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Title 26, Internal Revenue CodeRelease 119-110

§845 Certain Reinsurance Agreements

Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter L — Insurance Companies › PART III — PROVISIONS OF GENERAL APPLICATION › § 845

Last updated Sep 22, 2026|Official source

Summary

The Secretary of the Treasury can change how tax items are reported when two or more related persons (as defined under section 482) take part in a reinsurance agreement. This also applies if one party is effectively an agent or a pass-through for another. He can move or reclassify income, deductions, assets, reserves, credits, or other related items so each person’s taxable income shows the correct amount, source, and type. If a reinsurance contract has a big tax-avoidance effect for any party, the Secretary can make adjustments to stop that. For example, he can treat the contract as ending on December 31 and starting again on January 1 each year.

Full Legal Text

Title 26, §845

Internal Revenue Code, Source: USLM XML via OLRC

(a)Allocation in case of reinsurance agreement involving tax avoidance or evasion
In the case of 2 or more related persons (within the meaning of section 482) who are parties to a reinsurance agreement (or where one of the parties to a reinsurance agreement is, with respect to any contract covered by the agreement, in effect an agent of another party to such agreement or a conduit between related persons), the Secretary may—
(1)allocate between or among such persons income (whether investment income, premium, or otherwise), deductions, assets, reserves, credits, and other items related to such agreement,
(2)recharacterize any such items, or
(3)make any other adjustment,
if he determines that such allocation, recharacterization, or adjustment is necessary to reflect the proper amount, source, or character of the taxable income (or any item described in paragraph (1) relating to such taxable income) of each such person.
(b)Reinsurance contract having significant tax avoidance effect
If the Secretary determines that any reinsurance contract has a significant tax avoidance effect on any party to such contract, the Secretary may make proper adjustments with respect to such party to eliminate such tax avoidance effect (including treating such contract with respect to such party as terminated on December 31 of each year and reinstated on January 1 of the next year).

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

2004—Subsec. (a). Pub. L. 108–357 substituted “amount, source, or character” for “source and character” in concluding provisions.

Statutory Notes and Related Subsidiaries

Effective Date

of 2004 Amendment Pub. L. 108–357, title VIII, § 803(b), Oct. 22, 2004, 118 Stat. 1569, provided that: “The

Amendments

made by this section [amending this section] shall apply to any risk reinsured after the date of the enactment of this Act [Oct. 22, 2004].”

Effective Date

Pub. L. 98–369, div. A, title II, § 217(d),
July 18, 1984, 98 Stat. 762, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “(1) Subsection (a) of section 845 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by this title) shall apply with respect to any risk reinsured on or after
September 27, 1983. “(2) Subsection (b) of section 845 of such Code (as so added) shall apply with respect to risks reinsured after
December 31, 1984.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 845

Title 26, Internal Revenue Code

Last Updated

Sep 22, 2026

Release point: 119-110