IRS Chief Counsel - Treatment of premium stabilization reserves 

January 14:  The IRS today posted a “redacted” field advice memorandum* in which it was concluded that positive balances in an insurance company’s experience “premium stabilization reserve” (PSR) accounts are not return premiums and cannot be deducted from gross income under section 832 until they are refundable to customers or creditable to customers’ accounts. 20140201F (release date January 10, 2014, and dated December 3, 2013)

Read the field advice memo [PDF 88 KB]


The IRS publicly posted this field advice memo late today. An initial, preliminary review of the memo indicates that the IRS concluded that because the company’s contracts provided that positive PSR balances were not returned to a customer upon termination of the contract, the company’s liability for the amounts was not fixed.


*Field advice memo documents are prepared by IRS field attorneys in the Office of Chief Counsel, are reviewed by an Associate Office, and are subsequently issued to IRS field or service center employees. The memo cannot be used or cited as precedent.




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