1120-PC Instructions for Form 1120-PC

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2017

Department of the Treasury
Internal Revenue Service

Instructions for
Form 1120-PC

DRAFT AS OF
March 23, 2018

U.S. Property and Casualty Insurance Company Income Tax Return

Future Developments

Section references are to the Internal Revenue
Code unless otherwise noted.

Contents
What's New . . . . . . . . . . . . . .
Reminders . . . . . . . . . . . . . . .
Photographs of Missing Children
The Taxpayer Advocate Service .
How To Get Forms and
Publications . . . . . . . . . . .
General Instructions . . . . . . . . .
Purpose of Form . . . . . . . .
Who Must File . . . . . . . . .
Where To File . . . . . . . . . .
Electronic Filing . . . . . . . .
When To File . . . . . . . . . .
Who Must Sign . . . . . . . . .
Paid Preparer Authorization .
Statements . . . . . . . . . . .
Assembling the Return . . . .
Tax Payments . . . . . . . . .
Estimated Tax Payments . .
Interest and Penalties . . . . .
Accounting Methods . . . . .
Accounting Period . . . . . . .
Rounding Off to Whole
Dollars . . . . . . . . . . . .
Recordkeeping . . . . . . . . .
Other Forms and
Statements That May Be
Required . . . . . . . . . . .
Specific Instructions . . . . . . . . .
Period Covered . . . . . . . .
Name and Address . . . . . .
Identifying Information . . . .
Employer Identification
Number (EIN) . . . . . . . .
Section 953 Elections . . . . .
Final Return, Name Change,
Address Change, or
Amended Return . . . . . .
Taxable Income . . . . . . . .
Tax Computation and
Payments . . . . . . . . . .
Schedule A . . . . . . . . . . .
Schedule B, Part I . . . . . . .
Schedule B, Part II . . . . . . .
Schedule C . . . . . . . . . . .
Schedule E . . . . . . . . . . .
Schedule F . . . . . . . . . . .
Schedule G . . . . . . . . . . .
Schedule H . . . . . . . . . . .
Schedule I . . . . . . . . . . . .
Schedule L . . . . . . . . . . .
Schedule M-1 . . . . . . . . . .
Index . . . . . . . . . . . . . . . . . .
Mar 22, 2018

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For the latest information about
developments related to Form 1120-PC
and its instructions, such as legislation
enacted after they were published, go to
IRS.gov/Form1120PC.

What's New

Tax rates for fiscal year filers. P.L.
115-97 changed the corporation tax rates
under section 11 for tax years beginning
after 2017. Additionally, section 15
provides rules for using the tax rates
effective before and after a change to
calculate the tax if the effective date for
the change occurs during the tax year.
See the discussion under “Schedule J.
Tax Computation and Payment” in the
Instructions for Form 1120.

Disaster tax relief. Disaster tax relief
was enacted for those impacted by
California wildfires, Tropical Storm
Harvey, Hurricane Harvey, Irma, or Maria.
See Pub. 976, Disaster Relief, for details
and updates.
Form 8975. Certain United States
persons that are the ultimate parent entity
of a United States multinational enterprise
group with annual revenue for the
preceding reporting period of $850 million
or more are required to file Form 8975.
Form 8975 and its Schedules A (Form
8975) must be filed with the income tax
return of the ultimate parent entity of a
U.S. multinational enterprise group for the
tax year in or within which the reporting
period covered by Form 8975 ends. The
first required reporting period for an
ultimate parent entity is the 12-month
reporting period that begins on or after the
first day of a tax year of the ultimate parent
entity that begins on or after June 30,
2016. For more information, see Form
8975, Schedule A (Form 8975) and the
Instructions for Form 8975 and
Schedule A (Form 8975).
Deduction for foreign-source portion
of dividends received by domestic corporations from specified 10%-owned
foreign corporations. Certain domestic
corporations that are U.S. shareholders of
specified 10%-owned foreign corporations
are allowed a 100% deduction
(“participation exemption DRD”) for the
foreign-source portion of dividends
Cat. No. 64537I

received from the foreign corporation. This
applies to distributions after December 31,
2017. See new section 245A.
Treatment of deferred foreign income
upon transition to participation exemption system of taxation. U.S.
shareholders of specified foreign
corporations (as defined under section
965(e), as amended by P.L. 115-97) may
have an inclusion under section 965
based on the post-1986 deferred foreign
income of the specified foreign
corporations determined as of November
2, 2017 or December 31, 2017. The U.S
shareholders may elect to pay the liability
under section 965 on the post-1986
deferred foreign income in eight
installments. See section 965, as
amended.
Increase in penalty for failure to file.
For tax years beginning in 2017, the
minimum penalty for failure to file a return
that is over 60 days late has increased to
the smaller of the tax due or $210. See
Late filing of return, later.
Foreign-owned domestic disregarded
entities reporting. A foreign-owned
domestic disregarded entity may be
required to file Form 5472 even if
otherwise exempt from filing a return. See
Foreign-owned domestic disregarded
entities in the instructions for Who Must
File, later.

Reminders
Patient-centered outcomes research
institute fee. The Patient-Centered
Outcomes Research Institute fee is
imposed on issuers of specified health
insurance policies (section 4375) and plan
sponsors of applicable self-insured health
plans (section 4376) for policy and plan
years ending on or after October 1, 2012.
See Form 720 and its instructions for
more information.

Photographs of
Missing Children

The Internal Revenue Service is a proud
partner with the National Center for
Missing & Exploited Children® (NCMEC).
Photographs of missing children selected
by the Center may appear in instructions
on pages that would otherwise be blank.
You can help bring these children home

by looking at the photographs and calling
1-800-THE-LOST (1-800-843-5678) if you
recognize a child.

The Taxpayer Advocate
Service

The Taxpayer Advocate Service (TAS) is
an independent organization within the
IRS that helps taxpayers and protects
taxpayer rights. TAS's job is to ensure that
every taxpayer is treated fairly and knows
and understands their rights under the
Taxpayer Bill of Rights.

Where To File
File the corporation's return at the applicable IRS address listed below.
If the corporation's principal business, office,
or agency is located in:

Use the following addresses:

The United States

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0012

A foreign country or U.S. possession

Internal Revenue Service
P.O. Box 409101
Ogden, UT 84409

DRAFT AS OF
March 23, 2018

As a taxpayer, the corporation has
rights that the IRS must abide by in its
dealings with the corporation. TAS can
help the corporation if:
A problem is causing financial difficulty
for the business.
The business is facing an immediate
threat of adverse action.
The corporation has tried repeatedly to
contact the IRS but no one has
responded, or the IRS hasn't responded
by the date promised.
The TAS tax toolkit at
TaxpayerAdvocate.IRS.gov can help the
corporation understand these rights.
TAS has offices in every state, the
District of Columbia, and Puerto Rico.
Local advocates' numbers are in their
local directories and at
TaxpayerAdvocate.IRS.gov/Contact-Us.
The corporation can also call TAS at
1-877-777-4778.

TAS also works to resolve large-scale
or systemic problems that affect many
taxpayers. If the corporation knows of one
of these broad issues, please report it to
TAS through the Systemic Advocacy
Management System at IRS.gov/SAMS.
For more information, go to
IRS.gov/Advocate.

How To Get Forms
and Publications
Internet. You can access the IRS website
24 hours a day, 7 days a week, at IRS.gov
to:
Download forms, instructions, and
publications;
Order IRS products online;
Research your tax questions online;
Search publications online by topic or
keyword;
View Internal Revenue Bulletins (IRBs)
published in recent years; and
Sign up to receive local and national tax
news by email.
Tax forms and publications. The
corporation can download or print all of the
forms and publications it may need on
IRS.gov/FormsPubs. Otherwise, the
corporation can go to IRS.gov/
OrderForms to place an order and have

forms mailed to it. The corporation should
receive its order within 10 business days.

General Instructions
Purpose of Form

Use Form 1120-PC, U.S. Property and
Casualty Insurance Company Income Tax
Return, to report the income, gains,
losses, deductions, credits, and to figure
the income tax liability of insurance
companies, other than life insurance
companies.

Who Must File

Every domestic nonlife insurance
company and every foreign corporation
that would qualify as a nonlife insurance
company subject to taxation under section
831, if it were a U.S. corporation, must file
Form 1120-PC. This includes
organizations described in section 501(m)
(1) that provide commercial-type
insurance and organizations described in
section 833.
Exceptions. A nonlife insurance
company that is:
Exempt under section 501(c)(15)
should file Form 990, Return of
Organization Exempt from Income Tax.
Subject to taxation under section 831,
and disposes of its insurance business
and reserves, or otherwise ceases to be
taxed under section 831, but continues its
corporate existence while winding up and
liquidating its affairs, should file Form
1120, U.S. Corporation Income Tax
Return.
Life insurance companies. Life
insurance companies should file Form
1120-L, U.S. Life Insurance Company
Income Tax Return.
Foreign-owned domestic disregarded
entities. For tax years beginning after
2016 and ending after December 12,
2017, if a foreign person, including a
foreign corporation, wholly owns a
domestic disregarded entity (DE), the
domestic DE is treated as a domestic
corporation separate from its owner (the
-2-

foreign corporation) for purposes of the
reporting requirements under section
6038A that apply to 25% foreign-owned
domestic corporations. These rules apply
to a domestic DE owned by a foreign
insurance company that makes an
election under section 953(c)(3)(C) but do
not apply to a domestic DE owned by a
foreign insurance company that makes an
election under section 953(d) (for
information on these elections, see the
instructions for Item D). If a foreign
insurance company electing under section
953(c)(3)(C) wholly owns a domestic DE,
the DE may be required to file Form 5472.
For additional information and
coordination with Form 5472 filing by the
domestic DE, see the Instructions for
Form 5472.

Electronic Filing

See IRS.gov/Filing for the latest
information. Also, see IRS.gov/MeF and
click on the link for “Modernized e-File
Forms” for information on which forms the
corporation can or must e-file.

When To File

Generally, a corporation must file its
income tax return by the 15th day of the
4th month after the end of its tax year. A
new corporation filing a short-period return
must generally file by the 15th day of the
4th month after the short period ends. A
corporation that has dissolved must
generally file by the 15th day of the 4th
month after the date it dissolved.
However, a corporation with a fiscal tax
year ending June 30 must file by the 15th
day of the 3rd month after the end of its
tax year. A corporation with a short tax
year ending anytime in June will be
treated as if the short year ended on June
30, and must file by the 15th day of the 3rd
month after the end of its tax year.
If the due date falls on a Saturday,
Sunday, or legal holiday, the corporation
can file on the next business day.

Private Delivery Services

Corporations can use certain private
delivery services (PDS) designated by the
Instructions for Form 1120-PC (2017)

IRS to meet the “timely mailing as timely
filing” rule for tax returns. Go to IRS.gov/
PDS for the current list of designated
services.
The PDS can tell you how to get written
proof of the mailing date.
For the IRS mailing address to use if
you’re using PDS, go to IRS.gov/
PDSstreetAddress.

If the “Yes” box is checked, the
corporation is authorizing the IRS to call
the paid preparer to answer any questions
that may arise during the processing of its
return. The corporation is also authorizing
the paid preparer to:
Give the IRS any information that is
missing from the return,
Call the IRS for information about the
processing of the return or the status of
any related refund or payment(s), and
Respond to certain IRS notices about
math errors, offsets, and return
preparation.

Assembling the Return

To ensure that the corporation's tax return
is correctly processed, attach all
schedules and other forms after page 8 of
Form 1120-PC in the following order.
1. Schedule N (Form 1120), Foreign
Operations of U.S. Corporations.
2. Schedule D (Form 1120), Capital
Gains and Losses.
3. Schedule O (Form 1120), Consent
Plan and Apportionment Schedule for a
Controlled Group.
4. Form 4626, Alternative Minimum
Tax—Corporations.
5. Form 8302, Electronic Deposit of
Tax Refund of $1 Million or More.
6. Form 4136, Credit for Federal Tax
Paid on Fuels.
7. Form 8941, Credit for Small
Employer Health Insurance Premiums.
8. Form 851, Affiliations Schedule.
9. Additional schedules in
alphabetical order.
10. Additional forms in numerical order.
11. Supporting statements and
attachments.

DRAFT AS OF
March 23, 2018

Private delivery services cannot
deliver items to P.O. boxes. You
CAUTION must use the U.S. Postal Service
to mail any item to an IRS P.O. box
address.

!

preparer who signed it, check the “Yes”
box in the signature area of the return.
This authorization applies only to the
individual whose signature appears in the
“Paid Preparer Use Only” section of the
return. It does not apply to the firm, if any,
shown in that section.

Extension of Time To File

File Form 7004, Application for Automatic
Extension of Time to File Certain Business
Income Tax, Information, and Other
Returns, to request an extension of time to
file. Generally, the corporation must file
Form 7004 by the regular due date of the
return. See the Instructions for Form 7004.

Who Must Sign

The return must be signed and dated by:
The president, vice-president,
treasurer, assistant treasurer, chief
accounting officer; or
Any other corporate officer (such as tax
officer) authorized to sign.
If a return is filed on behalf of a
corporation by a receiver, trustee, or
assignee, the fiduciary must sign the
return, instead of the corporate officer.
Returns and forms signed by a receiver or
trustee in bankruptcy on behalf of a
corporation must be accompanied by a
copy of the order or instructions of the
court authorizing signing of the return or
form.
If an employee of the corporation
completes Form 1120-PC, the paid
preparer space should remain blank.
Anyone who prepares Form 1120-PC but
does not charge the corporation should
not complete that section. Generally,
anyone who is paid to prepare the return
must sign it and fill in the “Paid Preparer
Use Only” area.
The paid preparer must complete the
required preparer information and:
Sign the return in the space provided
for the preparer's signature.
Give a copy of the return to the
taxpayer.
Note. A paid preparer may sign original or
amended returns by rubber stamp,
mechanical device, or computer software
program.

Paid Preparer
Authorization

The corporation is not authorizing the
paid preparer to receive any refund check,
bind the corporation to anything (including
any additional tax liability), or otherwise
represent the corporation before the IRS.
The authorization will automatically end
no later than the due date (excluding
extensions) for filing the corporation's
2018 tax return. If the corporation wants to
expand the paid preparer's authorization
or revoke the authorization before it ends,
see Pub. 947, Practice Before the IRS and
Power of Attorney.

Statements
NAIC annual statement. Regulations
section 1.6012-2(c) requires that the NAIC
annual statement be filed with Form
1120-PC. A foreign insurance company
subject to tax under section 831 that is not
required to file an annual statement must
file a copy of the pro forma annual
statement. A penalty for the late filing of a
return may be imposed for not including
the annual statement when the return is
filed. However, see Electronic filing, next.
Electronic filing. If the domestic or
foreign nonlife insurance company files
Form 1120-PC electronically, do not
attach the annual statement or pro forma
annual statement to the electronically filed
return. However, you must provide a copy
of the annual statement or pro forma
annual statement to the Internal Revenue
Service if requested and retain it with your
other tax records for the period required
by the regulations.
Reconciliation. Corporations that do
not file a Schedule M-3 (Form 1120-PC)
with the Form 1120-PC must attach a
statement that reconciles the NAIC Annual
Statement to the Form 1120-PC.

If the corporation wants to allow the IRS to
discuss its 2017 tax return with the paid
Instructions for Form 1120-PC (2017)

-3-

Complete every applicable entry space
on Form 1120-PC. Do not enter “See
Attached” or “Available Upon Request”
instead of completing the entry spaces. If
more space is needed on the forms or
schedules, attach separate sheets using
the same size and format as the printed
forms. If there are supporting statements
and attachments, arrange them in the
same order as the schedules or forms
they support and attach them last. Show
the totals on the printed forms. Enter the
corporation's name and EIN on each
supporting statement or attachment.

Tax Payments

Generally, the corporation must pay any
tax due in full no later than the due date for
filing its tax return (not including
extensions). See the instructions for
line 16. If the due date falls on a Saturday,
Sunday, or legal holiday, the payment is
due on the next day that isn't a Saturday,
Sunday, or legal holiday.

Electronic Deposit
Requirement

Corporations must use electronic funds
transfer to make all federal tax deposits
(such as deposits of employment, excise,
and corporate income tax). Generally,
electronic funds transfers are made using
the Electronic Federal Tax Payment
System (EFTPS).

If the corporation does not want to use
the EFTPS, it can arrange for its tax
professional, financial institution, payroll
service, or other trusted third party to

make deposits on its behalf. Also, it can
arrange for its financial institution to
submit a same-day payment (discussed
later) on its behalf. EFTPS is a free service
provided by the Department of the
Treasury. Services provided by a tax
professional, financial institution, payroll
service, or other third party may have a
fee.

Estimated tax penalty. A corporation
that does not make estimated tax
payments when due may be subject to an
underpayment penalty for the period of
underpayment. Generally, a corporation is
subject to the penalty if its tax liability is
$500 or more and it did not timely pay at
least the smaller of:
Its tax liability for the current year, or
Its prior year tax.
See section 6655 for details and
exceptions, including special rules for
large corporations.
Use Form 2220, Underpayment of
Estimated Tax by Corporations, to see if
the corporation owes a penalty and to
figure the amount of the penalty. If Form
2220 is completed, enter the penalty on
line 15. See the instructions for line 15.

taxes that must be collected or withheld
are not collected or withheld, or these
taxes are not paid. These taxes are
generally reported on:
Form 720, Quarterly Federal Excise
Tax Return;
Form 941, Employer's QUARTERLY
Federal Tax Return;
Form 944, Employer's ANNUAL
Federal Tax Return; or
Form 945, Annual Return of Withheld
Federal Income Tax.
The trust fund recovery penalty may be
imposed on all persons who are
determined by the IRS to be responsible
for collecting, accounting for, or paying
over these taxes, and who acted willfully in
not doing so. The penalty is equal to the
full amount of the unpaid trust fund tax.
See the Instructions for Form 720 or Pub.
15 (Circular E), Employer's Tax Guide, for
details, including the definition of
responsible persons.

DRAFT AS OF
March 23, 2018

To get more information about EFTPS
or to enroll in EFTPS, visit www.eftps.gov
or call 1-800-555-4477 (TTY/TDD
1-800-733-4829).
Depositing on time. To make your
EFTPS deposits on time, the corporation
must submit the transaction by 8 p.m.
Eastern time the day before the date the
deposit is due. If the corporation uses a
third party to make deposits on its behalf,
they may have different cutoff times.

Same-day wire payment option. If the
corporation fails to submit a deposit
transaction on EFTPS by 8 p.m. Eastern
time the day before the date a deposit is
due, it can still make the deposit on time
by using the Federal Tax Collection
Service (FTCS). Before using the
same-day wire payment method, the
corporation will need to make
arrangements with its financial institution
ahead of time regarding availability,
deadlines, and costs. Financial institutions
may charge a fee for payments made this
way. To learn more about making a
same-day wire payment, go to IRS.gov/
SameDayWire.

Estimated Tax Payments

Generally, the following rules apply to the
corporation's payments of estimated tax.
The corporation must make installment
payments of estimated tax if it expects its
total tax for the year (less applicable
credits) to be $500 or more.
The installments are due by the 15th
day of the 4th, 6th, 9th, and 12th months
of the tax year. If any date falls on a
Saturday, Sunday, or legal holiday, the
installment is due on the next regular
business day.
The corporation must use electronic
funds transfer to make installment
payments of estimated tax.
Use Form 1120-W, Estimated Tax for
Corporations, as a worksheet to compute
estimated tax. See the Instructions for
Form 1120-W.
Penalties may apply if the corporation
does not make required estimated tax
payment deposits. See Estimated tax
penalty below.
If the corporation overpaid estimated
tax, it may be able to get a quick refund by
filing Form 4466, Corporation Application
for Quick Refund of Overpayment of
Estimated Tax.
See the instructions for lines 14c and
14e, Form 1120-PC, later.

!

CAUTION

tax.

Foreign insurance companies,
see Notice 90-13, 1990-1 C.B.
321, before computing estimated

Interest and Penalties
If the corporation receives a notice
about penalties after it files its
CAUTION return, send the IRS an
explanation and we will determine if the
corporation meets reasonable cause
criteria. Do not attach an explanation
when the corporation's return is filed.

!

Interest. Interest is charged on taxes
paid late even if an extension of time to file
is granted. Interest is also charged on
penalties imposed for failure to file,
negligence, fraud, substantial valuation
misstatements, substantial
understatements of tax, and reportable
transaction understatements from the due
date (including extensions) to the date of
payment. The interest charge is figured at
a rate determined under section 6621.
Late filing of return. A corporation that
does not file its tax return by the due date,
including extensions, may be penalized
5% of the unpaid tax for each month or
part of a month the return is late, up to a
maximum of 25% of the unpaid tax. The
minimum penalty for a return that is over
60 days late is the smaller of the tax due
or $210 (adjusted for inflation). The
penalty will not be imposed if the
corporation can show that the failure to file
on time was due to reasonable cause. See
Caution, earlier.
Late payment of tax. A corporation that
does not pay the tax when due generally
may be penalized 1 2 of 1% of the unpaid
tax for each month or part of a month the
tax is not paid, up to a maximum of 25% of
the unpaid tax. See Caution, earlier.
Trust fund recovery penalty. This
penalty may apply if certain excise,
income, social security, and Medicare
-4-

Other penalties. Other penalties can be
imposed for negligence, substantial
understatement of tax, reportable
transaction understatements, and fraud.
See sections 6662, 6662A, and 6663.

Accounting Methods

Figure taxable income using the method of
accounting regularly used in keeping the
corporation's books and records. In all
cases, the method used must clearly show
taxable income. Permissible methods
include cash, accrual, or any other method
authorized by the Internal Revenue Code.
The gross amounts of underwriting and
investment income should be computed
on the basis of the Statement of Income of
the NAIC annual statement to the extent
not inconsistent with the Internal Revenue
Code and its Regulations. In all cases, the
method used must clearly show taxable
income.
Change in accounting method.
Generally, the corporation must get IRS
consent to change either an overall
method of accounting or the accounting
treatment of any material item. To do so,
the corporation generally must file Form
3115, Application for Change in
Accounting Method. See the Instructions
for Form 3115 for more information and
exceptions, including filing exceptions for
qualified small taxpayers and filing
exceptions for certain first-year tangible
property changes for small business
taxpayers. Also, see Pub. 538.
Safe harbor method of accounting for
premium acquisition expenses.
Insurance companies subject to tax under
section 831 are provided with a safe
harbor method of accounting for premium
acquisition expenses. Form 3115 must be
filed in order to change to the safe harbor
Instructions for Form 1120-PC (2017)

method. For more information, see the
Instructions for Form 3115.
Certain changes in method of accounting for organizations to which section
833 applies. Blue Cross or Blue Shield
organizations under section 833(c)(2), or
organizations described in section 833(c)
(3), can obtain automatic consent to
change the method of accounting for
unearned premiums resulting from either a
failure to meet the medical loss ratio
(MLR) requirements of section 833(c)(5),
or meeting the MLR requirements after
failing to do so in a prior year. Form 3115
must be filed in order to make this change
in accounting method. See the
Instructions for Form 3115.
See Rev. Proc. 2017-30.

Other Forms and
Statements That May Be
Required
Reportable transaction disclosure
statement. Participants in any reportable
transaction must file Form 8886,
Reportable Transaction Disclosure
Statement. See the Instructions for Form
8886.

Election to reduce basis under section
362(e)(2)(C). If property is transferred to
a corporation subject to section 362(e)(2),
the transferor and the acquiring
corporation may elect, under section
362(e)(2)(C), to reduce the transferor's
basis in the stock received instead of
reducing the acquiring corporation's basis
in the property transferred. Once made,
the election is irrevocable. For more
information, see section 362(e)(2) and
Regulations section 1.362-4. If an election
is made, a statement must be filed in
accordance with Regulations section
1.362–4(d)(3).

DRAFT AS OF
March 23, 2018

Accounting Period

An insurance company must figure its
taxable income on the basis of a tax year.
A tax year is the annual accounting period
an insurance company uses to keep its
records and report its income and
expenses.
As a general rule under section 843,
the tax year for every insurance company
is the calendar year. However, if an
insurance company joins in the filing of a
consolidated return, it may adopt the tax
year of the common parent corporation
even if that year is not a calendar year.

Rounding Off to Whole
Dollars

The corporation can round off cents to
whole dollars on its return and schedules.
If the corporation does round to whole
dollars, it must round all amounts. To
round, drop amounts under 50 cents and
increase amounts from 50 to 99 cents to
the next dollar. For example, $1.39
becomes $1 and $2.50 becomes $3.
If two or more amounts must be added
to figure the amount to enter on a line,
include cents when adding the amounts
and round off only the total.

Recordkeeping

Keep the corporation's records for as long
as they may be needed for the
administration of any provision of the
Internal Revenue Code. Usually, records
that support an item of income, deduction,
or credit on the return must be kept for 3
years from the date the return is due or
filed, whichever is later. Keep records that
verify the corporation's basis in property
for as long as they are needed to figure
the basis of the original or replacement
property.
The corporation should keep copies of
all filed returns. They help in preparing
future and amended returns and in the
calculation of earnings and profits.
Instructions for Form 1120-PC (2017)

Reportable transactions by material
advisors. Material advisors to any
reportable transaction must file Form
8918, Material Advisor Disclosure
Statement. See the Instructions for Form
8918.

Transfers to a corporation controlled
by the transferor. Every significant
transferor (as defined in Regulations
section 1.351-3(d)) that receives stock of
a corporation in exchange for property in a
nonrecognition event must include the
statement required by Regulations section
1.351-3(a) on or with the transferor's tax
return for the tax year of the exchange.
The transferee corporation must include
the statement required by Regulations
section 1.351-3(b) on or with its return for
the tax year of the exchange, unless all the
required information is included in any
statement(s) provided by a significant
transferor that is attached to the same
return for the same section 351 exchange.
If the transferor or transferee corporation
is a controlled foreign corporation, each
U.S. shareholder (within the meaning of
section 951(b)) must include the required
statement on or with its return.
Distributions under section 355. Every
corporation that makes a distribution of
stock or securities of a controlled
corporation, as described in section 355
(or so much of section 356 as it relates to
section 355), must include the statement
required by Regulations section
1.355-5(a) on or with its return for the year
of the distribution. A significant distributee
(as defined in Regulations section
1.355-5(c)) that receives stock or
securities of a controlled corporation must
include the statement required by
Regulations section 1.355-5(b) on or with
its return for the year of receipt. If the
distributing or distributee corporation is a
controlled foreign corporation, each U.S.
shareholder (within the meaning of section
951(b)) must include the statement on or
with its return.
Dual consolidated losses. If a domestic
corporation incurs a dual consolidated
loss (as defined in Regulations section
1.1503-2(c)(5)), the corporation (or
consolidated group) may need to attach
an elective relief agreement and/or an
annual certification as provided in
Regulations section 1.1503-2(g)(2).

-5-

Annual information statement for elections under section 108(i). If the
corporation made an election in 2009 or
2010 to defer income from cancellation of
debt (COD) in connection with the
reacquisition of an applicable debt
instrument, the corporation must attach a
statement to its return beginning with the
tax year following the tax year for which
the corporation made the election, and
ending the first tax year all income
deferred has been included in income. In
addition, the corporation must annually
include a copy of the election statement it
filed to make the election to defer the
income. For more information regarding
the annual information statement, see
Rev. Proc. 2009-37, 2009-36 I.R.B. 309.
For additional information on reporting
the deferred COD income, see the
instructions for Line 13. Other Income,
later.
Other forms and statements. See Pub.
542, Corporations, for a list of other forms
and statements a corporation may need to
file in addition to the forms and statements
discussed throughout these instructions.

Specific Instructions
Period Covered

Generally, file the 2017 return for calendar
year 2017. However, if an insurance
company joins in the filing of a
consolidated return, it may adopt the tax
year of the common parent corporation
even if that year is not a calendar year. For
a fiscal or short tax year return, fill in the
tax year space at the top of the form.

Name and Address

Enter the corporation's true name (as set
forth in the charter or other legal document
creating it), address, and EIN on the
appropriate lines. Enter the address of the
corporation's principal office or place of
business. Include the suite, room, or other
unit number after the street address. If the
post office does not deliver mail to the
street address and the corporation has a
P.O. box, show the box number instead.

Note. Do not use the address of the
registered agent for the state in which the
corporation is incorporated. For example,
if a business is incorporated in Delaware
or Nevada and the corporation's principal
office is located in Little Rock, Arkansas,
the corporation should enter the Little
Rock address.
If the corporation has a foreign
address, include the city or town, state or
province, country, and foreign postal
code. Do not abbreviate the country
name. Follow the country's practice for
entering the name of the state or province
and postal code.

5. A reconciliation of retained
earnings.

consolidated return), for all life members
of the consolidated group.

Enter on Form 1120-PC the totals for
each item of income, gain, loss, expense,
or deduction, net of eliminating entries for
intercompany transactions between
corporations within the consolidated
group. Attach consolidated balance
sheets and a reconciliation of
consolidated retained earnings.

Schedule M-3 (Form 1120-PC)

A nonlife insurance company with total
assets (non-consolidated or consolidated
for all companies included within a tax
consolidation group) of $10 million or
more on the last day of the tax year must
file Schedule M-3 (Form 1120-PC), Net
Income (Loss) Reconciliation for U.S.
Property and Casualty Insurance
Companies With Total Assets of $10
Million or More, instead of Schedule M-1.
A corporation filing Form 1120-PC that is
not required to file Schedule M-3 may
voluntarily file Schedule M-3 instead of
Schedule M-1.

DRAFT AS OF
March 23, 2018

If the corporation receives its mail in
care of a third party (such as an
accountant or an attorney), enter on the
street address line “C/O” followed by the
third party's name and street address or
P.O. box.

Item A. Identifying
Information
Consolidated Return

If an affiliated group of corporations
includes one or more domestic life
insurance companies taxed under section
801, the common parent may elect to treat
those companies as includible
corporations. The life insurance
companies must have been members of
the group for the 5 tax years immediately
preceding the tax year for which the
election is made. See section 1504(c)(2)
and Regulations section 1.1502-47(d)(12).

Corporations filing a consolidated
return must check box 1 of Item A and
attach Form 851, Affiliations Schedule,
and other supporting statements to the
return. Also, for the first year a subsidiary
corporation is being included in a
consolidated return, attach Form 1122,
Authorization and Consent of Subsidiary
Corporation To Be Included in a
Consolidated Income Tax Return, to the
parent's consolidated return. Attach a
separate Form 1122 for each new
subsidiary being included in the
consolidated return.
File supporting statements for each
corporation included in the consolidated
return. Do not use Form 1120-PC as a
substitute for the supporting statement.
On the supporting statement, use columns
to show the following, both before and
after adjustments.
1. Items of gross income and
deductions.
2. A computation of taxable income.
3. Balance sheets as of the beginning
and end of the tax year.
4. A reconciliation of income per
books with income per return.

For more information on consolidated
returns, see the regulations under section
1502.

Note. If a nonlife insurance company is a
member of an affiliated group, file Form
1120-PC as an attachment to the
consolidated return in addition to the
supporting statements discussed, earlier.
Across the top of page 1 of Form
1120-PC, write “Supporting Statement to
Consolidated Return.”

Life-Nonlife Consolidated
Return

If the corporation is the common parent of
a life-nonlife consolidated group, check
boxes 1 and 2 of Item A.

Filing requirements. The common
parent of a life-nonlife consolidated group
is required to do the following.
File the applicable consolidated
corporate income tax return: as a Form
1120-L, U.S. Life Insurance Company
Income Tax Return, where the common
parent is a life insurance company; a Form
1120-PC, U.S. Property and Casualty
Insurance Company Income Tax Return,
where the common parent is an insurance
company, other than a life insurance
company; or a Form 1120, U.S.
Corporation Income Tax Return, where
the common parent is any other type of
corporation.
Indicate clearly on the face of the return
that the corporate tax return is a
life-nonlife return. This requirement is
satisfied by checking boxes 1 and 2 of
Item A on page 1.
Show any setoffs required by
paragraphs (g), (m), and (n) of
Regulations section 1.1502-47.
Report separately the nonlife
consolidated taxable income or loss,
determined under Regulations section
1.1502-47(h), on a Form 1120 or 1120-PC
(whether filed by the common parent or as
an attachment to the consolidated return),
for all nonlife members of the consolidated
group.
Report separately the consolidated
partial Life Insurance Company Taxable
Income (as defined by Regulations section
1.1502-47(d)(3)) determined under
Regulations section 1.1502-47, on a Form
1120-L (whether filed by the common
parent or as an attachment to the
-6-

If you are filing Schedule M-3 (Form
1120-PC), check Item A, box 3 at the top
of page 1 of Form 1120-PC. See the
Instructions for Schedule M-3 (Form
1120-PC) for more details.
Note. If you do not file Schedule M-3
(Form 1120-PC) with Form 1120-PC, see
Reconciliation under Statements, earlier.

Item B. Employer
Identification Number
(EIN)

Enter the corporation's EIN. If the
corporation does not have an EIN, it must
apply for one. An EIN can be applied for:
Online—Go to
IRS.gov/EIN. The EIN is issued
immediately once the application
information is validated.
By faxing or mailing Form SS-4,
Application for Employer Identification
Number.
Corporations located in the United
States or U.S. possessions can
CAUTION use the online application. Foreign
corporations should call 1-267-941-1099
(not a toll-free number) for more
information on obtaining an EIN. See the
Instructions for Form SS-4.

!

EIN applied for, but not received. If the
corporation has not received its EIN by the
time the return is due, enter Applied For
and the date the corporation applied in the
space for the EIN. However, if the
corporation is filing its return electronically,
an EIN is required at the time the return is
filed. An exception applies to subsidiaries
of corporations whose returns are filed
with the parent's electronically filed
consolidated Form 1120. These
subsidiaries should enter Applied For in
the space for the EIN on their returns. The
subsidiaries' returns are identified under
the parent corporation's EIN.
For more information, see the
Instructions for Form SS-4.

Instructions for Form 1120-PC (2017)

Item D. Section 831(b) and
Section 953 Elections

Check the 831(b) box if the insurance
company elects to be taxed on taxable
investment income in lieu of the tax
otherwise applicable under section 831(a).
Section 831(b) applies to a small company
as defined under section 831(b)(2)(A) if
such company meets the diversification
requirements of section 831(b)(2)(B) and
such corporation elects the application of
section 831(b) for such taxable year under
section 831(b)(2)(A)(iii). See the
instructions for Schedule I, Question 15,
later. See regulations section
301.9100-8(a) for the rules regarding the
timing and manner of making the election
under section 831(b)(2)(A)(iii).

to the left of line 13, page 1, write “Section
953(d)” and the amount. Attach a
statement showing the computation. See
section 953(d) for more details.

Item E. Final Return, Name
Change, Address Change,
or Amended Return

(Form 1120), enter the corporation's tax
from Part III of Schedule O.
Most corporations that are not
members of a controlled group and are not
filing a consolidated return figure their tax
by using the Tax Rate Schedule below.

DRAFT AS OF
March 23, 2018

Note. The election under section 831(b)
(2)(A)(iii) shall apply to the taxable year for
which made and for all subsequent
taxable years for which a corporation is a
small company as defined under section
831(b)(2)(A) and such corporation meets
the diversification requirements of section
831(b)(2)(B). Once made, an election
under section 831(b)(2)(A)(iii) may only be
revoked with the consent of the Secretary.

Check the applicable box if the
corporation is a foreign corporation and
elects under:
1. Section 953(c)(3)(C) to treat its
related person insurance income as
effectively connected with the conduct of a
trade or business in the United States or
2. Section 953(d) to be treated as a
domestic corporation.
Generally, a foreign corporation making
either section 953 election must file its
return by sending it to:
Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409
See Notice 87-50, 1987-2 C.B. 357, and
Rev. Proc. 2003-47, 2003-28 I.R.B. 55, for
the procedural rules, election statement
formats, and filing addresses for making
the respective elections under section
953(c)(3)(C) or section 953(d).
Note. Once either election is made, it will
apply to the tax year for which made and
all subsequent tax years unless revoked
with the consent of the IRS. Also, any loss
of a foreign corporation electing to be
treated as a domestic insurance company
under section 953(d) will be treated as a
dual-consolidated loss and may not be
used to reduce the taxable income of any
other member of the affiliated group for
this tax year or any other tax year.
Note. If a section 953(d) election is made,
include the additional tax required to be
paid on line 13, page 1. On the dotted line
Instructions for Form 1120-PC (2017)

Indicate a final return, name change,
address change, or amended return by
checking the appropriate box.

Note. If a change in address or
responsible party occurs after the return is
filed, use Form 8822-B, Change of
Address or Responsible Party—Business,
to notify the IRS. See the Instructions for
Form 8822-B for details.

Taxable Income

Line 1, Taxable income, and line 2,
Taxable investment income. If the
corporation is a small company as defined
in section 831(b)(2) and elects under
section 831(b)(2)(A)(iii) to be taxed on
taxable investment income, complete
Schedule B (ignore Schedule A) and enter
the amount from Schedule B, line 21, on
line 2, page 1. Also complete Question 15
on Schedule I. All other corporations
should complete Schedule A (ignore
Schedule B) and enter on line 1, page 1,
the amount from Schedule A, line 37.

Tax Computation and
Payments
P.L. 115-97 changed the
corporation tax rates under
CAUTION section 11 for tax years beginning
after 2017. Additionally, section 15
provides rules for using the tax rates
effective before and after a change to
calculate the tax if the effective date for
the change occurs during the tax year.
See the discussion under “Schedule J.
Tax Computation and Payment” in the
Instructions for Form 1120.

!

Line 3

If the corporation is a member of a
controlled group, check the box on line 3.
Complete and attach Schedule O (Form
1120), Consent Plan and Apportionment
Schedule for a Controlled Group.
Component members of a controlled
group must use Schedule O to report the
apportionment of taxable income, income
tax, and certain tax benefits between the
members of the group. See Schedule O
and the Instructions for Schedule O for
more information.

Line 4

If the corporation is a member of a
controlled group and is filing Schedule O

-7-

Tax Rate Schedule

If the amount on Form 1120-PC, page 1, line 1
or line 2 is:
But not over
Over—
—

Tax is:

Of the
amount
over—

$0
$50,000
15%
$0
50,000
75,000
$ 7,500 + 25%
50,000
75,000
100,000
13,750 + 34%
75,000
100,000
335,000
22,250 + 39%
100,000
335,000 10,000,000 113,900 + 34%
335,000
10,000,000 15,000,000 3,400,000 + 35% 10,000,000
15,000,000 18,333,333 5,150,000 + 38% 15,000,000
18,333,333
----35%
0

Deferred tax under section 1291. If the
corporation was a shareholder in a
passive foreign investment company
(PFIC) and received an excess distribution
or disposed of its investment in the PFIC
during the year, it must include the total
increase in taxes due under section
1291(c)(2) (from Form 8621) in the
amount entered on line 4. On the dotted
line next to line 4, enter “Sec. 1291” and
the amount.
Do not include on line 4 any interest
due under section 1291(c)(3). Instead,
include the amount of interest owed on
line 12.
For more information on reporting the
deferred tax and interest, see the
Instructions for Form 8621.
Additional tax under section 197(f). A
corporation that elects to recognize gain
and pay tax on the sale of a section 197
intangible under the related person
exception to the anti-churning rules should
include any additional tax due in the total
for line 4. On the dotted line next to line 4,
enter “Section 197” and the amount. See
section 197(f)(9)(B)(ii).
Line 5. Enter amount of tax that a reciprocal must include. A mutual
insurance company that is an interinsurer
or reciprocal underwriter may elect, under
section 835, to limit the deduction for
amounts paid or incurred to a qualifying
attorney-in-fact to the amount of the
deductions of the attorney-in-fact allocable
to the income received by the
attorney-in-fact from the reciprocal. If this
election is made, any increase in taxable
income of a reciprocal as a result of this
limitation is taxed at the highest rate of tax
specified in section 11(b).
Make no entry on line 5 if the mutual
insurance company's taxable income
before including the section 835(b)

amount is $100,000 or more. Otherwise,
this tax is 35% of the section 835(b)
amount. If an entry is made on line 5,
attach a statement showing how the tax
was computed.
Reciprocal underwriters making the
section 835(a) election are allowed a
credit on line 14h for the amount of tax
paid by the attorney-in-fact that is related
to the income received by the
attorney-in-fact from the reciprocal in the
tax year.
See section 835 and the related
regulations for special rules and
information regarding the statements
required to be attached to the return.

any carryforward of that credit, complete
and attach Form 8827, Credit for Prior
Year Minimum Tax—Corporations.
Line 8e. Bond credits from Form 8912.
Enter the allowable credits from Form
8912, Credit to Holders of Tax Credit
Bonds, line 12.
Line 10. Foreign corporations. A
foreign corporation carrying on an
insurance business in the United States is
taxed as a domestic insurance company
on its income effectively connected with
the conduct of a trade or business in the
United States (see sections 864(c) and
897 for definition).
Generally, any other U.S.-source
income received by the foreign
corporation is taxed at 30% (or at a lower
treaty rate) under section 881. If the
corporation has this income, attach a
statement showing the kind and amount of
income, the tax rate, and the amount of
tax. Enter the tax on line 10. However, see
Reduction of section 881 tax, later.

outstanding stock is directly or indirectly
owned by five or fewer individuals.
See Schedule PH (Form 1120), U.S.
Personal Holding Company (PHC) Tax,
for definitions and details on how to figure
the tax.

Line 12. Other Taxes

DRAFT AS OF
March 23, 2018

Line 6. Alternative minimum tax (AMT).
Unless the corporation is treated as a
small corporation exempt from the AMT, it
may owe the AMT if it has any of the
adjustments and tax preference items
listed on Form 4626. The corporation must
file Form 4626 if its taxable income (or
loss) before the NOL deduction, combined
with these adjustments and tax preference
items is more than the smaller of $40,000
or the corporation's allowable exemption
amount (from Form 4626). For this
purpose, taxable income does not include
the NOL deduction.
See Form 4626 for definitions and
details on how to figure the tax.
A corporation that is not a small
corporation exempt from the AMT
CAUTION may be required to file Form 4626
if it claims certain credits, even though it
does not owe any AMT. See the
instructions for Form 4626, Alternative
Minimum Tax—Corporations, for details.

!

Line 8a. Foreign tax credit. To find out
when a corporation can take the credit for
payment of income tax to a foreign country
or U.S. possession, see Form 1118,
Foreign Tax Credit—Corporations.
Line 8b. Credit from Form 8834. Enter
any qualified electric vehicle passive
activity credits from prior years allowed for
the current tax year from Form 8834,
Qualified Electric Vehicle Credit. Attach
Form 8834. Include on line 8b any credits
from Form 5735, American Samoa
Economic Development Credit. See the
Instructions for Form 5735. Attach Form
5735, if applicable.
Line 8c. General business credit. Enter
on line 8c the allowable credit from Form
3800, Part II, line 38.
The corporation is required to file Form
3800, General Business Credit, to claim
most business credits. For a list of
allowable credits, see Form 3800. Also,
see the applicable credit form and its
instructions.
Line 8d. Credit for prior year minimum
tax. To figure the minimum tax credit and

Note. Interest received from certain
portfolio debt investments that were
issued after July 18, 1984, is not subject to
the tax. See section 881(c).
See section 842 for more information.
Minimum effectively connected net
investment income. See section 842(b)
and Notice 89-96, 1989-2 C.B. 417, for the
general rules for computing this amount.
Also, see Rev. Proc. 2017-44, 2017-35
I.R.B. 216, for the domestic asset/liability
percentages and domestic investment
yields needed to compute this amount.
Any additional income required by
section 842(b) must be included in taxable
income (for example, Schedule A, line 13).
Reduction of section 881 tax.
Additional taxes resulting from the net
investment income adjustment may offset
a corporation's section 881 tax on
U.S.-source income. The tax reduction is
determined by multiplying the section 881
tax by the ratio of the amount of income
adjustment to income subject to the
section 881 tax, computed without the
exclusion for interest on state and local
bonds or income exempted from taxation
by treaty. See section 842(c)(2). Attach a
statement showing how the reduction
under section 881 was figured. Enter the
net tax imposed by section 881 on line 10.
Line 11. Personal holding company
tax. A corporation (other than a
corporation described in section 542(c)) is
taxed as a personal holding company
(PHC) under section 542 if:
At least 60% of its adjusted ordinary
gross income for the tax year is PHC
income, and
At any time during the last half of the tax
year more than 50% in value of its
-8-

Include any of the following taxes and
interest in the total on line 12. Check the
appropriate box(es) for the form, if any,
used to compute the total.

Recapture of investment credit. If the
corporation disposed of investment credit
property or changed its use before the end
of its useful life or recovery period, it may
owe a tax. See Form 4255, Recapture of
Investment Credit.
Recapture of low-income housing
credit. If the corporation disposed of
property (or there was a reduction in the
qualified basis of the property) for which it
took the low-income housing credit, and
the corporation did not follow the
procedures that would have prevented
recapture of the credit, it may owe a tax.
See Form 8611, Recapture of
Low-Income Housing Credit.
Other. Additional taxes and interest
amounts can be included in the total
entered on line 12. Check the box for
“Other” if the corporation includes any
additional taxes and interest such as the
items discussed below. See How to report
below, for details on reporting these
amounts on an attached statement.
Recapture of Indian employment credit.
Generally, if an employer terminates the
employment of a qualified employee less
than 1 year after the date of initial
employment, any Indian employment
credit allowed for a prior tax year because
of wages paid or incurred to that employee
must be recaptured. See Form 8845 and
section 45A.
Recapture of new markets credit (see
Form 8874, New Markets Credit, and
Form 8874-B, Notice of Recapture Event
for New Markets Credit).
Recapture of employer-provided
childcare facilities and services credit (see
Form 8882).
Interest on deferred tax attributable to
certain nondealer installment obligations
(section 453A(c)).
Interest due on deferred gain (section
1260(b)).
Interest due under section 1291(c)(3).
See Form 8621 and the Instructions for
Form 8621.
Alternative tax on qualifying shipping
activities (see Form 8902).

How to report. If the corporation
checked the “Other” box, attach a
statement showing the computation of
each item included in the total for line 12
Instructions for Form 1120-PC (2017)

and identify the applicable Code section
and the type of tax or interest.

Line 13. Total Tax
Include any deferred tax on the
termination of a section 1294 election
applicable to shareholders in a qualified
electing fund in the amount entered on
line 13.

4466 after the end of the corporation's tax
year, and no later than the due date for
filing the corporation’s tax return. Form
4466 must be filed before the corporation
files its tax return. See the Instructions for
Form 4466.

into its checking or savings account at any
U.S. bank or other financial institution
instead of having a check sent to the
corporation, complete Form 8302 and
attach it to the corporation's tax return.

Line 14h. Credit by reciprocal for tax
paid by attorney-in-fact under section
835(d). Enter the amount of tax paid by
an attorney-in-fact as a result of income
received by the attorney-in-fact from the
reciprocal during the tax year. For more
information, see section 835, the related
regulations, and the instructions for line 5,
earlier.

Schedule A—Taxable
Income

DRAFT AS OF
March 23, 2018

Subtract any deferred tax on the
corporation's share of undistributed
earnings of a qualified electing fund (see
Form 8621).
How to report. Attach a statement
showing the computation of each item
included in, or subtracted from, the total
for line 13. On the dotted line next to
line 13, specify (a) the applicable Code
section, (b) the type of tax, and (c) the
amount of tax.

Line 14b. Prior year(s) special estimated tax payments to be applied. The
amount entered on line 14b must agree
with the amount(s) from Form 8816, Part
III, line 11. See Form 8816 and section
847 for additional information.
Line 14c. Estimated tax payments.
Enter any estimated tax payments the
corporation made for the tax year. Do not
include any amount being applied on
line 14d.
Line 14d. Special estimated tax payments. If the deduction under section 847
is claimed on Schedule A, line 27, special
estimated tax payments must be made in
an amount equal to the tax benefit of the
deduction. These payments must be
made on or before the due date (without
regard to extensions) of this tax return.
See Form 8816 and section 847(2) for
additional information.
Tax benefit rule. Section 847(8)
requires that if a corporation carries back
net operating losses or capital losses that
arise in years after a year in which a
section 847 deduction was claimed, then
the corporation must recompute the tax
benefit attributable to the previously
claimed section 847 deduction taking into
account the loss carrybacks. Tax benefits
also include those derived from filing a
consolidated return with another insurance
company (without regard to section
1503(c)).
Therefore, if the recomputation
changes the amount of the section 847 tax
benefit, then the taxpayer must provide a
computation statement and attach it to
Form 8816.
Line 14e. Overpaid estimated tax. If the
corporation overpaid estimated tax, it may
be able to get a quick refund by filing Form
4466. The overpayment must be at least
10% of the corporation's expected income
tax liability and at least $500. File Form
Instructions for Form 1120-PC (2017)

Line 14i. Other credits and payments.
Enter the amount of any other credits the
corporation may take and/or payments
made. Write an explanation of the entry to
the left of the entry space.

Backup withholding. If the corporation
had federal income tax withheld from any
payments it received because, for
example, it failed to give the payer its
correct EIN, include the amount withheld
in the total for line 14i. Write the amount
withheld and the words “Backup
Withholding” on the dotted line to the left
of the entry space for line 14i.

Line 14j. Refundable credits from Form
8827. If the corporation elected to claim
certain unused minimum tax credits
instead of claiming any additional
first-year special depreciation allowance
for eligible property, see the Instructions
for Form 8827. Enter on line 14j the
amount from Form 8827, line 8c, if
applicable. See the Instructions for Form
8827, for more information.
Line 14k. Total payments. Add the
amounts on lines 14f through 14j and
enter the total on line 14k.
Line 15. Estimated tax penalty.
Generally, the corporation does not have
to file Form 2220 with its income tax return
because the IRS will figure the amount of
any penalty and notify the corporation of
any amount due. However, see the
Instructions for Form 2220 at IRS.gov/
Form2220 for circumstances were the
corporation must file Form 2220 even if it
owes no penalty.
If Form 2220 is attached, check the box
on line 15 and enter any penalty on this
line. See Estimated tax penalty, under
Estimated Tax Payments, earlier.
Line 16. Amount Owed. If the
corporation cannot pay the full amount of
tax owed, it can apply for an installment
agreement online. See IRS.gov/OPA for
the latest information.
Line 18. Electronic deposit of tax refund of $1 million or more. If the
corporation is due a refund of $1 million or
more and wants it electronically deposited
-9-

Gross income. Under section 832, gross
amounts of underwriting and investment
income should be computed on the basis
of the Statement of Income of the NAIC
annual statement to the extent not
inconsistent with the Internal Revenue
Code and its Regulations.
Income from qualifying shipping activities. Gross income does not include
income from qualifying shipping activities
if the corporation makes an election under
section 1354 to be taxed on its notional
shipping income (as defined in section
1353) at the highest corporate tax rate
specified in section 11. If the election is
made, the corporation generally may not
claim any loss, deduction, or credit with
respect to qualifying shipping activities. A
corporation making this election also may
elect to defer gain on the disposition of a
qualifying vessel.
Use Form 8902, Alternative Tax on
Qualifying Shipping Activities, to figure the
tax. Include the alternative tax on Form
1120-PC, page 1, line 12.
Note. In computing the amounts for lines
2, 3, and 4, take all interest, dividends, or
rents received during the year, add
interest, dividends, or rents due and
accrued at the end of the tax year, and
deduct interest, dividends, or rents due
and accrued at the end of the preceding
tax year. For rules regarding the accrual of
dividends, see Regulations section
1.301-1(b).
Line 3a, column (a). Gross interest.
Enter the gross amount of interest income,
including all tax-exempt interest.
Line 3b, column (a). Section 103(a)
excludes interest on state or local bonds
from gross income.
This exclusion does not apply to any:
1. Private activity bond which is not a
qualified bond as defined by section 141;
2. Arbitrage bond as defined by
section 148; or
3. Bonds not meeting the
requirements of section 149 (regarding the
registration of tax-exempt bonds).
Lines 3a and 3b, column (b). Amortization of premium. Enter on line 3a,
column (b), the total amortization of bond
premium, including amortization on
tax-exempt bonds. Enter on line 3b,

column (b), the amortization of bond
premium on tax-exempt bonds only.

credited during the same tax year. See
section 832(b)(1)(D).

Note. Insurance companies electing to
amortize discount for tax purposes must
reduce the amortization of premium by
any amortization of discount.

Line 9. Income on account of special
income and deduction accounts.
Corporations which write the kinds of
insurance below must maintain the
following special accounts. A corporation
which writes:
1. Mortgage guaranty insurance must
maintain a mortgage guaranty account;
2. Lease guaranty insurance must
maintain a lease guaranty account; and
3. Insurance on obligations the
interest on which is excludable from gross
income under section 103 must maintain
an account with respect to insurance on
state and local obligations.

Line 4. Gross rents. Enter gross rents,
computed as indicated under the
instructions for Gross income, earlier.
Deduct expenses, such as repairs,
interest, taxes, and depreciation, on the
proper lines for deductions.

a separate statement attached to this
return. If the amount entered is from more
than one partnership, identify the amount
from each partnership.
Part or all of the proceeds received
from certain corporate-owned life
insurance contracts issued after August
17, 2006. Corporations that own one or
more employer-owned life insurance
contracts issued after August 17, 2006,
must file Form 8925, Report of
Employer-Owned Life Insurance
Contracts.
Income from cancellation of debt (COD)
for the repurchase of a debt instrument for
less than its adjusted issue price.
Any COD income deferred from 2009 or
2010 that is includible in income in 2017.
See section 108(i), and Rev. Proc.
2009-37.
The corporation's share of the following
income from Form 8621, Information
Return by a Shareholder of a Passive
Foreign Investment Company or Qualified
Electing Fund.
1. Ordinary earnings of a qualified
electing fund (QEF).
2. Gain or loss from marking passive
foreign investment company (PFIC) stock
to market.
3. Gain or loss from sale or other
disposition of section 1296 stock.
4. Excess distributions from a section
1291 fund allocated to the current year
and pre-PFIC years, if any.
See Form 8621 and the Instructions for
Form 8621 for details.

DRAFT AS OF
March 23, 2018

Line 6. Capital gain net income. Every
sale or exchange of a capital asset must
be reported in detail on Schedule D (Form
1120), Capital Gains and Losses, even if
there is no gain or loss.
Generally, losses from sales or
exchanges of capital assets are only
allowed to the extent of gains. However,
corporations taxed under section 831 may
claim losses from capital assets sold or
exchanged to get funds to meet abnormal
insurance losses and to pay dividends and
similar distributions to policyholders. Do
not include those types of losses here, but
instead, report them on Schedule G.
The net capital loss for these
corporations is the amount by which
losses for the year from sales or
exchanges of capital assets exceed the
gains from these sales or exchanges plus
the smaller of:
1. Taxable income (computed without
gains or losses from sales or exchanges
of capital assets); or
2. Losses from the sale or exchange
of capital assets sold or exchanged to
obtain funds to meet abnormal insurance
losses and to provide for the payment of
dividends and similar distributions to
policyholders.
Subject to the limitations in section
1212(a), a net capital loss can be carried
back 3 years and forward 5 years as a
short-term capital loss.
Line 8. Certain mutual fire or flood insurance company premiums. A mutual
fire or flood insurance company whose
principal business is the issuance of
policies (1) for which the premium
deposits are the same (regardless of the
length of the term the policies are written
for) and (2) under which the unabsorbed
portion of such premium deposits not
required for losses, expenses, or
establishment of reserves is returned or
credited to the policyholder on
cancellation or expiration of the policy,
must include in income an amount equal
to 2% of the premiums earned on
insurance contracts during the tax year
with respect to such policies after
deduction of premium deposits returned or

Amounts required to be subtracted
from these accounts under sections
832(e)(5) and 832(e)(6) must be reported
as income on line 9. See section 832(e)
for more information.

Line 10. Income from protection
against loss account. Although section
1024 of P.L. 99-514 repealed section 824
relating to the protection against loss
(PAL) account, PAL account balances are
includible in income as though section 824
were still in effect. Attach a statement
showing the computation.
Line 11. Mutual interinsurers or reciprocal underwriters—decrease in subscriber accounts. Enter the decrease for
the tax year in savings credited to
subscriber accounts of a mutual insurance
company that is an interinsurer or
reciprocal underwriter.
Line 12. Income from a special loss
discount account. Enter the amount
from Form 8816, Part II, line 6.
Line 13. Other Income. Enter any other
taxable income not reported on lines 1
through 12. List the type and amount of
income on an attached statement. If the
corporation has only one item of other
income, describe it in parentheses on
line 13. Examples of other income to
report on line 13 include the following.
The amount included in income from
Form 6478, Biofuel Producer Credit, if
applicable.
The amount included in income from
Form 8864, Biodiesel and Renewable
Diesel Fuels Credit, if applicable.
Refunds of taxes deducted in prior
years to the extent they reduced income
subject to tax imposed. See section 111
and the related regulations. Do not offset
current year taxes against tax refunds.
Ordinary income from trade or business
activities of a partnership (from
Schedule K-1 (Form 1065 or Form
1065-B)). Do not offset ordinary losses
against ordinary income. Instead, include
the losses on line 31. Show the
partnership's name, address, and EIN on
-10-

Deductions
Limitations on Deductions
Section 263A uniform capitalization
rules. The uniform capitalization rules of
section 263A require corporations to
capitalize certain costs.
See Regulations sections 1.263A-1
through 1.263A-3.
Transactions between related taxpayers. Generally, an accrual basis taxpayer
can only deduct business expenses and
interest owed to a related party in the year
the payment is included in the income of
the related party. See sections 163(e)(3),
163(j), and 267 for limitations on
deductions for unpaid interest and
expenses.
Corporations use Form 8926,
Disqualified Corporate Interest Expense
Disallowed Under Section 163(j) and
Related Information, to figure the amount
of any corporate interest expense
disallowed by section 163(j).
Section 291 limitations. Corporations
may be required to adjust certain
deductions. See section 291 to determine
the amount of the adjustment.
Instructions for Form 1120-PC (2017)

Golden parachute payments. A portion
of the payments made by a corporation to
key personnel that exceeds their usual
compensation may not be deductible. This
occurs when the corporation has an
agreement (golden parachute) with these
key employees to pay them these excess
amounts if control of the corporation
changes. See section 280G and
Regulations section 1.280G-1. Also see
the instructions for line 15.

and attach Form 4562, Depreciation and
Amortization.

rules. Also see Notice 2011-2, 2011-2
I.R.B. 260.

Reducing certain expenses for which
credits are allowable. If the corporation
claims certain credits, it may need to
reduce the otherwise allowable
deductions for expenses used to figure the
credit. This applies to credits such as the
following.
Employment credits. See Employment
credits, later.
Credit for increasing research activities
(Form 6765).
Orphan drug credit (Form 8820).
Disabled access credit (Form 8826).
Employer credit for social security and
Medicare taxes paid on certain employee
tips (Form 8846).
Credit for small employer pension plan
startup costs (Form 8881).
Credit for employer-provided childcare
facilities and services (Form 8882).
Credit for small employer health
insurance premiums (Form 8941).
If the corporation has any of these
credits, figure the current year credit
before figuring the deduction for expenses
on which the credit is based. If the
corporation capitalized any costs on which
it figured the credit, it may need to reduce
the amount capitalized by the credit
attributable to these costs.
See the instructions for the form used
to figure the applicable credit for more
details.

Line 15. Compensation of officers.
Enter deductible officers' compensation
on line 15. See Employment credits, later,
for employment credits that may reduce
your deduction for officers' compensation.
Do not include compensation deductible
elsewhere on the return, such as elective
contributions to a section 401(k) cash or
deferred arrangement, or amounts
contributed under a salary reduction SEP
agreement or a SIMPLE IRA plan.
Include only the deductible part of each
officer's compensation on line 15. (See
Disallowance of deduction for employee
compensation in excess of $1 million,
below). Attach a statement for all officers
using the following columns:
1. Name of officer.
2. Social security number.
3. Percentage of time devoted to
business.
4. Amount of compensation.

DRAFT AS OF
March 23, 2018

Business start-up and organizational
costs. A corporation can elect to deduct
a limited amount of start-up and
organizational costs it paid or incurred.
Any remaining costs generally must be
amortized over an 180-month period. See
sections 195 and 248 and the related
regulations.

Time for making an election. The
corporation generally elects to deduct
start-up or organizational costs by
claiming the deduction on its income tax
return filed by the due date (including
extensions) for the tax year in which the
active trade or business begins. However,
for start-up or organizational costs paid or
incurred before September 9, 2008, the
corporation is required to attach a
statement to its return to elect to deduct
those costs.
For more details including special rules
for costs paid or incurred before
September 9, 2008, see the Instructions
for Form 4562. Also see Pub. 535,
Business Expenses.
If the corporation timely filed its return
for the year without making an election, it
can still make an election by filing an
amended return within 6 months of the
due date of the return (excluding
extensions). Clearly indicate the election
on the amended return and write “Filed
pursuant to Regulations section
301.9100-2” at the top of the amended
return. File the amended return at the
same address the corporation filed its
original return. The election applies when
figuring taxable income for the current tax
year and all subsequent years.
The corporation can choose to forgo
the election by affirmatively electing to
capitalize its start-up or organizational
costs on its income tax return filed by the
due date (including extensions) for the tax
year in which the active trade or business
begins.

Note. The election to either amortize or
capitalize start-up costs is irrevocable and
applies to all start-up costs that are related
to the trade or business.
Report the deductible amount of such
costs and any amortization on
Schedule A, line 31. For amortization that
begins during the 2017 tax year, complete

Instructions for Form 1120-PC (2017)

Limitations on deductions related to
property leased to tax-exempt entities.
If a corporation leases property to a
governmental or other tax-exempt entity,
the corporation cannot claim deductions
related to the property to the extent that
they exceed the corporation's income from
the lease payments. This disallowed
tax-exempt use loss can be carried over to
the next tax year and treated as a
deduction with respect to the property for
that tax year. See section 470(d) for
exceptions.
Limitation on tax benefits for remuneration under the Patient Protection and
Affordable Care Act. The $1 million
compensation limit is reduced to $500,000
for remuneration for services provided by
individuals for or on behalf of certain
health insurance providers in tax years
beginning after 2009. The $500,000
limitation applies to remuneration that is
deductible in the tax year during which the
services were performed and
remuneration for services during the year
that is deductible in a future tax year
(called “deferred deduction
remuneration”). The $500,000 limitation is
reduced by any amounts disallowed as
excess parachute payments. See section
162(m)(6) and Regulations section
1.162-31 for definitions and other special
-11-

If a consolidated return is filed, each
member of an affiliated group must furnish
this information.
Disallowance of deduction for
employee compensation in excess of
$1 million. Publicly held corporations
cannot deduct compensation to a
“covered employee” to the extent that the
compensation exceeds $1 million.
Generally, a covered employee is:
The principal executive officer of the
corporation (or an individual acting in that
capacity) as of the end of the tax year or
An employee whose total
compensation must be reported to
shareholders under the Securities
Exchange Act of 1934 because the
employee is among the 3 highest
compensated officers for that tax year
(other than the principal executive officer).
For this purpose, compensation does
not include the following.
Income from certain employee trusts,
annuity plans, or pensions.
Any benefit paid to an employee that is
excluded from the employee's income.
The deduction limit does not apply to:
Commissions based on individual
performance,
Qualified performance-based
compensation, and
Income payable under a written,
binding contract in effect on February 17,
1993.
The $1 million limit is reduced by
amounts disallowed as excess parachute
payments under section 280G.
See section 162(m) and Regulations
section 1.162-27. Also see Notice
2007-49, 2007-25 I.R.B. 1429.

Limitations on tax benefits for executive compensation under the Treasury
Troubled Asset Relief Program
(TARP). The $1 million compensation
limit is reduced to $500,000 for executive
remuneration and deferred deduction
executive remuneration paid to covered
executives by any entity that receives or
has received financial assistance under
TARP. The limit applies for each period in
which obligations arising from financial
assistance under TARP remain
outstanding. The $500,000 is reduced by
any amounts disallowed as excess
parachute payments. See section 162(m)
(5) for definitions and other special rules.
Also see Notice 2008-94, 2008-44 I.R.B.
1070, for additional guidance.
In addition, a portion of any parachute
payments made to a covered executive by
an applicable employer participating in a
Treasury troubled asset relief program is
not deductible as compensation if the
payments are made because of a
severance from employment during an
applicable tax year. For this purpose, a
parachute payment is any payment to a
senior executive officer for departure from
a company for any reason, except for
payments for services performed or
benefits accrued. These limits do not
apply to a payment already treated as a
parachute payment. See section 280G(e)
and Notice 2008-94.

during the year. Also complete Form 4562,
Depreciation and Amortization, Part V. If
the corporation leased a vehicle for a term
of 30 days or more, the deduction for the
vehicle lease expense may have to be
reduced by an amount includible in
income called the inclusion amount. The
corporation may have an inclusion amount
if:

risks. The fee is treated as a tax described
in section 275 relating to taxes for which
no deduction is allowed. For more
information, see the final regulations and
Revenue Ruling 2013–27.
Line 20a. Interest.
Note. Do not offset interest income
against interest expense.
The corporation must make an interest
allocation if the proceeds of a loan were
used for more than one purpose (for
example, to purchase a portfolio
investment and to acquire an interest in a
passive activity). See Temporary
Regulations section 1.163-8T for the
interest allocation rules.
Do not deduct the following interest.
Interest on indebtedness incurred or
continued to purchase or carry obligations
if the interest is wholly exempt from
income tax. See section 265(b) for special
rules and exceptions for financial
institutions. Also, see section 265(b)(7) for
a temporary de minimis exception for
financial institutions for certain tax-exempt
bonds issued in 2009 and 2010.
Interest and carrying charges on
straddles. Generally, these amounts must
be capitalized. See section 263(g).
Interest on debt allocable to the
production of designated property by a
corporation for its own use or for sale. The
corporation must capitalize this interest.
Also capitalize any interest on debt
allocable to an asset used to produce the
property. See section 263A(f) and
Regulations sections 1.263A-8 through
1.263A-15 for definitions and more
information.
Interest on unpaid taxes attributable to
nondisclosed reportable transactions. See
section 163(m).
Special rules apply to:
Disqualified interest on certain
indebtedness under section 163(j). See
Form 8926, and the related instructions.
Interest on which no tax is imposed
(see section 163(j)). A corporation that
owns an interest in a partnership, directly
or indirectly, must treat its distributive
share of the partnership liabilities, interest
income, and interest expense as liabilities,
income, and expenses of the corporation
for purposes of applying the earnings
stripping rules. For more details, see
section 163(j)(8).
Forgone interest on certain
below-market-rate loans (see section
7872).
Original issue discount (OID) on certain
high-yield discount obligations. See
section 163(e)(5) to determine the
disqualified amount of the deduction for
original issue discount that is deferred and
the amount that is disallowed on a
high-yield discount obligation. The rules
under section 163(e)(5) do not apply to

DRAFT AS OF
March 23, 2018

Line 16. Salaries and wages. Enter the
total salaries and wages paid for the tax
year. Do not include salaries and wages
deductible elsewhere on the return, such
as amounts included in officers'
compensation, elective contributions to a
section 401(k) cash or deferred
arrangement, or amounts contributed
under a salary reduction SEP agreement
or a SIMPLE IRA plan.
If the corporation provided taxable
fringe benefits to its employees,
CAUTION such as the personal use of a car,
do not deduct as wages the amount
allocated for depreciation and other
expenses that are claimed elsewhere on
the return (for example, on Schedule A,
line 22 or line 31).

!

Employment credits. If the corporation
claims a credit on any of the below forms,
it may need to reduce its deduction for
salaries and wages. See the applicable
form, for details.
Form 5884, Work Opportunity Credit;
Form 8844, Empowerment Zone
Employment Credit, if applicable;
Form 8845, Indian Employment Credit,
if applicable; and
Form 8932, Credit for Employer
Differential Wage Payments.
Line 18. Rents. If the corporation rented
or leased a vehicle, enter the total annual
rent or lease expense paid or incurred

And the vehicle's
FMV on the first day
of the lease
exceeded:

The lease term began:

Cars (excluding trucks and
vans)
After 12/31/12 but before
1/1/18 . . . . . . . . . .
After 12/31/07 but before
1/1/13 . . . . . . . . . .

$19,000

$18,500

Trucks and Vans

After 12/31/13 but before
1/1/18 . . . . . . . . . .

$19,500

After 12/31/09 but before
1/1/14 . . . . . . . . . .

$19,000

After 12/31/08 but before
1/1/10 . . . . . . . . . .

$18,500

After 12/31/07 but before
1/1/09 . . . . . . . . . .

$19,000

See Pub. 463, Travel, Entertainment,
Gift, and Car Expenses, for instructions on
figuring the inclusion amount. The
inclusion amount for lease terms that
began in 2017 is published in Rev. Proc.
2017-29, 2017-14 I.R.B. 1065. The
inclusion amount for lease terms
beginning in 2018 will be published in the
Internal Revenue Bulletin in early 2018.
Line 19. Taxes and licenses. Enter
taxes paid or accrued during the tax year,
but do not include the following.
Federal income taxes.
Foreign or U.S. possession income
taxes if a tax credit is claimed.
Taxes not imposed on the corporation.
Taxes, including state or local sales
taxes, that are paid or incurred in
connection with an acquisition or
disposition of property (these taxes must
be treated as a part of the cost of the
acquired property or, in the case of a
disposition, as a reduction in the amount
realized on the disposition).
Taxes assessed against local benefits
that increase the value of the property
assessed (such as for paving, etc.).
Taxes deducted elsewhere on the
return.
See section 164(d) for information on
the apportionment of taxes on real
property between a seller and a
purchaser.
Note. Section 9010 of the Patient
Protection and Affordable Care Act
imposes a fee on each covered entity
engaged in the business of providing
health insurance for United States health
-12-

Instructions for Form 1120-PC (2017)

certain high-yield discount obligations
issued before January 1, 2011. See
section 163(e)(5)(F), and Notice 2010-11,
2010-4 I.R.B. 326.
Interest which is allocable to
unborrowed policy cash values of life
insurance, endowment, or annuity
contracts issued after June 8, 1997. See
section 264(f). Attach a statement
showing the computation of the deduction.
Section 108(i) deductions. If the
corporation issued a debt instrument with
OID that is subject to section 108(i)(2)
because of an election to defer the income
from the cancellation of debt (COD), the
interest deduction for this OID is deferred
until the COD is includible in income. The
accrued OID is allowed as a deduction
ratably over the 5-year period that the
COD is includible in income. The
deduction is limited to the amount of COD
subject to the section 108(i) election. In
addition, a deferred COD deduction may
be allowed as a deduction in the current
year because of an accelerated event.
See section 108(i)(5)(D).

See Pub. 535 for more information on
depletion.
Line 24. Pension, profit-sharing, etc.,
plans. Enter the deduction for
contributions to qualified pension,
profit-sharing, or other funded deferred
compensation plans.

company that is an interinsurer or
reciprocal underwriter may deduct the
increase in savings credited to subscriber
accounts for the tax year.
Savings credited to subscriber
accounts means the surplus credited to
the individual accounts of subscribers
before the 16th day of the 3rd month
following the close of the tax year. This is
true only if the corporation would be
required to pay this amount promptly to a
subscriber if the subscriber ended the
contract when the corporation's tax year
ends. The corporation must notify the
subscriber as required by Regulations
section 1.823-6(c)(2)(v). The subscriber
must treat any savings credited to the
subscriber's account as a dividend paid or
declared.

DRAFT AS OF
March 23, 2018

Line 20b. Less tax-exempt interest expense. Enter interest paid or accrued
during the tax year on indebtedness
incurred or continued to purchase or carry
obligations if the interest is wholly exempt
from income tax. See section 265.
Line 21. Charitable contributions.
Include charitable, etc., contributions, as
provided in section 170. See section 170
and its regulations for limitations,
carryover, exclusions, requirements,
substantiation, and other rules.
See Pub. 526, Charitable
Contributions, for more information.
Note. P.L. 115-97 amends section 170(f)
(8) by increasing substantiation
requirements effective for contributions
made in tax years beginning after 2016.
Note. See Pub. 976, Disaster Relief, for
the suspension of contribution limitations.
Line 22. Depreciation. Include on line 22
depreciation and the cost of certain
property that the corporation elected to
expense under section 179. See Form
4562 and the Instructions for Form 4562.
Line 23. Depletion. See sections 613
and 613A for percentage depletion rates
applicable to natural deposits. Also, see
section 291 for the limitation on the
depletion deduction for iron ore and coal
(including lignite).
Attach Form T (Timber), Forest
Activities Schedule, if a deduction for
depletion of timber is taken.
There are special rules for intangible
drilling and development costs incurred
outside the United States. See section
263(i).

Instructions for Form 1120-PC (2017)

Note. Employers who maintain a plan are
generally required to file Form 5500, Form
5500-SF, or Form 5500-EZ. See
www.efast.dol.gov and IRS.gov/
Form5500ez.

Line 25. Employee benefit programs.
Enter contributions to employee benefit
programs not claimed elsewhere on the
return (for example, insurance, health and
welfare programs, etc.) that are not an
incidental part of a pension, profit-sharing,
etc., plan included on line 24.

Line 27. Additional deduction. Enter on
line 27 the total from Form 8816, Part II,
line 5.
Any insurance company taking the
additional deduction must:
Make special estimated tax payments
equal to the tax benefit from the deduction
and
Establish and maintain a Special Loss
Discount Account. See section 847 and
Form 8816 for more information.
Line 29. Dividends to policyholders.
Enter the total dividends and similar
distributions paid or declared to
policyholders, as policyholders, except in
the case of a mutual fire insurance
company exclusively issuing perpetual
policies. Whether dividends have been
paid or declared should be determined
according to the method of accounting
employed by the insurance company.
Dividends and similar distributions.
Include amounts returned or credited to
policyholders on cancellation or expiration
of policies issued by a mutual fire or flood
insurance company:
1. Where the premium deposits for
the policy are the same (regardless of the
length of the policy) and
2. The unabsorbed portion of the
premium deposits not required for losses,
expenses, or establishment of reserves is
returned or credited to the policyholder on
cancellation or expiration of the policy.
In the case of a qualified group
self-insurers fund, the fund's deduction for
policyholder dividends is allowed no
earlier than the date the state regulatory
authority determines the amount of the
policyholder dividend that may be paid.
See section 6076 of the Technical and
Miscellaneous Revenue Act of 1988.
Line 30. Mutual interinsurers or reciprocal underwriters—increase in subscriber accounts. A mutual insurance
-13-

Line 31. Other deductions. Attach a
statement listing by type and amount all
allowable deductions under sections
832(c)(1) and (10) (net of the annual
statement change in undiscounted unpaid
loss adjustment expenses) that are not
deductible on lines 15 through 30.
Examples of other deductions may
include the following. See Pub. 535 for
details on other deductions that may apply
to corporations.
The domestic production activities
deduction. See Form 8903.
Certain business start-up and
organizational costs (discussed earlier
under Limitations on Deductions).
Legal and professional fees.
Supplies used and consumed in the
business.
Travel, meals, and entertainment
expenses. Special rules apply (discussed
later).
Utilities.
Ordinary losses from trade or business
activities of a partnership (from
Schedule K-1 (Form 1065 or 1065-B)). Do
not offset ordinary income against
ordinary losses. Instead, include the
income on line 13. Show the partnership's
name, address, and EIN on a separate
statement attached to this return. If the
amount entered is from more than one
partnership, identify the amount from each
partnership.
Any extraterritorial income exclusion
from Form 8873, Extraterritorial Income
Exclusion.
Deduction for certain energy efficient
commercial building property placed in
service during the tax year.
Dividends paid in cash on stock held by
an employee stock ownership plan.
However, a deduction may only be taken
for the dividends above if, according to the
plan, the dividends are:
1. Paid in cash directly to the plan
participants or beneficiaries;
2. Paid to the plan, which distributes
them in cash to the plan participants or

their beneficiaries no later than 90 days
after the end of the plan year in which the
dividends are paid;
3. At the election of the participants or
their beneficiaries (a) payable as provided
under 1 or 2 above, or (b) paid to the plan
and reinvested in qualifying employer
securities; or
4. Used to make payments on a loan
described in section 404(a)(9).
See section 404(k) for more details and
the limitation on certain dividends.
Do not deduct the following.
Fines or penalties paid to a government
for violating any law.
Lobbying expenses. However, see
exceptions (discussed later).

deduction or to any carryback of a net
operating loss).
Line 36b. Net operating loss deduction. Section 172 provides for a net
operating loss (NOL) deduction, limitation,
carryovers, and carrybacks. Attach a
statement showing the computation of the
NOL deduction.
Note. P.L. 115-97 amended section
172. Some of the changes apply to losses
arising in tax years beginning after 2017
and some of the changes apply to net
operating losses arising in tax years
ending after 2017.
The following special rules apply.
Section 382 provides a limitation on net
operating loss carryforwards and certain
built-in losses following ownership
change.
Note. P.L. 115-97 amended section
382 for tax years beginning after 2017.
If a corporation acquires control of
another corporation (or acquires its assets
in a reorganization), the amount of
pre-acquisition losses that may offset
recognized built-in gain may be limited
(see section 384).
If a corporation elects the alternative tax
on qualifying shipping activities under
section 1354, no deduction is allowed for
an NOL attributable to the qualifying
shipping activities to the extent that the
loss is carried forward from a tax year
preceding the first tax year for which the
alternative tax election was made. See
section 1358(b)(2).
Section 831(b)(3) provides for a
limitation on use of net operating losses.
For more details on the NOL deduction,
see section 172, section 844, and the
Instructions for Form 1139, Corporation
Application for Tentative Refund.

Schedule B, Part
I—Taxable Investment
Income of Electing Small
Companies
Note. (1) Once an election under section
831(b) is made to be taxed only on
investment income, it can only be revoked
with the consent of the Secretary, and (2)
a corporation making this election must
include on line 8, Gross investment
income, any amount subtracted from a
protection against loss account.

DRAFT AS OF
March 23, 2018

Travel, meals, and entertainment.
Section 274 provides rules for deducting
expenditures for entertainment,
amusement, recreation, qualified
transportation fringes, gifts, travel, and
food and beverages for employees. There
are special rules for amounts the
corporation treats as compensation.
Note. P.L. 115-97 amended section 274
to provide different rules for some
amounts incurred or paid after 2017 and
different rules for some amounts incurred
or paid after 2025.
Lobbying expenses. Section 162(e)
provides rules for deducting expenditures
for lobbying.
Note. P.L. 115-97 amended section
162(e) to provide different rules to
amounts paid or incurred after December
21, 2017.
Line 32. Total deductions. Section 848
(capitalization of certain policy acquisition
expenses) requires insurance companies
to capitalize specified policy acquisition
expenses and deduct them ratably over
time. Attach a statement showing all
computations. See section 848 and its
regulations.
Note. PL 115 -97 amends section 848 to
provide different rules for policy
acquisition expenses first required to be
capitalized in a tax year beginning after
2017.

Line 34b. Deduction on account of the
special income and deduction accounts. Enter the total of the amounts
required to be added under sections
832(e)(4) and (6). However, no deduction
is permitted unless tax and loss bonds are
purchased in an amount equal to the tax
benefit of the deduction. See section
832(e).
Note. The deduction on account of the
special income and deduction accounts is
limited to taxable income for the tax year
(computed without regard to this

Line 37. Taxable income. If line 37
(figured without regard to the items listed
below under Minimum taxable income) is
zero or less, the corporation may have an
NOL.
Minimum taxable income. The
corporation's taxable income cannot be
less than the largest of the following
amounts.
The inversion gain of the corporation for
the tax year, if the corporation is an
expatriated entity or a partner in an
expatriated entity. See section 7874(a).
The sum of the corporation's excess
inclusions from its residual interest in a
REMIC from Schedules Q (Form 1066),
line 2c, and the corporation's taxable
income determined solely with respect to
its ownership and high-yield interests in
FASITs. See sections 860E(a) and 860J
(repealed).

Income

Line 1a, column (a). Gross interest.
Enter the gross amount of interest income,
including all tax-exempt interest income.
Line 1b, column (a). Interest exempt
under section 103. Enter the amount of
interest on state and local bonds that is
exempt from taxation under section 103.
See the instructions for Schedule A,
line 3b, column (a), for more information.

Lines 1a and 1b, column (b). Amortization of premium. Enter on line 1a,
column (b), the total amortization of
premium on tax-exempt bonds.
Enter on line 1b, column (b), the
amortization of bond premium on
tax-exempt bonds.
Note. Insurance companies electing to
amortize discount for tax purposes must
reduce the amortization of premium by
any amortization of discount.
Line 3. Gross rents. Enter the gross
rents received or accrued during the tax
year. Deduct rental expenses such as
repairs, interest, taxes, and depreciation
on the proper lines in the Deductions
section.
Line 5. Gross income from a trade or
business, other than an insurance
business, and from Form 4797. Enter
the gross income from a trade or
business, other than an insurance
business, carried on by the insurance
company or by a partnership of which the
insurance company is a partner. Include
section 1245 and section 1250 gains (as
modified by section 291) and other gains
from Form 4797, Sales of Business
Property, on investment assets only.
Line 6. Income from leases described
in sections 834(b)(1)(B) and 834(b)(1)
(C). Enter gross income from entering
into, changing, or ending any lease,
mortgage, or other instrument or
agreement from which the company earns
interest, rents, or royalties.
Line 8. Gross investment income. If
gross investment income includes an
amount subtracted from the protection

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Instructions for Form 1120-PC (2017)

against loss account, write on the dotted
line next to line 8, “PAL” and the amount.

Deductions
Line 9. Real estate taxes. Enter taxes
paid or accrued on real estate owned by
the corporation and deductible under
section 164.

Schedule B, Part
II—Invested Assets Book
Values

Use Schedule B, Part II, to compute the
limitation on investment expenses under
section 834(c)(2) when any general
expenses are in part assigned to, or
included in, the investment expenses
deducted on Schedule B, Part I, line 17.

stock owned by the corporation is based
on voting power and value of the stock.
Preferred stock described in section
1504(a)(4) is not taken into account.
Consolidated returns. Corporations
filing a consolidated return should see
Regulations sections 1.1502-13,
1.1502-26, and 1.1502-27 before
completing Schedule C.

DRAFT AS OF
March 23, 2018

Line 10. Other real estate expenses.
Enter all ordinary and necessary real
estate expenses, such as fire insurance,
heat, light, and labor. Also enter the cost
of incidental repairs, such as labor and
supplies, that do not add to the property's
value or appreciably prolong its life. Do not
include any amount paid for new buildings
or for permanent improvements or
betterments made to increase the value of
any property or any amount spent on
foreclosed property before the property is
held for rent.
Line 11. Depreciation. Enter
depreciation on assets only to the extent
that the assets are used to produce gross
investment income reported on
Schedule B, lines 1 through 7. For more
information, see the instructions for
line 22, Schedule A.
Note. See section 834(d)(1) regarding
the limitation of expenses on real estate
owned and occupied in part or in whole by
a mutual insurance company.
Line 12. Depletion. Enter any allowable
depletion on royalty income reported on
line 4, Schedule B. See the instructions for
line 23, Schedule A, for more information.

Line 13. Trade or business deductions.
Enter the total deductions related to any
trade or business income included in
gross investment income under section
834(b)(2). Do not include deductions for
any insurance business. Do not include
losses from sales or exchanges of capital
assets or property used in the business, or
from the compulsory or involuntary
conversion of property used in the trade or
business.
Line 14. Interest. See the instructions for
lines 20a and 20b, Schedule A.
Line 17. Investment expenses. Enter
expenses that are properly chargeable as
investment expenses. If general expenses
are allocated to investment expenses, the
total deduction cannot be more than the
amount on Schedule B, Part II, line 39.
Attach a statement showing the kind and
amount of general expenses. Minor items
may be grouped together.
See section 267 for the limitation on
deductions for unpaid expenses and
interest in transactions between related
taxpayers.

Schedule C—Dividends
and Special Deductions
Definitions

The acquisition date for investments
acquired by direct purchase is the trade
date rather than the settlement date. For
investments not acquired by direct
purchase (such as those acquired through
transfers among affiliates, tax-free
reorganizations, or the liquidation of a
subsidiary, etc.), the actual acquisition
date should be used regardless of the
holding period determined under section
1223.
A special rule applies in determining
the acquisition date of dividends received
from affiliates. This rule provides that the
portion of any 100% dividend which is
related to prorated amounts be treated as
received with respect to stock acquired on
the later of:
(a) the date the payor acquired the
stock or obligation to which the prorated
amounts are attributable or
(b) the first day on which the payor and
payee were members of the same
affiliated group as defined in section
243(b).
Also, if the taxpayer is a member of an
affiliated group filing a consolidated return,
its determination of dividends received is
made as if the group were not filing a
consolidated return.

Prorated amounts. Prorated amounts
means tax-exempt interest and dividends
for which a deduction is allowable under
section 243, 244 (as affected by P.L.
113-295, Div. A, section 221(a)(41)(A),
Dec. 19, 2014, 128 Stat. 4043), or 245
(other than 100% dividends).
100% dividend. 100% dividend means
any dividend if the percentage used for
purposes of determining the deduction
allowable under section 243, 244 (as
affected by P.L. 113-295, Div. A, section
221(a)(41)(A), Dec. 19, 2014, 128 Stat.
4043), or 245(b) is 100%. See section
243, section 244 as affected by P.L.
113-295, and section 245.

Lines 1 through 25
For purposes of the 20% ownership test
on lines 1 through 7, the percentage of

Instructions for Form 1120-PC (2017)

-15-

Lines 1 through 9, column (a). Enter in
column (a) of the appropriate line those
dividends that are subject to the
provisions of section 832(b)(5)(B).This will
include:
1. All dividends (other than 100%
dividends) received on stock acquired
after August 7, 1986, and
2. 100% dividends received on stock
acquired after August 7, 1986, to the
extent that such dividends are attributable
to prorated amounts (see definition
earlier).
In the case of an insurance company
that files a consolidated return, the
determination with respect to any dividend
paid by a member to another member of
the affiliated group is made as if no
consolidated return was filed. See section
832(g).
Line 1. Enter dividends (except those
received on debt-financed stock acquired
after July 18, 1984 (see section 246A))
that are:
Received from less-than-20%-owned
domestic corporations subject to income
tax, and
Qualified for the 70% deduction under
section 243(a)(1).
See section 246 and section 854 for
limitations and exclusions.
Report so-called dividends or earnings
received from mutual savings banks, etc.,
as interest. Do not treat them as
dividends.
Line 2. Enter on line 2:
Dividends (except those received on
debt-financed stock acquired after July 18,
1984) that are received from
20%-or-more-owned domestic
corporations subject to income tax and
that are subject to the 80% deduction
under section 243(c), and
Taxable distributions from an IC-DISC
or former DISC that are considered
eligible for the 80% deduction.
Line 3. Enter the following.
Dividends received on debt-financed
stock acquired after July 18, 1984, from
domestic and foreign corporations subject
to income tax that would otherwise be
subject to the dividends-received
deduction under section 243(a)(1), 243(c),
or 245(a). Generally, debt-financed stock
is stock that the corporation acquired by

incurring a debt (for example, it borrowed
money to buy the stock).
Dividends received from a RIC on
debt-financed stock. The amount of
dividends eligible for the
dividends-received deduction is limited by
section 854(b). The corporation should
receive a notice from the RIC specifying
the amount of dividends that qualify for the
deduction.

Worksheet for Schedule C, line 23

Keep for Your Records

1. Refigure the amount from Schedule A, line 35 or Schedule B,
line 19, whichever applies, without any domestic production
activities deduction, any adjustment under section 1059, and
without any capital loss carryback to the tax year under section
1212(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Enter the sum of the amounts from line 22, column (b) (without
regard to wholly owned foreign subsidiary dividends) and line 9,
column (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

DRAFT AS OF
March 23, 2018

Line 4. Enter dividends received on
preferred stock of a less-than-20%-owned
public utility that is subject to income tax
and is allowed the deduction provided in
section 247 (as affected by P.L. 113-295,
Div. A, section 221(a)(41)(A), Dec. 19,
2014, 128 Stat. 4043) for dividends paid.
Line 5. Enter dividends received on
preferred stock of a 20%-or-more-owned
public utility that is subject to income tax
and is allowed the deduction provided in
section 247 (as affected by P.L. 113-295,
Div. A, section 221(a)(41)(A), Dec. 19,
2014, 128 Stat. 4043) for dividends paid.

Line 6. Enter the U.S.-source portion of
dividends that:
Are received from
less-than-20%-owned foreign
corporations, and
Qualify for the 70% deduction under
section 245(a). To qualify for the 70%
deduction, the corporation must own at
least 10% of the stock of the foreign
corporation by vote and value.
Also include dividends received from a
less-than-20%-owned foreign sales
corporation (FSC) that:
Are attributable to income treated as
effectively connected with the conduct of a
trade or business within the United States
(excluding foreign trade income) and
Qualify for the 70% deduction under
section 245(c)(1)(B).
Line 7. Enter the U.S.-source portion of
dividends that:
Are received from 20%-or-more-owned
foreign corporations, and
Qualify for the 80% deduction under
section 245(a).
Also include dividends received from a
20%-or-more-owned FSC that:
Are attributable to income treated as
effectively connected with the conduct of a
trade or business within the United States
(excluding foreign trade income) and
Qualify for the 80% deduction provided
in section 245(c)(1)(B).
Line 8. Enter dividends received from
wholly owned foreign subsidiaries that are
eligible for the 100% deduction under
section 245(b).
In general, the deduction under section
245(b) applies to dividends paid out of the
earnings and profits of a foreign
corporation for a tax year during which:

4. Multiply line 3 by 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. Add lines 16, 19, 21, and 22 (without regard to FSC dividends),
column (b), and the portion of the deduction on line 17, column
(b), that is attributable to dividends received from
20%-or-more-owned corporations . . . . . . . . . . . . . . . . . . . . . . .
6. Enter the smaller of line 4 or line 5. If line 5 is greater than line 4,
stop here; enter the amount from line 6 on line 23, column (b),
and do not complete the rest of this worksheet . . . . . . . . . . . . .
7. Enter the total amount of dividends received from
20%-or-more-owned corporations that are included on lines 2,
3, 5, 7, and 8 (without regard to FSC dividends), column
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Subtract line 7 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9. Multiply line 8 by 70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Subtract line 5 from line 23, column (b) (without regard to FSC
dividends) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . .
12. Dividends-received deduction after limitation (section
246(b)). Add lines 6 and 11. Enter the result here and on
line 23, column (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All of its outstanding stock is directly or
indirectly owned by the domestic
corporation receiving the dividends, and
All of its gross income from all sources
is effectively connected with the conduct
of a trade or business within the United
States.
Also, include on line 8 dividends from
FSCs that are attributable to foreign trade
income and that are eligible for the 100%
deduction provided in section 245(c)(1)
(A).
Line 9. Enter only those dividends that
qualify under section 243(b) for the 100%
dividends-received deduction described in
section 243(a)(3).
The 100% deduction does not apply to
affiliated group members that are joining in
the filing of a consolidated return.
Line 10, column (b). Enter foreign
dividends not reportable on lines 3, 6, 7, or
8 of column (b). Include on line 10 the
corporation's share of distributions from a
section 1291 fund from Form 8621, to the
extent that the amounts are taxed as
dividends under section 301. See Form
8621 and the Instructions for Form 8621.

-16-

Line 11, column (b). Include income
constructively received from controlled
foreign corporations under subpart F. This
amount should equal the total subpart F
income reported on Schedule I of Form
5471, Information Return of U.S. Persons
With Respect to Certain Foreign
Corporations. These amounts are treated
as dividends only to the extent provided in
the Internal Revenue Code and Treasury
Regulations.
Line 12, column (b). Include gross-up
for taxes deemed paid under sections 902
and 960.
Note. P.L. 115-97 repealed the section
902 indirect foreign tax credits, amended
the section 960 credit determination, and
amended the section 78 gross up for
deemed paid foreign tax credit, effective
for tax years of foreign corporations
beginning after 2017, and tax years of
U.S. shareholders in which or with which
such tax years of foreign corporations
end.
Line 13, column (b). Include the
following.
1. Dividends (other than capital gain
distributions reported on Schedule D
Instructions for Form 1120-PC (2017)

(Form 1120) and exempt-interest
dividends) that are received from RICs
and that are not subject to the 70%
deduction.
2. Dividends from tax-exempt
organizations.
3. Dividends (other than capital gain
distributions) received from a REIT that,
for the tax year of the trust in which the
dividends are paid, qualifies under
sections 856 through 860.
4. Dividends not eligible for a
dividends-received deduction, which
include the following.
a. Dividends received on any share of
stock held for less than 46 days during the
91-day period beginning 45 days before
the ex-dividend date. When counting the
number of days the corporation held the
stock, you cannot count certain days
during which the corporation's risk of loss
was diminished. See section 246(c)(4)
and Regulations section 1.246-5 for more
details.
b. Dividends attributable to periods
totaling more than 366 days that the
corporation received on any share of
preferred stock held for less than 91 days
during the 181-day period that began 90
days before the ex-dividend date. When
counting the number of days the
corporation held the stock, you cannot
count certain days during which the
corporation's risk of loss was diminished.
See section 246(c)(4) and Regulations
section 1.246-5 for more details. Preferred
dividends attributable to periods totaling
less than 367 days are subject to the
46-day holding period rule above.
c. Dividends on any share of stock to
the extent the corporation is under an
obligation (including a short sale) to make
related payments with respect to positions
in substantially similar or related property.
5. Any other taxable dividend income
not properly reported elsewhere on
Schedule C.

dividends-received deduction. See
sections 172(d) and 246(b).

Schedule E—Premiums
Earned
Definitions

Lines 2b and 4b. Include on lines 2b and
4b 90% of unearned premiums for
insurance against default in the payment
of principal or interest on securities
described in section 165(g)(2)(C) (relating
to worthless securities) with maturities of
more than 5 years. See section 832(b)(7)
(B).

DRAFT AS OF
March 23, 2018

Line 17. Dividends received on
debt-financed stock acquired after July 18,
1984, are not entitled to the full 70% or
80% dividends-received deduction. The
70% or 80% deduction is reduced by a
percentage that is related to the amount of
debt incurred to acquire the stock. See
section 246A. Also, see section 245(a)
before making this computation for an
additional limitation that applies to
dividends received from foreign
corporations. Attach a statement showing
how the amount on line 17 was figured.
Line 23, column (b). Generally, line 23,
column (b), cannot exceed the amount
from the Worksheet for Schedule C,
line 23, above. However, in a year in
which an NOL occurs, this limitation does
not apply even if the loss is created by the
Instructions for Form 1120-PC (2017)

Undiscounted unearned premiums.
Undiscounted unearned premiums means
the unearned premiums shown in the
annual statement filed for the year ending
with or in the tax year.

Applicable interest rate. Applicable
interest rate means the annual rate
determined under section 846(c)(2) for the
calendar year the premiums are received.

Applicable statutory premium recognition pattern. Applicable statutory
premium recognition pattern means the
statutory premium recognition pattern in
effect for the calendar year the premiums
are received, and is based on the statutory
premium recognition pattern which applies
to premiums received by the corporation
in that calendar year. For purposes of the
preceding sentence, premiums received
during any calendar year will be treated as
received in the middle of such year.

Medical loss ratio. Section 833(c)(5)
limits the 100% deduction of unearned
premiums by Blue Cross and Blue Shield
organizations described in section 833(c)
(2), and other organizations described in
section 833(c)(3), to those with an MLR of
85% or more. Organizations with an MLR
less than 85% are allowed to deduct only
80% of unearned premiums. See section
833(c)(5), Regulations section 1.833-1
and Notice 2010-79 for more information.
Also see Notice 2012-37 applicable to the
first tax year beginning after December 31,
2012. See Regulations section 1.833-1(c)
(2) for transition rules applicable to the first
tax year beginning after December 31,
2013 and December 31, 2014.
Line 1. Enter gross premiums written on
insurance contracts during the tax year,
less return premiums and premiums paid
for reinsurance. See Regulations section
1.832-4.
Lines 2a and 4a. Include on lines 2a and
4a the following.
1. All life insurance reserves, as
defined in section 816(b) (but determined
under section 807).
2. Generally, all section 833
organizations with an MLR of 85% or more
(discussed earlier) are permitted to enter
100% of unearned premiums on lines 2a
and 4a. Section 833 organizations with an
MLR of less than 85% must change to an
80% Unearned Premium Reserve. For
more information, see Accounting
Methods, earlier.

-17-

Lines 2c and 4c. The amount of
discounted unearned premiums at the end
of any tax year must be the present value
of those premiums (as of such time and
separately with respect to premiums
received in each calendar year)
determined by using:
1. The amount of the undiscounted
unearned premiums at such time;
2. The applicable interest rate; and
3. The applicable statutory premium
recognition pattern.
Lines 2d and 4d. Include on lines 2d and
4d 80% of the total of all unearned
premiums not reported on lines 2a through
2c, or 4a through 4c, respectively.
A reciprocal or interinsurer required
under state law to reflect unearned
premiums on its annual statement net of
premium acquisition expenses should
increase its unearned premiums by the
amount of such acquisition expenses prior
to making the computation on lines 2d and
4d. See section 832(b)(7)(E).
Line 6. Transitional adjustments apply to
companies which become taxable under
section 831(a). See section 832(b)(7)(D).

Schedule F—Losses
Incurred
Line 1. Losses paid. Enter the total
losses paid on insurance contracts during
the tax year less salvage and reinsurance
recovered during the tax year. Attach a
statement that reconciles the amount
entered on line 1 to the amount reported
on the corporation's annual statement.
Lines 2a and 4a. Unpaid losses on life
insurance contracts. Unpaid losses
must be adjusted for recoveries of
reinsurance. The amounts of expected
recoveries should be estimated based on
the facts in each case and the
corporation's experience with similar
cases. See Regulations section
1.832-4(b).
Lines 2b and 4b. Discounted unpaid
losses outstanding. Enter all discounted
unpaid losses as defined in section 846.
Section 846 provides that the amount
of discounted unpaid losses must be
figured separately by each line of business
(multiple peril lines must be treated as a
single line of business) and by each
accident year and must be equal to the

present value of those losses determined
by using the:
1. Amount of the undiscounted unpaid
losses,
2. Applicable interest rate, and
3. Applicable loss payment pattern.
Special rules apply with respect to:
Unpaid losses related to disability
insurance (other than credit disability
insurance),
Noncancelable accident and health
insurance,
Cancelable accident and health
insurance, and
International and reinsurance lines of
business.
With regard to the special rules for
discounting unpaid losses on accident and
health insurance (other than disability
income insurance), unpaid losses are
assumed to be paid in the middle of the
year following the accident year.
Generally, the amount of undiscounted
unpaid losses means the unpaid losses
and unpaid loss adjustment expenses
shown in the annual statement. However,
see Regulations section 1.846-1(a)(1)
referring to Regulations section 1.832-4(b)
relating to the determination of unpaid
losses.
Under section 832(b)(5)(A), unpaid
losses must be adjusted to take into
account estimated recoveries due to
salvage and reinsurance for those losses.
If the amounts shown in the annual
statement were determined on a
discounted basis and if the extent to which
these losses were discounted can be
determined on the basis of information
disclosed on or with the annual statement,
the amount of the undiscounted unpaid
losses must be recomputed to eliminate
any reduction caused by such
discounting. In no event can the amount of
discounted unpaid losses with respect to
any line of business for an accident year
exceed the total amount of unpaid losses
with respect to any line of business for an
accident year as reported on the annual
statement. Also see Regulations section
1.832-4(d) regarding increasing unpaid
losses shown on the annual statement by
salvage recoverable. Also see Rev. Proc.
92-77, 1992-2 C.B. 454.
The applicable interest rate for each
calendar year and the applicable loss
payment pattern for each accident year for
each line of business are determined by
the IRS. The applicable interest rate and
loss payment patterns for 2017 will be
published in Rev. Proc. 2018-13, 2018-7
I.R.B. 356. The applicable interest rate
and loss payment patterns for 2015 and
2016 are published in Rev. Proc. 2015-52,
2015-45 I.R.B. 638 and 2016-58, 2016-51
I.R.B. 839, respectively.

Corporations having sufficient historical
experience to determine a loss payment
pattern may, under certain circumstances,
elect under section 846(e) to use their own
historical experience (instead of the loss
payment patterns determined by the IRS).
If this election is made, the loss payment
patterns will be based on the most recent
calendar year for which an annual
statement was filed before the beginning
of the accident year. The election will not
apply to any international or reinsurance
line of business. If the corporation makes
this election, check the “Yes” column for
question 7 in Schedule I, Other
Information. For more information, see
section 846(e), Regulations section
1.846-2, and Rev. Proc. 92-76, 1992-1
C.B. 453.

policyholders to the extent that the gross
receipts from their sale or exchange are
not more than the amount by which the
sum of dividends and similar distributions
paid to policyholders, losses paid, and
expenses paid for the tax year is more
than the total on line 9, Schedule G.
Total gross receipts from sales of
capital assets (line 12, column (c)) must
not be more than line 10. If necessary, the
corporation may report part of the gross
receipts from a particular sale of a capital
asset on this schedule and the rest on
Schedule D (Form 1120). Otherwise, do
not include on Schedule D (Form 1120)
any sales reported on this schedule.

DRAFT AS OF
March 23, 2018
Note. There is a special application of the
“fresh start” provision for an insurance
company that is not subject to tax under
section 831(a) for its first tax year
beginning after December 31, 1986,
because (1) it is described in section
501(c) or (2) it is subject to tax under
section 831(b) on its investment income.
If the insurance company later
becomes subject to tax under section
831(a), the rules relating to the fresh start
under the discounting provisions are
applied by treating the last tax year before
the year in which the insurance company
becomes subject to tax under section
831(a) as the insurance company's last
tax year beginning before 1987. See
section 1010(e) of the Technical and
Miscellaneous Revenue Act of 1988 and
Notice 88-100, 1988-2 C.B. 439.

Lines 6 and 7. Estimated salvage and
reinsurance recoverable. Enter on lines
6 and 7 the amount of estimated salvage
and reinsurance recoverable. The amount
of estimated salvage recoverable must be
determined on a discounted basis. The
salvage discount factors for 2017 will be
published in Rev. Proc. 2018-13, 2018-07
I.R.B. 356. The salvage discount factors
for 2018 will be published in the Internal
Revenue Bulletin when available. Also see
Regulations section 1.832-4.
Line 9. Tax-exempt interest subject to
section 832(b)(5)(B). Enter the amount
of tax-exempt interest received or accrued
during the tax year on investments made
after August 7, 1986. For information
regarding the determination of the
acquisition date of an investment, see the
instructions for Schedule C.

Schedule G—Other Capital
Losses

Capital assets are considered sold or
exchanged to provide funds to meet
abnormal insurance losses and to pay
dividends and make similar distributions to
-18-

Schedule H—Special
Deduction and Ending
Adjusted Surplus for
Section 833 Organizations
Section 833(c)(5) provides that section
833(a)(2) and section 833(a)(3) do not
apply to any organization with an MLR of
less than 85%. See section 833(c)(5),
Regulations section 1.833-1 and Notice
2010-79 for more information. Also see
Notice 2012-37 applicable to the first tax
year beginning after December 31, 2012.
See Regulations section 1.833-1(c)(2) for
transition rules applicable to the first tax
year beginning after December 31, 2013
and December 31, 2014.

Line 5. Beginning adjusted surplus. If
the corporation was a section 833
organization in 2015, it should enter the
amount from its 2015 Form 1120-PC,
Schedule H, line 10.
Generally, the adjusted surplus as of
the beginning of any tax year is an amount
equal to the adjusted surplus as of the
beginning of the preceding tax year:
1. Increased by the amount of any
adjusted taxable income for the preceding
tax year or
2. Decreased by the amount of any
adjusted net operating loss for the
preceding tax year.
If 2017 is the first tax year the taxpayer
qualifies as a section 833 organization,
see section 833(c)(3)(C) to determine the
adjusted surplus as of the beginning of the
2017 tax year.
For purposes of the computation of the
adjusted surplus, the terms “adjusted
taxable income” and “adjusted net
operating loss” mean the taxable income
or the net operating loss, respectively,
determined with the following
modifications:
1. Without regard to the deduction
determined under section 833(b)(1);
2. Without regard to any carryover or
carryback to that tax year; and
Instructions for Form 1120-PC (2017)

3. By increasing gross income by an
amount equal to the net exempt income
for the tax year.
Line 6. Special deduction. The special
deduction under section 833(b) cannot be
taken if the MLR is less than 85%. If the
MLR is less than 85%, enter zero on line 6
and Schedule A, line 34a.

Note. If the corporation is an “excluded
member” of a controlled group (see
definition in the Instructions for
Schedule O (Form 1120)), it is still
considered a member of a controlled
group for this purpose.
Affiliated group. An affiliated group is
one or more chains of includible
corporations (section 1504(a)) connected
through stock ownership with a common
parent corporation. The common parent
must be an includible corporation and the
following requirements must be met.
1. The common parent must own
directly stock that represents at least 80%
of the total voting power and at least 80%
of the total value of the stock of at least
one of the other includible corporations.
2. Stock that represents at least 80%
of the total voting power and at least 80%
of the total value of the stock of each of
the other corporations (except for the
common parent) must be owned directly
by one or more of the other includible
corporations.

Any foreign estate or trust within the
meaning of section 7701(a)(31); or
A foreign government (or one of its
agencies or instrumentalities) to the extent
that it is engaged in the conduct of a
commercial activity as described in
section 892.
However, the term “foreign person”
does not include any foreign person who
consents to the filing of a joint income tax
return.

DRAFT AS OF
March 23, 2018

Note. The deduction for any tax year is
limited to taxable income for that tax year
determined without regard to this
deduction.

Note. Under section 833(b)(4), any
determination under section 833(b) must
be made by only taking into account items
from the health-related business of the
corporation.

Line 8a. Adjusted tax-exempt income.
Reduce the total tax-exempt interest
received or accrued during the tax year by
any amount (not otherwise deductible)
which would have been allowable as a
deduction for the tax year if such interest
were not tax-exempt. Enter the result on
line 8a.

Line 8b. Adjusted dividends-received
deduction. Reduce the total amount
allowed as a deduction under sections
243, 244 (as affected by P.L. 113-295,
Div. A, section 221(a)(41)(A), Dec. 19,
2014, 128 Stat. 4043), and 245 by the
amount of any decrease in deductions
allowable for the tax year because of
section 832(b)(5)(B) when the decrease is
caused by the deductions under sections
243, 244 (as affected by P.L. 113-295,
Div. A, section 221(a)(41)(A), Dec. 19,
2014, 128 Stat. 4043), and 245. Enter the
result on line 8b.

Schedule I—Other
Information

The following instructions apply to Form
1120-PC, page 7. Complete all items that
apply to the corporation.

Question 4

Check the “Yes” box if:
The corporation is a subsidiary in an
affiliated group (defined later), but is not
filing a consolidated return for the tax year
with that group, or
The corporation is a subsidiary in a
parent-subsidiary controlled group. For a
definition of parent-subsidiary controlled
group, see the Instructions for Schedule O
(Form 1120).
Any corporation that meets either of the
requirements above should check the
“Yes” box. This applies even if the
corporation is a subsidiary member of one
group and the parent corporation of
another.

Instructions for Form 1120-PC (2017)

For this purpose, the term “stock”
generally does not include any stock that
(a) is nonvoting, (b) is nonconvertible, (c)
is limited and preferred as to dividends
and does not participate significantly in
corporate growth, and (d) has redemption
and liquidation rights that do not exceed
the issue price of the stock (except for a
reasonable redemption or liquidation
premium). See section 1504(a)(4).

Question 6

Check the “Yes” box if one foreign person
owned at least 25% of (a) the total voting
power of all classes of stock of the
corporation entitled to vote, or (b) the total
value of all classes of stock of the
corporation.
The constructive ownership rules of
section 318 apply in determining if a
corporation is foreign owned. See section
6038A(c)(5) and the related regulations.
Enter on line 6a the percentage owned
by the foreign person specified in question
6. On line 6b, enter the name of the
owner's country.
Note. If there is more than one
25%-or-more foreign owner, complete
lines 6a and 6b for the foreign person with
the highest percentage of ownership.
Foreign person. The term “foreign
person” means:
An individual who is not a citizen or
resident of the United States;
An individual who is a citizen or resident
of a U.S. possession who is not otherwise
a citizen or resident of the United States;
Any partnership, association, company,
or corporation that is not created or
organized in the United States;
-19-

Owner's country. For individuals, the
term “owner's country” means the country
of residence. For all others, it is the
country where incorporated, organized,
created, or administered.
Requirement to file Form 5472. If the
corporation checked “Yes,” it may have to
file Form 5472, Information Return of a
25% Foreign-Owned U.S. Corporation or
a Foreign Corporation Engaged in a U.S.
Trade or Business. Generally, a 25%
foreign-owned corporation that had a
reportable transaction with a foreign or
domestic related party during the tax year
must file Form 5472. See the Instructions
for Form 5472 for filing instructions and
penalties for failure to file.

Item 10

Show any tax-exempt interest received or
accrued. Include any exempt-interest
dividends received as a shareholder in a
mutual fund or other RIC.

Item 11

If the corporation has an NOL, it generally
can elect under section 172(b)(3) to waive
the entire carryback period for the NOL
and instead carry the NOL forward to
future tax years. To do so, check the box
on line 11 and file the tax return by its due
date, including extensions. Do not attach
the statement described in Temporary
Regulations section 301.9100-12T. Once
made, the election is irrevocable.
Corporations filing a consolidated
return that elect to waive the entire
carryback period for the group must also
attach the statement required by
Regulations section 1.1502-21(b)(3) or the
election will not be valid.

Item 12

Enter the amount of the NOL carryover to
the tax year from prior years, even if some
of the loss is used to offset income on this
return. The amount to enter is the total of
all NOLs generated in prior years but not
used to offset income (either as a
carryback or carryover) in a tax year prior
to 2017. Do not reduce the amount by any
NOL deduction reported on Schedule A,
line 36b.

Question 13

A corporation that files Form 1120-PC
must file Schedule UTP (Form 1120),

Uncertain Tax Position Statement, with its
2017 income tax return if:
For 2017, the corporation's total assets
equal or exceed $50 million;
The corporation or a related party
issued audited financial statements
reporting all or a portion of the
corporation's operations for all or a portion
of the corporation's tax year; and
The corporation has one or more tax
positions that must be reported on
Schedule UTP.

Also, if you checked “No,” your
deduction of unearned premiums is
limited. See the instructions for
Schedule E for more information.

Question 15

Only a corporation that qualifies as a small
company under section 831(b)(2) is
eligible to elect to be taxed on taxable
investment income under section 831(b) in
lieu of the tax otherwise applicable under
section 831(a). See section 831(b)(2)(A)
(iii). Section 831(b)(2)(A)(ii) provides that
a corporation must meet the diversification
requirements in section 831(b)(2)(B) to
qualify as a small company. A corporation
meets the diversification requirements if
under section 831(b)(2)(B)(i)(I) no more
than 20 percent of the net written
premiums (or, if greater, direct written
premiums) of such corporation for the
taxable year is attributable to any one
policyholder. However, a corporation that
does not meet this 20-percent test can
meet the diversification requirement under
section 831(b)(2)(B) if no person who
holds (directly or indirectly) an interest in
such insurance company is a specified
holder who holds (directly or indirectly)
aggregate interest in such insurance
company which constitutes a percentage
of the entire interests in such insurance
company which is more than 2% higher
than the percentage of interests in the
specified assets with respect to such
insurance company held (directly or
indirectly) by such specified holder under
section 831(b)(2)(B)(i)(II).

Schedule L—Balance
Sheets per Books
Note. All insurance companies required
to file Form 1120-PC must complete
Schedule L.
The balance sheets should agree with
the corporation's books and records.

DRAFT AS OF
March 23, 2018

For details, see the Instructions for
Schedule UTP.

Attach Schedule UTP to the
corporation's income tax return. Do not file
it separately. A taxpayer that files a
protective Form 1120-PC must also file
Schedule UTP if it satisfies the
requirements set forth above.

Question 14

Section 833(c)(5) provides that section
833(a)(2) and section 833(a)(3) do not
apply to a Blue Cross or Blue Shield
organization described in section 833(c)
(2), or other organization described in
section 833(c)(3), unless it has an MLR of
85% or more for the tax year.
For purposes of section 833(c)(5), the
MLR is equal to the amount expended on
reimbursement for clinical services
provided to enrollees (as defined in 45
C.F.R. 158.140) and for activities that
improve health care quality (as defined in
45 C.F.R. 158.150) under its policies
during the tax year (section 833(c)(5) MLR
numerator) divided by the total premium
revenue (section 833(c)(5) MLR
denominator). See section 833(c)(5),
Regulations section 1.833-1 and Notice
2010-79 for more information. Also see
Notice 2012-37 applicable to the first tax
year beginning after December 31, 2012.
See Regulations section 1.833-1(c)(2) for
transition rules applicable to the first tax
year beginning after December 31, 2013
and December 31, 2014.
Check the “Yes” box if the corporation
is a Blue Cross or Blue Shield organization
described in section 833(c)(2), or other
organization described in section 833(c)
(3), that has satisfied the MLR
requirements of section 833(c)(5).
If you checked “Yes,” you must enter
the following.
The section 833(c)(5) MLR numerator
on line 14(a),
The section 833(c)(5) MLR
denominator on line 14(b), and
The section 833(c)(5) percentage on
line 14(c).
If you checked “No,” enter zero on
Schedule H, line 6, and Schedule A,
line 34a. You cannot take the special
deduction. See the instructions for
Schedule H.

A corporation making an election under
section 831(b)(2)(A)(iii) must complete
Question 15 to indicate whether it qualifies
as a small company, and, therefore, is
eligible to make the election to be taxed
on taxable investment income because it
meets the diversification requirements of
the 20-percent test in section 831(b)(2)(B)
(i)(I). If the corporation answers “no” on
Question 15(a), then the corporation must
satisfy the specified holder/specified asset
test in section 831(b)(2)(B)(i)(II) to qualify
to make the section 831(b)(2)(A)(iii)
election to be taxed on taxable investment
income. If the corporation satisfies the
specified holder/specified asset test in
section 831(b)(2)(B)(i)(II), the corporation
should answer “yes” on question 15(b). If
the corporation does not satisfy either the
diversification requirements of section
831(b)(2)(B)(i)(I) or section 831(b)(2)(B)(i)
(II) for the taxable year (answering “no” for
both 15(a) and 15(b)), the corporation is
not a small company and, therefore, is not
eligible to be taxed on taxable investment
income under section 831(b) in lieu of the
tax otherwise applicable under section
831(a).

If filing a consolidated return, report
total consolidated assets, liabilities, and
shareholder's equity for all corporations
joining in the return. See Consolidated
Return, earlier.
Corporations with total assets
(non-consolidated or consolidated for all
corporations included within the tax
consolidation group) of $10 million or
more on the last day of the tax year must
file Schedule M-3 (Form 1120-PC) instead
of Schedule M-1. See the separate
Instructions for Schedule M-3 (Form
1120-PC) for provisions that also affect
Schedule L.
Line 1. Cash. Include certificates of
deposit as cash on this line.
Line 5. Tax-exempt securities. Include
on this line:
State and local government obligations,
the interest on which is excludable from
gross income under section 103(a), and
Stock in a mutual fund or other RIC that
distributed exempt-interest dividends
during the tax year of the corporation.
Line 18. Insurance liabilities. Include
on this line:
Undiscounted unpaid losses.
Loss adjustment expenses.
Unearned premiums.
See section 846 for more information.
Line 27. Adjustments to shareholders'
equity. Some examples of adjustments to
report on this line include:
Unrealized gains and losses on
securities held “available for sale.”
Foreign currency translation
adjustments.
The excess of additional pension
liability over unrecognized prior service
cost.
Guarantees of employee stock
ownership plan (ESOP) debt.
Compensation related to employee
stock award plans.
If the total adjustment to be entered on
line 27 is a negative amount, enter the
amount in parentheses.

Schedule M-1—
Reconciliation of Income
(Loss) per Books With
Income (Loss) per Return
All insurance companies required to file
Form 1120-PC, with total assets

-20-

Instructions for Form 1120-PC (2017)

(non-consolidated or consolidated for all
corporations included within the tax
consolidation group) of $10 million or
more on the last day of the tax year must
file Schedule M-3 (Form 1120-PC) instead
of Schedule M-1. See Schedule M-3
(Form 1120-PC), earlier. A corporation
filing Form 1120-PC that is not required to
file Schedule M-3 (Form 1120-PC) may
voluntarily file Schedule M-3 (Form
1120-PC) instead of Schedule M-1. See
the Instructions for Schedule M-3 (Form
1120-PC) for more information.

Meals and entertainment expenses not
deductible under section 274(n).
Expenses for the use of an
entertainment facility.
The part of business gifts over $25.
Expenses of an individual over $2,000
which are allocable to conventions on
cruise ships.
Employee achievement awards over
$400.
The cost of entertainment tickets over
face value (also subject to 50% limit under
section 274(n)).
The cost of skyboxes over the face
value of nonluxury box seat tickets.

The part of luxury water travel expenses
not deductible under section 274(m).
Expenses for travel as a form of
education.
Other nondeductible travel and
entertainment expenses.
For more information, see Pub. 535.
Line 7a. Tax-exempt interest. Report
any tax-exempt interest received or
accrued, including any exempt-interest
dividends received as a shareholder in a
mutual fund or other RIC. Also report this
same amount on Schedule I, item 10.

DRAFT AS OF
March 23, 2018

Line 5c. Travel and entertainment.
Include on line 5c any of the following.

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Do not send the tax form to this address. Instead, see Where To File, earlier.

Instructions for Form 1120-PC (2017)

-21-

Index
A
Accounting methods 4
Accounting methods, change
in 4
Accounting period (tax year) 5
Address Change 7
Adjustments to shareholders'
equity 20
Affiliated group 19
Amended return 7
Amortization 11
Assembling the return 3

Depository methods of tax
payment 3
Disclosure statement 5

Lobbying expenses 14
M
Medical loss ratio 5, 17–20
Minimum tax:
Alternative minimum tax 8
Prior year, credit for 8

B, Part II 15
C 15
E 17
F 17
G 18
H 18
I 19
L 20
M-1 20
M-3 6
Section 953 Election 7
Special estimated tax
payments:
Prior year(s) special
estimated tax payments
to be applied 9
Tax benefit rule 9

DRAFT AS OF
March 23, 2018

B
Backup withholding 9
Blue Cross or Blue Shield 17,
20
Business start-up
expenses 11
C
Charitable contributions 13
Consolidated return 6
Controlled group:
Brother-Sister 7
Combined group 7
Member of 7
Parent-Subsidiary 7
D
Deductions 10
Definitions:
100% dividend 15
Acquisition date 15
Applicable interest rate 17
Applicable statutory
premium recognition
pattern 17
Prorated amounts 15
Undiscounted unearned
premiums 17

E
Electronic deposit of tax refund
of $1 million or more 9
Electronic federal tax payment
system (EFTPS) 3
Electronic Filing 2
Employer identification number
(EIN) 6
Estimated tax:
Payments 4, 9
Penalty 4, 9
Extension of time to file 3
F
Final return 7
Foreign corporations 8
Foreign person 19
Foreign tax credit 8
Forms and publications, how
to get 2

O
Other deductions 13
Overpaid estimated tax 9
Owner's country 19

P
Paid preparer authorization 3
Patient-centered outcomes
research fee 1
Penalties 4, 9
Pension, profit-sharing, etc.
plans 13
Period covered 5
Personal holding company
tax 8
Private delivery services 2

G
General business credit 8
Golden parachute
payments 11
I
Insurance liabilities 20
Interest due on late payment of
tax 4
L
Limitation on
dividends-received
deduction 17
Limitations on deductions 10

N
NAIC annual statement 3
Name change 7
Net operating loss 14

R
Recordkeeping 5
Refundable credits 9
Related party transactions 10
S
Schedule:
A 9
B, Part I 14

-22-

T
Tax and payments 7
Tax-exempt securities 20
Tax issues, unresolved 2
Tax rate schedule 7
Travel, meals, and
entertainment 14
U
Uncertain Tax Positions 19
W
When to file, extension 3
Where to file 2
Who must file:
Exceptions 2
Life insurance
companies 2
Who must sign 3
Worksheet for Schedule C 16