NAIC Meeting Updates

During the NAIC’s November meeting, the Statutory Accounting Principles Working Group (SAPWG) adopted the following changes to statutory accounting:

• SSAP Nos. 48—Joint Ventures, Partnerships and LLCs, 93—Low-Income Housing Tax Credit Property Investments, and 94—Transferable and Non-Transferable State Tax Credits:  Expanded guidance on tax credit investments to include all tax credit investments regardless of structure and type of state or federal tax credit program, effective 1/1/2025.  Previous guidance in SSAP 48 was limited to Low-Income Housing Tax Credits.
• SSAP No. 101—Income Taxes:  Newly required GAAP disclosure requirements from ASU 2023-09 were rejected for statutory accounting; the update also removes a disclosure requirement related to unrecognized deferred tax liabilities.
• SSAP No. 108—Derivatives Hedging Variable Annuity Guarantees:  Updated definitions for clearly defined hedging strategies (CDHS) to mirror guidance previously adopted by the Life Actuarial Task Force (VM-01).
• Interpretation (INT) 24-01:  The new Principles-Based Bond Definition Implementation Q&A was adopted.  This interpretation provides guidance through an 11 question-and-answer format and includes specific paragraph references to SSAP 26.  If you’ve had questions on implementing the Bond Project, effective 1/1/25, check the Q&A to see if they have been clarified.

For many insurers, the above changes will not have a significant impact on their statutory financial reporting.  However, if your company is impacted by the new NAIC adoptions and would like to discuss it further, please reach out to your SB team!

Tax Talk with Tom Wheeland

As year-end approaches, you may have some important things on your mind like:  “What are the odds I will lose my Thanksgiving weight by Christmastime, or should I just ask Santa for bigger sweaters?” or “Does Mrs. Claus really care about Santa’s health or is she a hopeless enabler?”

But what I always consider at this time of the year is minimizing taxes.  Yes.  Though I may get coal in my stocking for keeping taxes top of mind during the holidays, the application of time and pressure might turn that coal into a diamond.  So here are a few tax planning gems to consider for year-end.

For companies anticipating current year losses, consider the potential to carryback property/casualty net operating losses (NOLs) up to two years to recover prior year taxes.  Life companies and general C corporations must carry NOLs forward.  For any company expecting a current year loss with amounts on deposit with the IRS, consider requesting an accelerated refund by filing Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, as soon as possible after year-end.  With interest rates now being meaningful, such a refund will give companies some cash to invest for a few months before first quarter estimated taxes are due in mid-April.  Companies with large NOL carryforwards should start evaluating the admissibility of the resulting deferred tax asset to anticipate any challenges or the need for a valuation allowance.

For companies anticipating income, consider guaranteeing policyholder dividends or bonus amounts by year-end to fix the liability and accelerate the tax deduction into 2024.  Any guaranteed bonus amounts must be paid by March 15, 2025, in order to be deductible in 2024, whereas policyholder dividends must be paid or credited by the date of the timely filed return, including extensions (October 15, 2025).  IRC section 179 expensing and 60% bonus depreciation are available in 2024 and represent simple ways to accelerate tax deductions and reduce taxable income.

This is also a good time of the year to evaluate capital gains and losses.  If a company has realized capital losses to date, consider whether those losses can be carried back to prior years under the three-year carryback provision.  If the company has an expiring capital loss carryforward, gain securities could be sold to absorb the carryforward and then reacquired if such securities have additional gain potential.  Companies with capital gains to date may look for loss securities (low-yielding bonds, for instance) to sell to reduce current taxes and move those investment dollars to higher yielding bonds.

Obviously, each company is different, and tax rules are complex.  Please reach out to your Strohm Ballweg team for assistance.  Oh, speaking of section 179 expensing, can Santa take a deduction for the value of his sleigh?  No.  Santa did not pay for the sleigh; it was on the house…Happy holidays!

• Tom Wheeland, CPA, JD

New Employee

We’re excited to welcome Shaina Strennen, CPA, as a Project Specialist on the SB team!  Shaina joined us part-time in early 2024 and transitioned to a full-time role this November.  Over the past year, she has made a significant impact on our audits and compilation work.  Fun fact:  Shaina was previously an intern and full-time employee with us, and we’re thrilled to have her back!

Partner Announcement

We are thrilled to announce that Cheryll Bossingham, CPA will become a Partner on January 1, 2025!  With over 21 years of public accounting experience exclusively serving the insurance industry, Cheryll currently manages the outsourced financial departments for two insurance companies.  She is deeply committed to fostering growth and professional development within our team, leading these efforts through our Human Resources and Training Committees.  Congratulations, Cheryll, on this well-deserved achievement!