1120-PC Instructions for Form 1120-PC

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2022

Department of the Treasury
Internal Revenue Service

Instructions for
Form 1120-PC

DRAFT AS OF
December 13, 2022
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 . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . .

Dec 12, 2022

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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

COVID-19 related credit for qualified sick and family leave.
Generally, the credit for qualified sick
and family leave wages, as enacted
under the Families First Coronavirus
Response Act (FFCRA) and amended
and extended by the COVID-related
Tax Relief Act of 2020, and the credit
for qualified sick and family leave
wages, as enacted under the
American Rescue Plan Act of 2021
(the ARP), have expired. However,
employers that paid qualified sick and
family leave wages in 2022 for leave
taken after March 31, 2020, and
before October 1, 2021, may be
eligible to claim a credit for qualified
sick and family leave wages in 2022.
See the March 2022 revision of the
Instructions for Form 941 and the
2022 Instructions for Form 944 for
more information. The no double
benefit rules continue to apply.
Increase in penalty for failure to
file. For tax years beginning in 2022,
the maximum penalty for failure to file
a tax return that is more than 60 days
late has increased to the smaller of
the tax due or $450. See Late filing of
return, later.
Form 1120-W now historical. Form
1120-W, Estimated Tax for
Corporations, and the Instructions for
Form 1120-W are now historical. The
2022 Form 1120-W (released in 2021)
and the 2022 Instructions for Form
1120-W (released in 2021) will be the
last revisions of the form and its
instructions. Prior versions will be
available on IRS.gov.
Alternative minimum tax. For tax
years beginning after December 31,
Cat. No. 64537I

2022, the Inflation Reduction Act of
2022 (the IRA) imposes a corporate
alternative minimum tax (AMT).
Applicable corporations (within the
meaning of section 59(k)) may be
required to pay this AMT. Short-period
filers with a tax year beginning after
December 31, 2022, and ending
before December 31, 2023, see
section 55 and the instructions for
Line 12, Other taxes, later.

Advanced manufacturing investment credit. An eligible corporation
that claims the advanced
manufacturing investment credit for
tax years ending after December 31,
2022, can make a deemed payment
election under section 48D. If the
election is made, the corporation is
treated as making a payment against
tax by the amount of the credit. See
section 48D and the Instructions for
Form 3468.

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.
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;
and
• The corporation has tried
repeatedly to contact the IRS but no
one has responded, or the IRS hasn't
responded by the date promised.

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 address:

DRAFT AS OF
December 13, 2022
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/ContactUs. The corporation can also call TAS
at 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 view, print, or
download 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 IRS will
process your order for forms and
publications as soon as possible.

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

General Instructions

Purpose of Form

Use Form 1120-PC, to report the
income, gains, losses, deductions,
and 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. 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 foreign corporation) for
-2-

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 is required 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. For additional
information and coordination with
Form 5472 filing by the domestic DE,
see the Instructions for Form 5472.

Electronic Filing

Go to IRS.gov/Filing for the latest
information. Also, go to 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
Instructions for Form 1120-PC (2022)

a short tax year ending any time 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.

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
complete the section.
The paid preparer must complete
the required preparer information and:
• Sign the return in the space
provided for the preparer's signature,
and
• Give a copy of the return to the
taxpayer.

Statements
NAIC annual statement.
Regulations section 1.6012-2(c)
requires that the National Association
of Insurance Commissioners (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.

DRAFT AS OF
December 13, 2022
Private Delivery Services

Corporations can use certain private
delivery services (PDSs) designated
by the 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 are using a PDS, go to IRS.gov/
PDSstreetAddresses.
Private delivery services
cannot deliver items to P.O.
CAUTION boxes. You must use the U.S.
Postal Service to mail any item to an
IRS P.O. box address.

!

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
a 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.

Note. A paid preparer may sign
original or amended returns by rubber
stamp, mechanical device, or
computer software program.

Paid Preparer
Authorization

If the corporation wants to allow the
IRS to discuss its 2022 tax return with
the paid 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.

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.
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.

Paid Preparer Use Only section. If
an employee of the corporation
completes Form 1120-PC, the paid
preparer space should remain blank.

The authorization will automatically
end no later than the due date
(excluding extensions) for filing the
corporation's 2023 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.

Instructions for Form 1120-PC (2022)

-3-

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 IRS 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), Net Income (Loss)
Reconciliation for U.S. Property and
Casualty Insurance Companies With
Total Assets of $10 Million or More,
with Form 1120-PC must attach a
statement that reconciles the NAIC
annual statement to Form 1120-PC.

Assembling the Return

To ensure that the corporation's tax
return is correctly processed, attach
all schedules and other forms after
page 9 of Form 1120-PC in the
following order.
1. Schedule N (Form 1120).
2. Form 4136.
3. Form 8978.
4. Form 965-B.
5. Form 8941.
6. Form 3800.
7. Additional schedules in
alphabetical order.
8. Additional forms in numerical
order.
9. Supporting statements and
attachments.
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
employer identification number (EIN)
on each supporting statement or
attachment.

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 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 16. See the
instructions for line 16.

DRAFT AS OF
December 13, 2022
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 17. 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 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.
To get more information about
EFTPS or to enroll in EFTPS, go to
EFTPS.gov or call 800-555-4477. To
contact EFTPS using
Telecommunications Relay Services
(TRS) for people who are deaf, hard
of hearing, or have a speech
disability, dial 711 and provide the
TRS assistant the 800-555-4477
number above or 800-733-4829.
Depositing on time. To make
EFTPS deposits on time, the

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.
• If, after the corporation figures and
deposits estimated tax, it finds that its
tax liability for the year will be more or
less than originally estimated, it may
have to refigure its required
installments. If earlier installments
were underpaid, the corporation may
owe a penalty. 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 Form
1120-PC, lines 15c and 15e, later.
See section 6655 for more
information on estimated taxes.
Estimated tax penalty. A
corporation that does not make
-4-

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

!

Interest and Penalties
If the corporation receives a
notice about penalties after it
CAUTION files its return, send the IRS
an explanation and we will determine
if the corporation meets the criteria for
the reasonable-cause exception to the
penalties. 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 $450 (adjusted for inflation). The
penalty will not be imposed if the
Instructions for Form 1120-PC (2022)

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
may generally 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.

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.

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.

DRAFT AS OF
December 13, 2022
Trust fund recovery penalty. This
penalty may apply if certain excise,
income, social security, and Medicare
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.
Note. The trust fund recovery penalty
will not apply to any amount of trust
fund taxes an employer holds back in
anticipation of the credit for qualified
sick and family leave wages or the
employee retention credit that they
are entitled to. See Pub. 15 for more
information.
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
Instructions for Form 1120-PC (2022)

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 for income tax purposes. To
obtain consent, the corporation must
generally file Form 3115, Application
for Change in Accounting Method,
during the tax year for which the
change was requested. See the
Instructions for Form 3115 and Pub.
538, Accounting Periods and
Methods, for more information and
exceptions, including filing exceptions
for qualified small business taxpayers.
Also see the Instructions for Form
3115 for procedures that may apply
for obtaining automatic consent to
change certain methods of
accounting, non-automatic change
procedures, and reduced Form 3115
filing requirements.
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 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.
-5-

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 may enter decimal
points and cents when completing its
tax return. However, the corporation
should round off cents to whole
dollars on its return, forms, and
schedules to make completing its
return easier. The corporation must
either round off all amounts on its
return to whole dollars, or use cents
for all amounts. To round, drop
amounts under 50 cents and increase
amounts from 50 to 99 cents to the
next dollar. For example, $8.40
rounds to $8 and $8.50 rounds to $9.

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.

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.

section 951(b)) must include the
statement on or with its return.

has a P.O. box, show the box number
instead.

Dual-consolidated losses. If a
domestic corporation incurs a
dual-consolidated loss (as defined in
Regulations section 1.1503(d)-1(b)
(5)), the corporation (or consolidated
group) may need to attach a domestic
use agreement and/or an annual
certification, as provided in
Regulations sections 1.1503(d)-6(d)
and (g).

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.

DRAFT AS OF
December 13, 2022
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
(CFC), 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 CFC, each U.S.
shareholder (within the meaning of

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).

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 2022 return for
calendar year 2022. 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

-6-

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(b)(12).

Corporations filing a consolidated
return must check Item A, box 1, 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
Instructions for Form 1120-PC (2022)

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.
5. A reconciliation of retained
earnings.

• Show any setoffs required by
paragraphs (e), (h), and (j) of
Regulations section 1.1502-47.
• Report separately the nonlife
consolidated taxable income or loss,
determined under Regulations section
1.1502-47(f), 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
life insurance company taxable
income (as defined by Regulations
section 1.1502-47(b)(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 consolidated
return), for all life members of the
consolidated group.

Corporations located in the
United States or U.S.
CAUTION possessions can use the
online application. Foreign
corporations may call 267-941-1099
(not a toll-free number) for more
information on obtaining an EIN. See
the Instructions for Form SS-4.

!

DRAFT AS OF
December 13, 2022
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.

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, enter “Supporting
Statement to Consolidated Return.”

Life-Nonlife Consolidated
Return

If the corporation is the common
parent of a life-nonlife consolidated
group, check Item A, boxes 1 and 2.
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 one of
the following: a Form 1120-L, where
the common parent is a life insurance
company; a Form 1120-PC, where the
common parent is an insurance
company, other than a life insurance
company; or a Form 1120, 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 Item A, boxes 1
and 2.

Instructions for Form 1120-PC (2022)

Schedule M-3 (Form 1120-PC)

A nonlife insurance company with
total assets (nonconsolidated 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)
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.
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 in any of the following
ways.
• 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.
-7-

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.

Item D. Section 831(b) and
Section 953 Elections
Section 831(b) election. 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 tax year under
section 831(b)(2)(A)(iii). See the
instructions for Schedule I, Question
14, 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).
Note. The election under section
831(b)(2)(A)(iii) applies to the tax year
for which made and for all subsequent
tax 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.

Section 953 elections. 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.

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 page 1,
line 2. Also, complete Schedule I,
Question 14. All other corporations
should complete Schedule A (ignore
Schedule B) and enter on page 1,
line 1, the amount from Schedule A,
line 37.

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).

DRAFT AS OF
December 13, 2022
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 page 1, line 13.
On the dotted line to the left of line 13,
enter “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
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.

Tax Computation and
Payments
Line 3. Member of a control group.
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 (Form 1120) to report
the apportionment of certain tax
benefits between the members of the
group. See Schedule O (Form 1120)
and the Instructions for Schedule O
(Form 1120) for more information.
Line 4. Income tax. Corporations
figure their tax by multiplying taxable
income by 21% (0.21).
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
“Section 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
-8-

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 21% 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 15h 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.
Line 6. Base erosion minimum tax
amount. If the corporation had gross
receipts of at least $500 million in any
1 of the 3 preceding tax years, see
section 59A and the Instructions for
Form 8991 for further guidance on the
determination of the amount of base
erosion minimum tax.
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

Instructions for Form 1120-PC (2022)

from Form 8834, Qualified Electric
Vehicle Credit. Attach Form 8834.
Line 8c. General business credit.
Enter on line 8c the allowable credit
from Form 3800, General Business
Credit, Part II, line 38.
The corporation is required to file
Form 3800 to claim most business
credits. For a list of allowable credits,
see Form 3800. Also, see the
applicable credit form and its
instructions.

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)(1). Attach a
statement showing how the reduction
under section 881 was figured. Enter
the net tax imposed by section 881 on
line 10.

Recapture of Low-Income Housing
Credit.
Other. Additional taxes and
interest amounts can be included in
the total entered on line 12. Check the
“Other” box if the corporation includes
any additional taxes and interest such
as the items discussed below. Attach
a statement showing the computation
of each item included in the total for
line 12 and identify the applicable
Code section and the type of tax or
interest.
• 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 (see section 453A(c)).
• Interest due on deferred gain (see
section 1260(b)).
• Interest due under section 1291(c)
(3). See Form 8621 and its
instructions.
• Alternative tax on qualifying
shipping activities (see Form 8902).

DRAFT AS OF
December 13, 2022
Line 8d. Credit for prior year minimum tax. Enter any allowable credit
from Form 8827, Credit for Prior Year
Minimum Tax—Corporations.
Complete and attach Form 8827.
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 a 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.
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. 2022-36, 2022-40 I.R.B.
274, available at IRS.gov/irb/
2022-36_IRB#REV-PROC-2022-40,
for the domestic asset/liability
percentages and domestic investment
yields needed to compute this
amount.

Instructions for Form 1120-PC (2022)

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 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. 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,
-9-

Alternative minimum tax.
Applicable corporations filing a return
for a short tax year that begins in 2023
and ends in 2023, include on line 12
any corporate AMT imposed under
section 55 by the Inflation Reduction
Act of 2022. Check the “Other” box.
On the dotted line next to line 12,
enter “CAMT” and the AMT amount.
Attach a detailed statement showing
the computation of the AMT. Include a
computation of adjusted financial
statement income. Label the
statement “CAMT.”
Line 13. Total tax. Include any
deferred tax on the termination of a
section 1294 election applicable to
shareholders in a qualified electing
fund (QEF) in the amount entered on
line 13.

Subtract any deferred tax on the
corporation's share of undistributed
earnings of a QEF (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 16. 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 for circumstances where
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, earlier.

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).

DRAFT AS OF
December 13, 2022
Line 14. Reserved for future use.

Line 15b. Reserved for future use.

Line 15c. Estimated tax payments.
Enter any estimated tax payments the
corporation made for the tax year.
Line 15d. Reserved for future use.

Line 15e. 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
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.
Line 15h. 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 and the
related regulations, and the
instructions for line 5, earlier.

Line 15i. Other credits and payments. Enter the amount of any other
credits the corporation may take
and/or payments made. Enter 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 15i. Enter the amount
withheld and the words “Backup
Withholding” on the dotted line to the
left of the entry space for line 15i.
Line 15k. Total payments. Add the
amounts on lines 15f through 15i and
enter the total on line 15k.

Line 17. Amount owed. If the
corporation cannot pay the full amount
of tax owed, it can apply for an
installment agreement online. Go to
IRS.gov/OPA for the latest
information.

Line 19. 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 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.

Schedule A—Taxable
Income
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 may
generally not claim any loss,
deduction, or credit with respect to
qualifying shipping activities. A
corporation making this election may
also elect to defer gain on the
disposition of a qualifying vessel.
Use Form 8902, Alternative Tax on
Qualifying Shipping Activities, to
-10-

Line 3a, column (a). Interest (including tax-exempt interest). Enter
the gross amount of interest income,
including all tax-exempt interest.

Line 3b, column (a). Interest exempt under section 103. 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.
Note. Insurance companies electing
to amortize discount for tax purposes
must reduce the amortization of
premium by any amortization of
discount.
Line 4. Gross rents. Enter gross
rents, computed as indicated under
Gross income, earlier. Deduct
expenses, such as repairs, interest,
taxes, and depreciation, on the proper
lines for deductions.
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
Instructions for Form 1120-PC (2022)

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; 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.

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.

losses on line 31. 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.
• Section 91 Transferred Loss
Amount. Enter the transferred loss
amount and identify the amount as
“Section 91 Transferred Loss Amount”
required to be recognized under
section 91 resulting from a transfer of
substantially all the assets of a foreign
branch (within the meaning of section
367(a)(3)(C), as in effect before its
repeal) to a specified 10%-owned
foreign corporation (as defined in
section 245A(b)) with respect to which
you were a U.S. shareholder
immediately after the transfer as other
income. Under section 91(d),
transferred loss amounts recognized
are treated as derived from sources
within the United States.
• 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. See Form 8925.
• One-eighth of any adjustment
attributable to the application of the
discount factors published in Rev.
Proc. 2019-06, 2019-02 I.R.B 284,
available at IRS.gov/irb/
2019-02_IRB#RP-2019-06, to unpaid
losses for the tax year preceding the
first tax year beginning after
December 31, 2017. See P.L. 115-97,
section 13523(e).
• 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 QEF.
2. Gain or loss from marking 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 its instructions
for details.
• The amount of payroll tax credit
taken by an employer on its 2022

DRAFT AS OF
December 13, 2022
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 credited during the same
tax year.
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,
Instructions for Form 1120-PC (2022)

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 a reciprocal
underwriter.
Line 13. Other income. Enter any
other taxable income not reported on
lines 1 through 11. 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.
• Any income under P.L. 115-97,
section 13517(c)(3)(B)(ii) (transitional
relief for change in reserve).
• The amount included in income
from Form 6478, Biofuel Producer
Credit.
• The amount included in income
from Form 8864, Biodiesel,
Renewable Diesel, or Sustainable
Aviation Fuels Credit.
• 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). Do
not offset ordinary losses against
ordinary income. Instead, include the
-11-

employment tax returns (Forms 941,
943, and 944) for qualified paid sick
leave and qualified paid family leave
under the FFCRA and the ARP (both
the nonrefundable and refundable
portions). The corporation must
include the full amount of the credit for
qualified sick and family leave wages
in gross income for the tax year that
includes the last day of any calendar
quarter in which the credit is allowed.

Section 291 limitations.
Corporations may be required to
adjust certain deductions. See section
291 to determine the amount of the
adjustment.
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.

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 current tax
year, complete and attach Form 4562.

DRAFT AS OF
December 13, 2022
Note. A credit is available only if the
leave was taken after March 31, 2020,
and before October 1, 2021, and only
after the qualified leave wages were
paid, which might, under certain
circumstances, not occur until a
quarter after September 30, 2021,
including quarters in 2022.

Deductions
Limitations on Deductions
Section 263A uniform capitalization rules. The uniform capitalization
rules of section 263A require
corporations to capitalize certain
costs.
A small business taxpayer is not
required to capitalize costs under
section 263A. A small business
taxpayer that wants to discontinue
capitalizing costs under section 263A
must change its method of
accounting. See section 263A(i) and
Regulations section 1.263A-1(j). Also,
see the Instructions for Form 3115.
For more information on the
uniform capitalization rules, see Pub.
538. Also, 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)
and 267 for limitations on deductions
for unpaid interest and expenses.
Limitations on business interest
expense. Business interest expense
may be limited. See section 163(j) and
Form 8990, Limitation on Business
Interest Expense Under Section
163(j). Also, see Limitation on
deduction in the instructions for
Line 20a and Schedule K, Question
18, later.<

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 must
generally be amortized over a
180-month period. See sections 195
and 248 and the related regulations.

Time for making an election.
The corporation generally elects to
deduct startup 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. For more details including
special rules for costs paid or incurred
before September 9, 2008, see the
Instructions for Form 4562,
Depreciation and Amortization. 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 enter “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.
-12-

Reducing certain expenses for
which credits are allowable. If the
corporation claims certain credits, it
may need to reduce 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 start-up 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.

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.

Instructions for Form 1120-PC (2022)

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

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 three 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.

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.

DRAFT AS OF
December 13, 2022
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,
later). 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.
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
Instructions for Form 1120-PC (2022)

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 the TARP. The limit applies for
each period in which obligations
arising from financial assistance
under the 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 TARP is
not deductible as compensation if the
payments are made because of a
severance from employment during
-13-

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, 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).
If the corporation claims a
credit for any wages paid or
CAUTION incurred, it may need to
reduce any corresponding deduction
for salaries and wages. See
Employment credits below.

!

Employment credits. If the
corporation claims a credit on any of
the forms below, it may need to
reduce its deduction for officers’
compensation and salaries and
wages. See the applicable form for
details.
• Form 5884, Work Opportunity
Credit.
• Form 8844, Empowerment Zone
Employment Credit.
• Form 8845, Indian Employment
Credit.
• Form 8932, Credit for Employer
Differential Wage Payments.
• Form 8994, Employer Credit for
Paid Family and Medical Leave.
Line 18. Rents. If the corporation
rented or leased a vehicle, enter the
total annual rent or lease expense
paid or incurred during the year. Also,
complete Form 4562, 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:

The lease term began:

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

Cars (excluding trucks and
vans)

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 U.S. health 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 Rev. Rul. 2013-27.

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).
Limitation on deduction. Under
section 163(j), business interest
expense is generally limited to the
sum of business interest income, 30%
of the adjusted taxable income, and
floor plan financing interest. The
amount of any business interest
expense that is not allowed as a
deduction for the tax year is carried
forward to the following year. If
section 163(j) applies, use Form 8990
to figure the amount of business
interest expense the corporation can
deduct for the current tax year and the
amount that can be carried forward to
the next year. See the Instructions for
Form 8990. Also see Schedule I,
Question 18, later.
Special rules apply to the
following.
• 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 OID 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 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.

DRAFT AS OF
December 13, 2022
After 12/31/21 but before
1/1/23 . . . . . . . . . .

$56,000

After 12/31/20 but before
1/1/22 . . . . . . . . . .

$51,000

After 12/31/17 but before
1/1/21 . . . . . . . . . .

$50,000

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

$19,000

After 12/31/07 but before
1/1/13 . . . . . . . . . .

$18,500

After 12/31/21 but before
1/1/23 . . . . . . . . . .

$56,000

After 12/31/20 but before
1/1/22 . . . . . . . . . .

$51,000

After 12/31/17 but before
1/1/21 . . . . . . . . . .

$50,000

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

$19,500

Do not reduce the
corporation's deduction for
CAUTION social security and Medicare
taxes by the nonrefundable and
refundable portions of the FFCRA and
ARP credits for qualified sick and
family leave wages claimed on its
employment tax returns. Instead,
report this amount as income on
line 13.

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

$19,000

Line 20a. Interest.

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

$18,500

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

$19,000

Trucks and Vans

See Pub. 463, Travel, Gift, and Car
Expenses, for instructions on figuring
the inclusion amount.
Note. The inclusion amount for lease
terms beginning in 2023 will be
published in the Internal Revenue
Bulletin in early 2023.
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.

!

Note. Do not offset interest income
against interest expense.
The corporation must allocate the
interest expense 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
-14-

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 contributions, as
provided in section 170. See section
170 and its regulations for limitations,
carryover, exclusions, requirements,
substantiation, and other rules.
Instructions for Form 1120-PC (2022)

For more information on charitable
contributions, including substantiation
and recordkeeping requirements, see
section 170 and the related
regulations and Pub. 526. For other
special rules that apply to
corporations, see Pub. 542.
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.

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.

tax year. Complete and attach new
Form 7205.
• Certain business startup 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). 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.
• Dividends paid in cash on stock
held by an employee stock ownership
plan (ESOP). 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 expenses such as
the following.
• Amounts paid to, or at the direction
of, a government or specified
nongovernmental entity for the
violation, or investigation or inquiry, of
a law. However, see the exceptions
discussed later.

DRAFT AS OF
December 13, 2022
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).
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.
Note. Employers who maintain a plan
are generally required to file Form
5500, Form 5500-SF, or Form
5500-EZ. Go to www.EFAST.dol.gov
and IRS.gov/Form5500EZ for more
information.
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 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.
Instructions for Form 1120-PC (2022)

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 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.
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.
• Any deduction under P.L. 115-97,
section 13517(c)(3)(B)(i) (transitional
relief for change in reserve).
• Any applicable deduction under
section 179D for costs of energy
efficient commercial buildings
property placed in service during the
-15-

• Lobbying expenses. However, see
the exceptions discussed later.
• Amounts paid or incurred for any
settlement, payout, or attorney fees
related to sexual harassment or
sexual abuse, if such payments are
subject to a nondisclosure agreement.
See section 162(q).

professional organizations (such as
bar and medical associations),
business leagues, trade associations,
chambers of commerce, boards of
trade, and real estate boards.
However, no deduction is allowed if a
principal purpose of the organization
is to entertain or provide
entertainment facilities for members
or their guests. This includes country
clubs, golf and athletic clubs, airline
and hotel clubs, and clubs operated to
provide meals under conditions
favorable to business discussion.

• Amounts that constitute restitution,
• Amounts paid to come into

compliance with the law,
• Amounts paid or incurred as the
result of certain court orders or
agreements in which no government
or governmental entity is a party, and
• Amounts paid or incurred for taxes
due. No deduction is allowed unless
the amounts are specifically identified
in the order or agreement and the
corporation establishes that the
amounts were paid for that purpose.
Also, any amount paid or incurred as
reimbursement to the government for
the costs of any investigation or
litigation are not eligible for the
exceptions and are nondeductible.
See section 162(f).

DRAFT AS OF
December 13, 2022
Travel, meals, and entertainment.
Subject to limitations and restrictions
discussed below, a corporation can
deduct ordinary and necessary travel,
meals, and non-entertainment
expenses paid or incurred in its trade
or business. Generally, entertainment
expenses, membership dues, and
facilities used in connection with these
activities cannot be deducted. In
addition, no deduction is generally
allowed for qualified transportation
fringe benefits. Also, special rules
apply to deductions for gifts, luxury
water travel, and convention
expenses. See section 274, Pub. 463,
and Pub. 535.

Travel. The corporation cannot
deduct travel expenses of any
individual accompanying a corporate
officer or employee, including a
spouse or dependent of the officer or
employee, unless:
• That individual is an employee of
the corporation, and
• That individual’s travel is for a bona
fide business purpose and would
otherwise be deductible by that
individual.
Meals. Generally, the corporation
can deduct only 50% of the amount
otherwise allowable for
non-entertainment-related meal
expenses paid or incurred in its trade
or business. However, the corporation
can deduct 100% of business meal
expenses if the meals are food and
beverages provided by a restaurant.
This applies only to amounts paid or
incurred after December 31, 2020,
and before January 1, 2023.
Meals not separately stated from
entertainment are generally not
deductible. In addition (subject to
exceptions under section 274(k)(2)):
• Meals must not be lavish or
extravagant, and
• An employee of the corporation
must be present at the meal.
Membership dues. The
corporation can deduct amounts paid
or incurred for membership dues in
civic or public service organizations,

Qualified transportation fringes
(QTFs). Generally, no deduction is
allowed under section 274(a)(4) for
QTFs provided by employers to their
employees. QTFs are defined in
section 132(f)(1) and include:
• Transportation in a commuter
highway vehicle between the
employee’s residence and place of
employment,
• Any transit pass, and
• Qualified parking.
See section 274; Pub. 15-B,
Employer’s Tax Guide to Fringe
Benefits; and Pub. 535 for details.
Entertainment facilities.
Generally, the corporation cannot
deduct an expense paid or incurred
for a facility (such as a yacht or
hunting lodge) used for an activity
usually considered entertainment,
amusement, or recreation.

Amounts treated as
compensation. Generally, the
corporation may be able to deduct
otherwise nondeductible
entertainment, amusement, or
recreation expenses if the amounts
are treated as compensation to the
recipient and reported on Form W‐2
for an employee or on Form 1099‐
NEC for an independent contractor.
However, if the recipient is an
officer, director, beneficial owner
(directly or indirectly), or other
“specified individual” (as defined in
section 274(e)(2)(B) and Regulations
section 1.274‐9(b)), special rules
apply.
Fines and penalties. Generally, no
deduction is allowed for fines or
similar penalties paid or incurred to, or
at the direction of, a government or
governmental entity for violating any
law, or for the investigation or inquiry
into the potential violation of a law,
except:
-16-

Lobbying expenses. Generally,
lobbying expenses are not deductible.
These expenses include:
• Amounts paid or incurred in
connection with influencing federal,
state, or local legislation (but not
amounts paid or incurred before
December 22, 2017, in connection
with local legislation); or
• Amounts paid or incurred in
connection with any communication
with certain federal executive branch
officials in an attempt to influence the
official actions or positions of the
officials. See Regulations section
1.162‐29 for the definition of
“influencing legislation.”
Dues and other similar amounts
paid to certain tax‐exempt
organizations may not be deductible.
If certain in‐house lobbying
expenditures do not exceed $2,000,
they are deductible.

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.
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).

Instructions for Form 1120-PC (2022)

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 deduction or to any
carryback of a net operating loss
(NOL)).
Line 36b. Net operating loss deduction. Section 172 provides for an
NOL deduction, limitation, carryovers,
and carrybacks. Attach a statement
showing the computation of the NOL
deduction.
The following special rules apply.
• Section 382 provides a limitation on
NOL carryforwards and certain built-in
losses following ownership change.
• 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 NOLs.
For more details on the NOL
deduction, see section 172 and the
Instructions for Form 1139,
Corporation Application for Tentative
Refund.

and the corporation's taxable income
determined solely with respect to its
ownership and high-yield interests in
financial asset securitization
investment trusts (FASITs). See
section 860E(a).
Net operating loss. For losses
incurred in tax years beginning in
2022, only certain losses can be
carried back. The carryback period for
these losses is 2 years. For NOLs that
can be carried back, the corporation
can elect to waive the carryback
period and instead carry the NOL
forward to future tax years.
See the Instructions for Form 1139.
See the instructions for Schedule I,
Item 10 for information on making the
election to waive the entire carryback
period for 2022.
For tax years beginning in 2022,
the NOL deduction for the year cannot
exceed the aggregate amount of
NOLs arising in tax years beginning
before January 1, 2018, carried to
such year plus the lesser of:
1. The aggregate amount of NOLs
arising in tax years beginning after
December 31, 2017, carried to such
tax year; or
2. 80% of the excess, if any, of
taxable income determined without
any NOL deduction, section 199A
deduction, or section 250 deduction,
over any NOL carryover to the tax
year from tax years beginning before
January 1, 2018.

Income
Line 1a, column (a). Interest (including tax-exempt 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.

DRAFT AS OF
December 13, 2022

Line 37. Taxable income. If line 37
(figured without regard to the items
listed under Minimum taxable income
below) is zero or less, the corporation
may have an NOL that can be carried
back or forward as a deduction to
other tax years.
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 real estate mortgage
investment conduit (REMIC) from
Schedules Q (Form 1066), line 2c,
Instructions for Form 1120-PC (2022)

An exception applies for NOLs of
insurance companies other than life
insurance companies. The 80%
taxable income limit does not apply to
these entities. See sections 172(b)
and (f).
See the Instructions for Form 1139
for other special rules and elections.

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
Schedule B, line 8, any amount
subtracted from a PAL account.
-17-

Lines 1a and 1b, column (b). Amortization of premium. Enter on
line 1a, column (b), the total
amortization of bond premium,
including amortization 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. 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, 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 PAL
account, enter 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.
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. Do
not include any amount spent on
foreclosed property before the
property is held for rent.

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.

1.1502-26, and 1.1502-27 before
completing Schedule C.
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).

DRAFT AS OF
December 13, 2022
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.

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 Schedule A,
line 22.

Schedule C—Dividends,
Inclusions,
Dividends-Received
Deduction, and Other
Special Deductions

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.

Prorated amounts. Prorated
amounts mean 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), December 19,
2014, 128 Stat. 4043), or 245 (other
than 100% dividends).

Line 12. Depletion. Enter any
allowable depletion on royalty income
reported on Schedule B, line 4. See
the instructions for Schedule A,
line 23 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 Schedule A, lines 20a
and 20b.
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

Definitions

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),
December 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 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 consolidated returns should see
Regulations sections 1.1502-13,

-18-

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 certain 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 50% 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 certain 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
65% deduction under section 243(c),
and
• Taxable distributions from an
interest charge domestic international
sales corporation (IC-DISC) or former
domestic international sales
corporation (DISC) that are
considered eligible for the 65%
deduction.
Line 3. Enter the following.
• Dividends received on certain
debt-financed stock acquired after
July 18, 1984, from domestic and
foreign corporations subject to income
tax that would otherwise be subject to
Instructions for Form 1120-PC (2022)

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
regulated investment company (RIC)
on certain 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.

• Qualify for the 65% deduction
under sections 245(a) and 242 by
reference.
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 65% deduction
provided in section 245(c)(1)(B).

Include on line 11 the
foreign-source portion of any dividend
that does not qualify for the section
245A deduction (for example, hybrid
dividends within the meaning of
section 245A(e), ineligible amounts of
dividends within the meaning of
Regulations section 1.245A-5(b),
dividends that fail to meet the holding
period requirement under section
246(c)(5), etc.).
Also, include on line 11 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 its
instructions.
Attach a statement identifying the
amount of each dividend reported on
line 11 and the provision pursuant to
which a deduction is not allowed with
respect to such dividend.

DRAFT AS OF
December 13, 2022
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), December 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), December 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 50% deduction
under section 245(a). To qualify for
the 50% 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 50% 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
Instructions for Form 1120-PC (2022)

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:
• 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 the
foreign-source portion of dividends
that:
• Are received from specified
10%-owned foreign corporations (as
defined in section 245A(b)), including,
for example, gain from the sale of
stock of a foreign corporation that is
treated as a dividend under sections
1248(a) and (j); and
• Qualify for the 100% deduction
under section 245A(a) (excluding any
hybrid dividends; see the instructions
for line 11 below).
Line 11, column (b). Enter the
foreign dividends not reportable on
line 3, 6, 7, 8, or 10 of column (b).
-19-

Line 12a, column (b). Enter the
foreign-source portion of any subpart
F inclusions attributable to the sale or
exchange by a CFC of stock in
another foreign corporation described
in section 964(e)(4). This should
equal the U.S. shareholder's pro rata
share of the amount reported on
Form(s) 5471, Schedule I, line 1a. (Do
not include on line 12a any portion of
such subpart F inclusion that is not
eligible for the section 245A deduction
pursuant to Regulations section
1.245A-5(g)(2). Include such amounts
on line 12c.)
Line 12b, column (b). Enter the total
subpart F inclusions attributable to
tiered hybrid dividends. This should
equal the sum of the amounts
reported by the U.S. shareholder on
Form(s) 5471, Schedule I, line 1b.
Line 12c, column (b). Enter all other
amounts included in income under
section 951, other than amounts on
line 15. This should equal the U.S.
shareholder's pro rata share of the
sum of the amounts reported on Form
5471, Schedule I, lines 1c–1h, 2, and
4.
Line 13, column (b). Enter amounts
included in income under the section
951. See Form 8992, Part II, line 5;
and the Instructions for Form 8992. If
you also have a Form 5471 reporting
requirement, attach Form 5471.
Line 15, column (b). Reserved for
future use.

Line 16, column (b). Include the
following.
1. Dividends (other than capital
gain distributions reported on
Schedule D (Form 1120) and
exempt-interest dividends) that are
received from RICs and that are not
subject to the 50% deduction.
2. Dividends from tax-exempt
organizations.
3. Dividends (other than capital
gain distributions) received from a real
estate investment trust (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 received on any
share of preferred stock which are
attributable to periods totaling more
than 366 days, if such stock was 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.

Worksheet for Schedule C, Line 26

Keep for Your Records

1. Refigure the amount from Schedule A, line 35, or Schedule B,
line 19, whichever applies, without 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 25, 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
December 13, 2022

Line 20. Dividends received on
certain debt-financed stock acquired
after July 18, 1984, are not entitled to
the full 50% or 65%

4. Multiply line 3 by 65% (0.65) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. Add lines 19, 22, 24, and 25, column (b) (without regard to FSC
dividends), and the portion of the deduction on line 20, 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 26, 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, column (b) (without regard to FSC
dividends) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Subtract line 7 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9. Multiply line 8 by 50% (0.50) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Subtract line 5 from line 26, 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 26, column (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

dividends-received deduction. The
50% or 65% 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 20 was figured.
Line 26, column (b). Generally,
line 26, column (b), cannot exceed the
amount from the Worksheet for
Schedule C, Line 26, above.
However, in a year in which an NOL
occurs, this limitation does not apply
even if the loss is created by the
dividends-received deduction. See
sections 172(d) and 246(b).
Line 28, column (b). Enter the
section 250 deduction claimed for
foreign-derived intangible income
(FDII) and global intangible low-taxed
income (GILTI). This should equal the
sum of Form 8993, Part III, lines 28
and 29.
-20-

Line 29. Reserved for future use.

Schedule E—Premiums
Earned
Definitions
Undiscounted unearned premiums. Undiscounted unearned
premiums means the unearned
premiums shown in the annual
statement filed for the year ending
with or within 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
Instructions for Form 1120-PC (2022)

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 (MLR). 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) and Regulations section
1.833-1.

3. The applicable statutory
premium recognition pattern.

3. Applicable loss payment
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).

Section 846(e)(6) provides that any
determination under section 846(a)
(discounted losses determined) with
respect to unpaid losses relating to
accident and health insurance lines of
businesses (other than credit disability
insurance) must be made (a) in the
case of unpaid losses relating to
disability income, by using the general
rules prescribed under section 807(d)
applicable to noncancelable accident
and health insurance contracts and
using a mortality or morbidity table
reflecting the taxpayer’s experience,
except that the limitation of section
846(a)(3) (Limitation on amount of
discounted losses) will apply; and (b)
in all other cases, by using an
assumption (in lieu of a loss payment
pattern) that unpaid losses are paid in
the middle of the year following the
accident year.
A separate series of discount
factors are computed for, and applied
to, undiscounted unpaid losses
attributable to each accident year of
each line of business shown on the
annual statement (as defined by
section 846(e)(3)) filed for the
calendar year ending with or within
the tax year. See section 1.832-4(b)
relating to the determination of unpaid
losses.
Section 832(b)(5)(A) provides rules
for figuring losses incurred. Section
832(b)(5)(B) provides rules for
reducing the deduction figured in
section 832(b)(5)(A).
Rev. Proc. 2022–XX prescribes
discount factors for the 2022 accident
year for use by insurance companies
in computing discounted unpaid
losses under section 846 and
discounted estimated salvage
recoverable under section 832. Rev.
Proc. 2022-XX also provides, for
convenience, discount factors for
losses incurred in earlier accident
years for use in tax years beginning in
2022. The discount factors set forth in
Rev. Proc. 2022-XX are determined
under section 846 and Regulations
section 1.846-1.

DRAFT AS OF
December 13, 2022
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 Change in
accounting method, earlier.
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).
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

Instructions for Form 1120-PC (2022)

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

-21-

Note. P.L. 115-97, section 13523,
modified discounting rules for
property and casualty insurance
companies, modified the rate of
interest used to discount unpaid
losses, modified computational rules

for loss payment patterns, and
repealed the historical payment
pattern election. These amendments
apply to tax years beginning after
2017. An 8-year transition rule also
applies. See section 846 of the
Internal Revenue Code, as modified
by P.L. 115-97, section 13523.

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 Schedule G, line 9.

2. Without regard to any carryover
or carryback to that tax year.
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.

DRAFT AS OF
December 13, 2022
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. See Rev. Proc. 2022-XX
for the latest information and
guidance.
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.
Line 13. Reduction of deduction
under section 832(b)(5)(B).
Multiply line 12 by the applicable
percentage, which is 25% for 2021
(5.25% divided by the highest
corporate tax rate).

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 policyholders to the

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.

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). Also, see Medical
loss ratio, earlier.

Line 5. Beginning adjusted surplus. If the corporation was a section
833 organization in 2021, it should
enter the amount from its 2021 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 NOL for the preceding
tax year.
If 2022 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 2022 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 NOL,
respectively, determined with the
following modifications.
1. Without regard to the deduction
determined under section 833(b)(1).
-22-

Note. The deduction for any tax year
is limited to taxable income for that tax
year determined without regard to this
deduction.
Note. 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), December 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), December
19, 2014, 128 Stat. 4043), and 245.
Enter the result on line 8b.

Schedule I—Other
Information

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
Instructions for Form 1120-PC (2022)

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.

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.

Item 10

Generally, if the corporation has an
NOL for 2022, it can generally elect 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 10 and file the
tax return by its due date, including
extensions. Do not attach the
statement described in Temporary
Regulations section 301.9100-12T.
Generally, once made, the election is
irrevocable.

DRAFT AS OF
December 13, 2022
Note. If the corporation is an
“excluded member” of a controlled
group (see the 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 (see 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.

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 the total
voting power of all classes of stock of
the corporation entitled to vote, or at
least 25% of 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.
Instructions for Form 1120-PC (2022)

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;
• 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.
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. 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 9

Show any tax-exempt interest
received or accrued. Include any
exempt-interest dividends received as
a shareholder in a mutual fund or
other RIC. Also, if required, include
the same amount on Schedule M-1,
line 7 (or Schedule M-3 (Form
1120-PC), Part II, line 13, if
applicable).

-23-

If the corporation timely filed its
return for the loss year without making
the election, it can make the election
on an amended return filed within 6
months of the due date of the loss
year return (excluding extensions).
Attach the election to the amended
return and enter "Filed pursuant to
section 301.9100-2" on the election
statement. See the Instructions for
Form 1139.
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 11

Enter the amount of the NOL
carryover to this 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
2022. Do not reduce the amount by
any NOL deduction reported on
Schedule A, line 36b.

Question 12

Schedule UTP (Form 1120) asks for
information about tax positions that
affect the U.S. federal income tax
liabilities of certain corporations that
issue or are included in audited
financial statements and have assets
that equal or exceed $10 million. 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 13

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.

company. A corporation meets the
diversification requirements if under
section 831(b)(2)(B)(i)(I) no more than
20% of the net written premiums (or, if
greater, direct written premiums) of
such corporation for the tax year is
attributable to any one policyholder.
However, a corporation that does not
meet this 20% 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).

all persons aggregated with the
corporation, as specified in section
59A(e)(3). See the Instructions for
Form 8991 to determine if the
corporation is subject to the base
erosion minimum tax.

Question 16

DRAFT AS OF
December 13, 2022
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) and Regulations section
1.833-1. Also, see Medical loss ratio,
earlier.
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 section 833(c)(5) MLR
numerator on line 13(a),
• The section 833(c)(5) MLR
denominator on line 13(b), and
• The section 833(c)(5) percentage
on line 13(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.
Also, if you checked “No,” your
deduction of unearned premiums is
limited. See the instructions for
Schedule E for more information.

Question 14

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

A corporation making an election
under section 831(b)(2)(A)(iii) must
complete question 14 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% test in section 831(b)(2)(B)
(i)(I). If the corporation answers “No”
for question 14(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” for
question 14(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 tax year (answering “No” for both
questions), 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).

Question 15

If the corporation had gross receipts
of at least $500 million in any 1 of the
3 preceding tax years, complete Form
8991 and attach it to this return. For
this purpose, the corporation's gross
receipts include the gross receipts of
-24-

If the corporation paid or accrued any
interest or royalty for which a
deduction is not allowed under
section 267A, check "Yes" and enter
the total amount of interest and royalty
paid or accrued by the corporation
(including the corporation's allocable
share through a partnership) for which
a deduction is not allowed.

Payments to which section 267A
applies. Interest or royalty paid or
accrued by a domestic corporation
(including, in the case of a domestic
corporation that is a partner in a
partnership, the domestic
corporation's allocable share of
interest or royalty paid or accrued by
the partnership) is subject to section
267A. Section 267A generally applies
to interest or royalty paid or accrued
according to a hybrid arrangement
(such as, for example, a payment
according to a hybrid instrument, or a
payment to a reverse hybrid),
provided that the payment or accrual
is to a related party (or according to a
structured arrangement). In addition,
under an imported mismatch rule,
section 267A generally applies to
interest or royalties paid or accrued
according to a non-hybrid
arrangement where the income
attributable to that payment or accrual
is directly or indirectly offset by certain
deductions involving hybridity incurred
by a related party or according to a
structured arrangement. However,
section 267A does not apply if a de
minimis exception is satisfied. See
Regulations section 1.267A-1(c). For
purposes of section 267A, interest
and royalties are defined broadly. For
additional information about
arrangements subject to section
267A, see Regulations sections
1.267A-2 and 1.267A-4. Also, see the
anti-avoidance rule under Regulations
section 1.267A-5(b)(6).

Extent to which deduction is disallowed. When section 267A applies
to interest or royalties paid or accrued
pursuant to a hybrid arrangement, it
generally disallows a deduction for the
amount to the extent that, under the
foreign tax law, there is not a
Instructions for Form 1120-PC (2022)

corresponding income inclusion
(including long-term deferral).
However, the deduction is not
disallowed to the extent the amount is
directly or indirectly included in
income in the United States, such as if
the amount is taken into account with
respect to a U.S. shareholder under
section 951(a) or section 951A. For
additional information, see
Regulations sections 1.267A-2
through 1.267A-4. For examples
illustrating the application of section
267A, see Regulations section
1.267A-6.

$27 million or less for the 3 prior tax
years. See section 448(c) and the
Instructions for Form 8990 for
additional information.

Schedule L—Balance
Sheets per Books

• 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

DRAFT AS OF
December 13, 2022
Question 17

Check “Yes” if the taxpayer has an
election in effect to exclude a real
property trade or business or a
farming business from section 163(j).
For more information, see section
163(j) and the Instructions for Form
8990.

Question 18

Generally, a taxpayer with a trade or
business must file Form 8990 to claim
a deduction for business interest. In
addition, Form 8990 must be filed by
any taxpayer that owns an interest in a
partnership with current year, or prior
year carryover, excess business
interest expense allocated from the
partnership.

Exclusions from filing. A taxpayer
is not required to file Form 8990 if the
taxpayer is a small business taxpayer
(defined below) and does not have
excess business interest expense
from a partnership. A taxpayer is also
not required to file Form 8990 if the
taxpayer only has business interest
expense from the following excepted
trades or businesses.
• An electing real property trade or
business.
• An electing farming business.
• Certain utility businesses.
Small business taxpayer. A small
business taxpayer is not subject to the
business interest expense limitation
and is not required to file Form 8990.
A small business taxpayer is a
taxpayer that (a) is not a tax shelter
(as defined in section 448(d)(3)); and
(b) meets the gross receipts test of
section 448(c), discussed next.
Gross receipts test. For tax years
beginning in 2022, a taxpayer meets
the gross receipts test if the taxpayer
has average annual gross receipts of
Instructions for Form 1120-PC (2022)

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.

If filing a consolidated return, report
total consolidated assets, liabilities,
and shareholders’ equity for all
corporations joining in the return. See
Consolidated returns, earlier.

Corporations with total assets
(nonconsolidated 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, and
• 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 ESOP debt, and
-25-

In completing Schedule M-1, the
following apply.

• All insurance companies required to
file Form 1120-PC with total assets
(nonconsolidated 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.
Line 5c. Travel and entertainment.
Include on line 5c any of the following.
• Entertainment expenses not
deductible under section 274(a).
• Meal 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, allocable to conventions on
cruise ships.
• Employee achievement awards of
nontangible or tangible property over
$400 ($1,600 if part of a qualified
plan).
• The cost of skyboxes.
• Nondeductible club dues.
• 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.
Paperwork Reduction Act Notice. We ask for the information on these forms to carry out the Internal Revenue laws of
the United States. You are required to give us the information. We need it to ensure that you are complying with these
laws and to allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be
retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax
returns and return information are confidential, as required by section 6103.

DRAFT AS OF
December 13, 2022
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden
for business taxpayers filing this form is approved under OMB control number 1545-0123 and is included in the
estimates shown in the instructions for their business income tax return.
If you have comments or suggestions for making this form and related schedules simpler, we would be happy to hear
from you. You can send us comments through IRS.gov/FormComments. Or you can write to:
Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224

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

-26-

Instructions for Form 1120-PC (2022)

Index

A
Accounting methods 5
Accounting methods,
change in 5
Accounting period (tax
year) 5
Address change 8
Adjustments to
shareholders' equity 25
Affiliated group 23
Amended return 8
Amortization 12
Assembling the return 3

Undiscounted unearned
premiums 20
Depository methods of tax
payment 4
Disclosure statement 6

L
Limitation on
dividends-received
deduction 20
Limitations on
deductions 12
Lobbying expenses 16

Related party
transactions 12

S

DRAFT AS OF
December 13, 2022
B

Backup withholding 10
Base erosion minimum
tax 8
Blue Cross or Blue
Shield 21, 24
Business start-up
expenses 12

C
Charitable contributions 14
Consolidated return 6
Controlled group:
Member of 8
Parent-subsidiary 8

D
Deductions 12
Definitions 18
100% dividend 18
Applicable interest rate 20
Applicable statutory
premium recognition
pattern 20
Prorated amounts 18

E

Electronic deposit of tax
refund of $1 million or
more 10
Electronic federal tax
payment system
(EFTPS) 4
Electronic filing 2
Employer identification
number (EIN) 7
Estimated tax:
Payments 4, 10
Penalty 4, 10
Extension of time to file 3

F
Final return 8
Foreign corporations 9
Foreign person 23
Foreign tax credit 8
Forms and publications,
how to get 2

G
General business credit 9
Golden parachute
payments 12

I
Insurance liabilities 25
Interest due on late
payment of tax 4

M

Medical loss ratio 5, 21, 22,
24
Medical loss ratio (MLR) 21
Minimum tax:
Prior year, credit for 9

N

NAIC annual statement 3
Name change 8
Net operating loss 17

O
Other deductions 15
Owner's country 23

P
Paid preparer
authorization 3
Penalties 4, 10
Pension, profit-sharing, etc.
plans 15
Period covered 6
Personal holding company
tax 9
Private delivery services 3

R
Recordkeeping 5

-27-

Schedule:
A 10
B, Part I 17
B, Part II 18
C 18
E 20
F 21
G 22
H 22
I 22
L 25
M-1 25
M-3 7
Section 953 election 7

T
Tax and payments 8
Tax issues, unresolved 1
Tax rate 8
Tax-exempt securities 25
Travel, meals, and
entertainment 16

U
Uncertain tax positions 23

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 20