NAIC Meeting Updates

With the implementation of the Principles-Based Bond Definition effective January 2, 2025, most of the changes to statutory guidance should have been implemented during the first quarter. The PBBD project was a major, multi-year effort in revising multiple SSAPs and annual statement schedules that took much of the NAIC’s time and focus recently.

SSAP 93 (Investments in Tax Credit Structures) and 94 (State and Federal Tax Credits) were also effective January 1, 2025. SSAP 93 changes expands previous guidance applicable to Low-Income Housing Tax Credits investments to all qualifying state and federal tax credit investments. SSAP 94 changes expands previous guidance applicable to purchased state tax credits to include purchased federal tax credits.

Looking forward, the NAIC is looking at guidance for repurchase agreements, reverse repurchase agreements, and securities lending, which might include enhanced disclosure requirements. The NAIC is also reviewing guidance for investments in subsidiaries previously considered “investment subsidiaries” that was removed in 2005. A proposed amendment to SSAP 22 (Leases) would prohibit sale-leaseback accounting when cash received from the sale is restricted, instead requiring use of the financing method where the asset is not removed, and a liability is recorded. Ongoing discussions are planned regarding admittance of negative IMR – currently admitted through December 31, 2025.

One Big Beautiful Bill and its Impact on Insurance Companies

KEY PROVISIONS OF OB3

Tom Wheeland, CPA, JD

OB3. Is it a competitor of the drug Jardiance (just without an annoying jingle and dance routine)? Negative. Is OB3 a rap artist? No. An emerging character from one of the seemingly endless Star Wars spin-offs? Wrong you are (in Yoda-voice). On July 4th, President Trump signed into law H.R.1, One Big Beautiful Bill Act, or OB3.

OB3 contains a host of tax changes impacting individuals, corporations and estates. There are also several provisions impacting corporations doing business internationally. But there are only a handful of general provisions germane to domestic insurance companies. There are no significant insurance-specific provisions in OB3.

Bonus Depreciation and IRC §179 Expensing

OB3 permanently reinstates 100% bonus depreciation for certain assets placed in service after January 19, 2025. Under prior law, 2025 additions were subject to 40% bonus depreciation. Additionally, the IRC §179 expensing limitation has been increased to $2.5 million with the phase-out beginning at $4.0 million (amounts will be adjusted for inflation).

Research & Development (R&D)

Under prior law, domestic R&D expenditures were subject to capitalization and amortization over a 5-year period. Foreign R&D expenditures were subject to a 15-year amortization period. OB3 permanently provides for the immediate deductibility of domestic R&D expenditures paid or incurred after December 31, 2024, whereas the rules for foreign expenditures remain static.

Taxpayers can elect to deduct previously capitalized and unamortized domestic R&D expenditures over a 1- or 2-year period commencing in the first tax year beginning after December 31, 2024. Some taxpayers may prefer to capitalize and amortize new domestic R&D and OB3 provides an election to capitalize and amortize these amounts over the useful life of the research (not less than 60 months) or 10 years.

Charitable Contribution Floor

Charitable contributions are limited to 10% of taxable income. However, OB3 has introduced a new 1% floor for charitable contributions made in tax years beginning after December 31, 2025.

Additional Provisions

Other provisions, including changes to the net business interest expense rules, could impact some insurers. If you would like to learn more, please let me know. I am always happy to discuss!

Promotion Announcement

We started off 2025 with Mario Prcic, CPA, CPCU being promoted to Senior Manager. Congratulations, Mario!

New Employee

We welcomed back Ty Bienema, who had previously had a couple of internships with us, in June as a full-time staff accountant.

Professional Designations

A couple of our team members have recently earned significant professional designations: Derek Salzwedel, CPCU and Collin Zander, CPA. Congratulations Derek & Collin!

Happy Thanksgiving

As we head into the season of gratitude, all of us at Strohm Ballweg would like to extend our sincere appreciation to our clients, vendors, and industry partners. Your trust, collaboration, and continued support make it possible for us to serve the insurance industry with expertise, dedication, and commitment.

During this season, we hope you enjoy time with family and friends and find moments of rest and reflection. Thank you for being part of our community, and we look forward to continuing our work together in the year ahead.

Wishing you a warm, safe, and happy Thanksgiving.