 | 96.7473 | 98.4640 | 91.1009 | 97.2894 |
| 2004 | 98.4640 | 98.1839 | 98.4640 | 92.4766 | 98.4640 |
| 2003 | 98.4640 | 98.4640 | 98.4640 | 93.8785 | 98.4640 |
| 2002 | 98.4640 | 98.4640 | 98.4640 | 95.3051 | 98.4640 |
| 2001 | 98.4640 | 98.4640 | 98.4640 | 96.7511 | 98.4640 |
| 2000 | 98.4640 | 98.4640 | 98.4640 | 98.1886 | 98.4640 |
| Years before 2000 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Taxpayer Using the Composite Method | |||||
| Years before 2009 | 98.4640 | 94.4219 | 96.4942 | 90.7644 | 94.8105 |
| Table 3 (part A) | |||||
|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | |||||
| For the Taxable Year Preceding the First Taxable Year Beginning After December 31, 2017, in Short-Tail Lines of Business | |||||
| Accident Year | Auto Physical Damage | Fidelity/Surety | Financial Guaranty/Mortgage Guaranty | International | Other* |
| 2017 | 98.2924 | 95.7528 | 95.5027 | 96.0825 | 96.9295 |
| 2016 | 96.9631 | 96.9631 | 96.9631 | 96.9631 | 96.9631 |
| Years before 2016 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| * For Accident and Health lines of business (other than disability income or credit disability insurance), the discount factor for taxable year 2017 is 98.4640 percent. |
| Table 3 (part B) | ||||||
|---|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | ||||||
| For the Taxable Year Preceding the First Taxable Year Beginning After December 31, 2017, in Short-Tail Lines of Business | ||||||
| Accident Year | Reinsurance – Nonproportional Assumed Financial Lines | Reinsurance – Nonproportional Assumed Liability | Reinsurance – Nonproportional Assumed Property | Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary & Theft) | Warranty | Short-Tail Composite |
| 2017 | 95.3460 | 94.5342 | 96.0638 | 97.3657 | 98.0866 | 96.8171 |
| 2016 | 96.9631 | 96.9631 | 96.9631 | 96.9631 | 96.9631 | 96.9631 |
| Years before 2016 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Table 4 (part A) | ||||||
|---|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | ||||||
| For the Taxable Year Preceding the First Taxable Year Beginning After December 31, 2017, in Long-Tail Lines of Business | ||||||
| Accident Year | Commercial Auto/Truck Liability/Medical | Medical Professional Liability –Claims-Made | Medical Professional Liability –Occurrence | Multiple Peril Lines | Other Liability - Claims-Made | Other Liability - Occurrence |
| 2017 | 93.7136 | 91.1847 | 86.1703 | 95.0382 | 90.3833 | 88.7841 |
| 2016 | 94.4581 | 92.2226 | 88.3371 | 93.3147 | 91.2289 | 89.6647 |
| 2015 | 95.0089 | 92.4524 | 89.9455 | 93.6251 | 91.7605 | 90.2415 |
| 2014 | 95.0495 | 92.7481 | 91.3552 | 92.8232 | 91.8038 | 90.4153 |
| 2013 | 94.9245 | 92.8961 | 92.3529 | 90.9251 | 91.6496 | 90.1639 |
| 2012 | 94.7625 | 92.9180 | 93.1329 | 91.1314 | 92.1818 | 90.2353 |
| 2011 | 95.0535 | 93.9081 | 93.9891 | 90.8234 | 92.6788 | 90.2570 |
| 2010 | 94.6859 | 94.8439 | 94.7064 | 90.5036 | 93.4801 | 91.5250 |
| 2009 | 96.1971 | 95.7805 | 95.8926 | 93.1447 | 94.6287 | 92.1970 |
| 2008 | 98.2598 | 97.6158 | 97.6580 | 94.5519 | 96.4911 | 94.1762 |
| Taxpayer Not Using the Composite Method | ||||||
| 2007 | 98.4640 | 98.4640 | 98.4640 | 95.9642 | 97.8837 | 95.6063 |
| 2006 | 98.4640 | 98.4640 | 98.4640 | 97.3555 | 98.4640 | 97.0517 |
| Years before 2006 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Taxpayer Using the Composite Method | ||||||
| Years before 2008 | 98.4640 | 98.4640 | 98.4640 | 96.7357 | 97.9777 | 96.5363 |
| Table 4 (part B) | |||||
|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | |||||
| For the Taxable Year Preceding the First Taxable Year Beginning After December 31, 2017, in Long-Tail Lines of Business | |||||
| Accident Year | Private Passenger Auto Liability/Medical | Products Liability –Claims-Made | Products Liability –Occurrence | Workers’ Compensation | Long-Tail Composite |
| 2017 | 95.4241 | 85.1518 | 87.1543 | 87.4184 | 92.3564 |
| 2016 | 95.0203 | 85.6347 | 88.5453 | 85.8424 | 91.2748 |
| 2015 | 94.9784 | 87.5083 | 89.3276 | 84.6991 | 90.9788 |
| 2014 | 94.5984 | 82.9398 | 90.7045 | 83.1346 | 89.7633 |
| 2013 | 93.9009 | 84.2812 | 89.3185 | 82.5478 | 88.1393 |
| 2012 | 93.9524 | 85.6749 | 89.3669 | 81.9913 | 88.0168 |
| 2011 | 94.2025 | 87.1293 | 90.3357 | 82.3684 | 87.9945 |
| 2010 | 94.7658 | 88.4262 | 91.3398 | 83.2518 | 88.5587 |
| 2009 | 95.3902 | 89.7489 | 91.7494 | 83.8871 | 89.8408 |
| 2008 | 97.5924 | 91.0980 | 94.0873 | 85.8606 | 91.6956 |
| Taxpayer Not Using the Composite Method | |||||
| 2007 | 98.4640 | 92.4736 | 95.5247 | 87.1320 | 93.0752 |
| 2006 | 98.4640 | 93.8753 | 96.9877 | 88.4289 | 94.4760 |
| 2005 | 98.4640 | 95.3017 | 98.4640 | 89.7517 | 95.8902 |
| 2004 | 98.4640 | 96.7473 | 98.4640 | 91.1009 | 97.2894 |
| 2003 | 98.4640 | 98.1839 | 98.4640 | 92.4766 | 98.4640 |
| 2002 | 98.4640 | 98.4640 | 98.4640 | 93.8785 | 98.4640 |
| 2001 | 98.4640 | 98.4640 | 98.4640 | 95.3051 | 98.4640 |
| 2000 | 98.4640 | 98.4640 | 98.4640 | 96.7511 | 98.4640 |
| 1999 | 98.4640 | 98.4640 | 98.4640 | 98.1886 | 98.4640 |
| Years before 1999 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Taxpayer Using the Composite Method | |||||
| Years before 2008 | 98.4640 | 94.4219 | 96.4942 | 90.7644 | 94.8105 |
Unless revised discount factors have been published, any taxpayer using discount factors prescribed herein to compute discounted unpaid losses under § 846 in the first taxable year beginning after December 31, 2017, must use the discount factors prescribed in Tables 5 and 6 in subsequent taxable years for purposes of determining the unpaid losses and expenses unpaid (as defined in § 832(b)(5) and (6)) attributable to accident year 2018, the unpaid losses (as defined in §§ 805(a)(1) and 807(c)(2)) attributable to accident year 2018, and salvage recoverable attributable to accident year 2018.
| Table 5 (part A) | |||||
|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | |||||
| For Losses Incurred in Accident Year 2018 in Short-Tail Lines of Business | |||||
| Taxable Year Beginning in | Auto Physical Damage | Fidelity/Surety | Financial Guaranty/Mortgage Guaranty | International | Other* |
| 2018 | 98.2924 | 95.7528 | 95.5027 | 96.0825 | 96.9295 |
| 2019 | 96.9631 | 96.9631 | 96.9631 | 96.9631 | 96.9631 |
| Taxpayer Not Using Composite Method | |||||
| Years after 2019 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Composite Discount Factors | |||||
| 2020 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Years after 2020 | Use composite discount factors published for the relevant accident year.** | ||||
| * For Accident and Health lines of business (other than disability income or credit disability insurance), the discount factor for taxable year 2018 is 98.4640 percent. For later years, the discount factor for losses incurred in 2018 is the discount factor published for Accident and Health lines of business for losses incurred in the accident year coinciding with the taxable year. | |||||
| **The relevant accident year is the accident year that is two years prior to the specified taxable year. | |||||
| Table 5 (part B) | ||||||
|---|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | ||||||
| For Losses Incurred in Accident Year 2018 in Short-Tail Lines of Business | ||||||
| Taxable Year Beginning in | Reinsurance – Nonproportional Assumed Financial Lines | Reinsurance – Nonproportional Assumed Liability | Reinsurance – Nonproportional Assumed Property | Special Property (Fire, Allied Lines, Inland Marine, Earthquake,Burglary & Theft) | Warranty | Short-Tail Composite |
| 2018 | 95.3460 | 94.5342 | 96.0638 | 97.3657 | 98.0866 | 96.8171 |
| 2019 | 96.9631 | 96.9631 | 96.9631 | 96.9631 | 96.9631 | 96.9631 |
| Taxpayer Not Using Composite Method | ||||||
| Years after 2019 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Composite Discount Factors | ||||||
| 2020 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Years after 2020 | Use composite discount factors published for the relevant accident year.** | |||||
| **The relevant accident year is the accident year that is two years prior to the specified taxable year. | ||||||
| Table 6 (part A) | ||||||
|---|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | ||||||
| For Losses Incurred in Accident Year 2018 in Long-Tail Lines of Business | ||||||
| Taxable Year Beginning in | Commercial Auto/Truck Liability/Medical | Medical Professional Liability – Claims-Made | Medical Professional Liability – Occurrence | Multiple Peril Lines | Other Liability – Claims-Made | Other Liability – Occurrence |
| 2018 | 93.7136 | 91.1847 | 86.1703 | 95.0382 | 90.3833 | 88.7841 |
| 2019 | 94.4581 | 92.2226 | 88.3371 | 93.3147 | 91.2289 | 89.6647 |
| 2020 | 95.0089 | 92.4524 | 89.9455 | 93.6251 | 91.7605 | 90.2415 |
| 2021 | 95.0495 | 92.7481 | 91.3552 | 92.8232 | 91.8038 | 90.4153 |
| 2022 | 94.9245 | 92.8961 | 92.3529 | 90.9251 | 91.6496 | 90.1639 |
| 2023 | 94.7625 | 92.9180 | 93.1329 | 91.1314 | 92.1818 | 90.2353 |
| 2024 | 95.0535 | 93.9081 | 93.9891 | 90.8234 | 92.6788 | 90.2570 |
| 2025 | 94.6859 | 94.8439 | 94.7064 | 90.5036 | 93.4801 | 91.5250 |
| 2026 | 96.1971 | 95.7805 | 95.8926 | 93.1447 | 94.6287 | 92.1970 |
| 2027 | 98.2598 | 97.6158 | 97.6580 | 94.5519 | 96.4911 | 94.1762 |
| Taxpayer Not Using Composite Method | ||||||
| 2028 | 98.4640 | 98.4640 | 98.4640 | 95.9642 | 97.8837 | 95.6063 |
| 2029 | 98.4640 | 98.4640 | 98.4640 | 97.3555 | 98.4640 | 97.0517 |
| Years after 2029 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Composite Discount Factors | ||||||
| 2028 | 98.4640 | 98.4640 | 98.4640 | 96.7357 | 97.9777 | 96.5363 |
| Years after 2028 | Use composite discount factors published for the relevant accident year.* | |||||
| *The relevant accident year is the accident year that is ten years prior to the specified taxable year. |
| Table 6 (part B) | |||||
|---|---|---|---|---|---|
| Factors for Discounting Unpaid Losses Under Section 846 (percent) | |||||
| For Losses Incurred in Accident Year 2018 in Long-Tail Lines of Business | |||||
| Taxable Year Beginning in | Private Passenger Auto Liability/Medical | Products Liability – Claims-Made | Products Liability – Occurrence | Workers’ Compensation | Long-Tail Composite |
| 2018 | 95.4241 | 85.1518 | 87.1543 | 87.4184 | 92.3564 |
| 2019 | 95.0203 | 85.6347 | 88.5453 | 85.8424 | 91.2748 |
| 2020 | 94.9784 | 87.5083 | 89.3276 | 84.6991 | 90.9788 |
| 2021 | 94.5984 | 82.9398 | 90.7045 | 83.1346 | 89.7633 |
| 2022 | 93.9009 | 84.2812 | 89.3185 | 82.5478 | 88.1393 |
| 2023 | 93.9524 | 85.6749 | 89.3669 | 81.9913 | 88.0168 |
| 2024 | 94.2025 | 87.1293 | 90.3357 | 82.3684 | 87.9945 |
| 2025 | 94.7658 | 88.4262 | 91.3398 | 83.2518 | 88.5587 |
| 2026 | 95.3902 | 89.7489 | 91.7494 | 83.8871 | 89.8408 |
| 2027 | 97.5924 | 91.0980 | 94.0873 | 85.8606 | 91.6956 |
| Taxpayer Not Using Composite Method | |||||
| 2028 | 98.4640 | 92.4736 | 95.5247 | 87.1320 | 93.0752 |
| 2029 | 98.4640 | 93.8753 | 96.9877 | 88.4289 | 94.4760 |
| 2030 | 98.4640 | 95.3017 | 98.4640 | 89.7517 | 95.8902 |
| 2031 | 98.4640 | 96.7473 | 98.4640 | 91.1009 | 97.2894 |
| 2032 | 98.4640 | 98.1839 | 98.4640 | 92.4766 | 98.4640 |
| 2033 | 98.4640 | 98.4640 | 98.4640 | 93.8785 | 98.4640 |
| 2034 | 98.4640 | 98.4640 | 98.4640 | 95.3051 | 98.4640 |
| 2035 | 98.4640 | 98.4640 | 98.4640 | 96.7511 | 98.4640 |
| 2036 | 98.4640 | 98.4640 | 98.4640 | 98.1886 | 98.4640 |
| Years after 2036 | 98.4640 | 98.4640 | 98.4640 | 98.4640 | 98.4640 |
| Composite Discount Factors | |||||
| 2028 | 98.4640 | 94.4219 | 96.4942 | 90.7644 | 94.8105 |
| Years after 2028 | Use composite discount factors published for the relevant accident year.* | ||||
| *The relevant accident year is the accident year that is ten years prior to the specified taxable year. | |||||
.01 If revised unpaid loss discount factors for the 2018 accident year are published after final regulations are published in the Federal Register, the Treasury Department and IRS propose to issue guidance providing that taxpayers must use, for taxable years ending on or after the date the final regulations are published, the revised discount factors for purposes of determining, for all accident years ending with or before calendar year 2018, the unpaid losses and expenses unpaid (as defined in § 832(b)(5) and (6)) and the unpaid losses (as defined in §§ 805(a)(1) and 807(c)(2)).
.02 The Treasury Department and IRS propose that such guidance would instruct any taxpayer that used the discount factors prescribed in this revenue procedure in a taxable year beginning after December 31, 2017, and that does not amend the return filed for such taxable year to use the revised discount factors, to take into account the difference between the amount of the TCJA adjustment determined using the unpaid loss discount factors prescribed in this revenue procedure and the amount of the TCJA adjustment determined using the revised unpaid loss discount factors. The difference would be taken into account ratably over the taxable years remaining in the TCJA period of adjustment, beginning with the first taxable year in which the taxpayer uses the revised discount factors.
.03 Such guidance would also instruct any taxpayer that used the discount factors prescribed in this revenue procedure in a taxable year beginning after December 31, 2017, and that does not amend the return filed for such taxable year to use the revised discount factors, to compute, with respect to the last taxable year in which the discount factors prescribed in this revenue procedure were used, the adjustment to the amount of the discounted unpaid losses under § 846 at the end of that taxable year and the amount of discounted estimated salvage recoverable under § 832 at the end of that taxable year due to computing those amounts using the revised discount factors rather than the discount factors prescribed in this revenue procedure. The adjustment would be computed as follows: (1) from discounted unpaid losses computed using the discount factors prescribed in this revenue procedure subtract discounted unpaid losses computed using the revised discount factors, and (2) to the result so obtained, add estimated salvage computed using the revised discount factors and subtract estimated salvage computed using the discount factors prescribed in this revenue procedure. A positive adjustment would be taken into account as an addition to gross income, and a negative adjustment would be taken into account as a reduction to gross income. The adjustment would be taken into account either (1) in the first taxable year in which the taxpayer uses the revised discount factors, or (2) ratably over the taxable years remaining in the TCJA period of adjustment, beginning with the first taxable year in which the taxpayer uses the revised discount factors. For the first taxable year in which a taxpayer uses the revised discount factors, the taxpayer would determine each of the following as if the revised discount factors had applied in the preceding taxable year: (1) the unpaid losses and expenses unpaid (as defined in § 832(b)(5) and (6)) at the end of the preceding taxable year, (2) the unpaid losses (as defined in §§ 805(a)(1) and 807(c)(2)) at the end of the preceding taxable year, and (3) the estimated salvage recoverable under § 832 at the end of the preceding taxable year.
The Treasury Department and IRS request comments on the proposed guidance described in section 6 of this revenue procedure. Comments should be submitted in writing on or before February 6, 2019, and should contain a reference to this Rev. Proc. 2019–06. All comments will be available for public inspection and copying. Comments may be submitted in one of three ways:
(1) By mail to Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2019–06), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
(2) Electronically to Notice.Comments@irscounsel.treas.gov. Please include “Rev. Proc. 2019–06” in both the body of the comment and on the subject line of any electronic communications. Alternatively, taxpayers may submit comments electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS–2018–0043 in the search field on the regulations.gov homepage to find this notice and submit comments).
(3) By hand–delivery Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (Rev. Proc. 2019–06), Courier’s Desk, Internal Revenue Service, 1111 Constitution Ave., NW, Washington, DC 20224.
The principal author of this revenue procedure is Kathryn M. Sneade of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure contact Ms. Sneade at (202) 317-6995 (not a toll free number).
[3] The published yield curve spot rates can be found at https://home.treasury.gov/data/treasury-coupon-issues-and-corporate-bond-yield-curve/corporate-bond-yield-curve.
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