2004 HTML Instructions for Form 1120-L,

Use Form 1120-L, U.S. Life Insurance Company Income Tax Return, to report the income, gains, losses, deductions, credits, and to figure the income tax liability of life insurance companies.

Every domestic life insurance company and every foreign corporation that would qualify as a life insurance company if it were a U.S. corporation must file Form 1120-L. This includes organizations described in section 501(m)(1) that provide commercial-type life insurance.

Mutual savings banks conducting life insurance business and meeting the requirements of section 594 are subject to an alternative tax consisting of:

A partial tax computed on Form 1120, U.S. Corporation Income Tax Return, on the taxable income of the bank excluding the life insurance department and
A partial tax on the taxable income computed on Form 1120-L of the life insurance department.

Enter the combined tax on line 3 of Schedule J, Form 1120. File Form 1120 and attach Form 1120-L as a schedule (and identify it as such) or attach a statement showing the computation of the taxable income of the life insurance department (including all relevant information that would be reported on Form 1120-L).

A foreign life insurance company that sells a U.S. real property interest must file Form 1120-L and Schedule D (Form 1120) to report the sale. Gain or loss from the sale of a U.S. real property interest is considered effectively connected with the conduct of a U.S. business, even though the foreign life insurance company does not carry on any insurance business in the United States and is not otherwise required to file a U.S. income tax return. See sections 842 and 897, and the Schedule K, line 9, instructions on page 17 for additional information.

Insurance companies, other than life insurance companies, should file Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return. A burial or funeral benefit insurance company that directly manufactures funeral supplies or performs funeral services is taxable under section 831 and should file Form 1120-PC.

An “insurance company” means any corporation if more than half of its business during the tax year is from the issuance of insurance or annuity contracts or the reinsuring of risks underwritten by insurance companies.

A “life insurance company” is an insurance company in the business of issuing life insurance and annuity contracts either separately or combined with health and accident insurance, or noncancelable contracts of health and accident insurance that meet the reserves test in section 816(a). Guaranteed renewable life, health, and accident insurance that the corporation cannot cancel but reserves the right to adjust premium rates by classes, according to experience under the kind of policy involved, are treated as noncancelable.

The “reserves test” requires that life insurance reserves, as defined in section 816(b), plus unearned premiums and unpaid losses (whether or not ascertained) on noncancelable life, health, or accident policies not included in life insurance reserves must make up more than 50% of total reserves as defined in section 816(c). When determining whether the reserves test has been met:

Generally, a corporation must file its income tax return by the 15th day of the 3rd 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 3rd month after the short period ends. A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved.

If the due date falls on a Saturday, Sunday, or legal holiday, the corporation can file on the next business day.

A group of corporations with members located in more than one service center area will often keep all the books and records at the principal office of the managing corporation. In this case, the tax returns of the corporations may be filed with the service center for the area in which the principal office of the managing corporation is located.

The president, vice-president, treasurer, assistant treasurer, chief accounting officer or
Any other corporate officer (such as 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.

If an employee of the corporation completes Form 1120-L, the paid preparer's space should remain blank. Anyone who prepares Form 1120-L but does not charge the corporation should not complete that section. Generally, anyone who is paid to prepare the return must sign it and fill in the “Paid Preparer's Use Only” area.

Sign the return in the space provided for the preparer's signature.
Give a copy of the return to the taxpayer.

If the corporation wants to allow the IRS to discuss its 2004 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's Use Only” section of the corporation's 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 that the corporation has shared with the preparer about math errors, offsets, and return preparation. The notices will not be sent to the preparer.

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. If the corporation wants to expand the paid preparer's authorization, see Pub. 947, Practice Before the IRS and Power of Attorney.

The authorization cannot be revoked. However, the authorization will automatically end no later than the due date (excluding extensions) for filing the corporation's 2005 tax return.

The life insurance company may have to file some of the forms listed below. See the form for more information.

For a list of additional forms the life insurance company may need to file, see Other Forms That May Be Required in the Instructions for Forms 1120 and 1120-A.

Form W-2, Wage and Tax Statement. Use this form to report wages, tips, other compensation, withheld income, social security, and Medicare taxes for employees.
Form 720, Quarterly Federal Excise Tax Return. Use this form to report and pay environmental taxes, communications and air transportation taxes, fuel taxes, manufacturers taxes, ship passenger taxes, and certain other excise taxes.
Form 851, Affiliations Schedule. The parent corporation of an affiliated group of corporations must attach this form to its consolidated return. If this is the first year one or more subsidiaries are being included in a consolidated return, also see Form 1122, Authorization and Consent of Subsidiary Corporation To Be Included in a Consolidated Income Tax Return, below.
Form 941, Employer's Quarterly Federal Tax Return. Employers must file this form to report income tax withheld, and employer and employee social security and Medicare taxes. Also, see Trust fund recovery penalty on page 6.
Form 945, Annual Return of Withheld Federal Income Tax. File Form 945 to report income tax withheld from nonpayroll distributions or payments, including pensions, annuities, IRAs, gambling winnings, and backup withholding. Also, see Trust fund recovery penalty on page 6.
Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding.
Form 1099-MISC, Miscellaneous Income. Use this form to report payments: to providers of health and medical services, of rent or royalties, nonemployee compensation, etc.

Note.

Every corporation must file Form 1099-MISC if it makes payments of rents, commissions, or other fixed or determinable income (see section 6041) totaling $600 or more to any one person in the course of its trade or business during the calendar year.
Form 1122, Authorization and Consent of Subsidiary Corporation To Be Included in a Consolidated Income Tax Return. File this form if this is the first year a consolidated return is being filed.
Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations. This form is filed by a domestic life insurance company that controls a foreign corporation; acquires, disposes of, or owns 10% or more in value or vote of the outstanding stock of a foreign corporation; or had control of a foreign corporation for an uninterrupted period of at least 30 days during the annual accounting period of the foreign corporation. See Question 4 of Schedule N (Form 1120).
Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. This form is filed by a domestic life insurance company that is 25% or more foreign-owned. See Question 8 on page 18.
Form 8302, Electronic Deposit of Tax Refund of $1 Million or More. This form must be filed to request an electronic deposit of a tax refund of $1 million or more.
Form 8390, Information Return for Determination of Life Insurance Company Earnings Rate Under Section 809. This form is used to gather information regarding the earnings rates of the 50 largest domestic stock life insurance companies (stock companies), as determined by the IRS, and all domestic mutual life insurance companies (mutual companies).
Form 8621, Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. A domestic life insurance company uses this form to make certain elections by shareholders in a passive foreign investment company and to figure certain deferred taxes.
Form 8816, Special Loss Discount Account and Special Estimated Tax Payments for Insurance Companies. This form must be filed by any insurance company that elects to take an additional deduction under section 847.
Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships. A domestic life insurance company may have to file Form 8865 if it:
1. Controlled a foreign partnership (owned more than a 50% direct or indirect interest in the partnership).
2. Owned at least a 10% direct or indirect interest in a foreign partnership while U.S. persons controlled that partnership.
3. Had an acquisition, disposition, or change in proportional interest in a foreign partnership that:
  1. Increased its direct interest to at least 10% or reduced its direct interest of at least 10% to less than 10%.
  2. Changed its direct interest by at least a 10% interest.
4. Contributed property to a foreign partnership in exchange for a partnership interest if:
  1. Immediately after the contribution, the domestic life insurance company owned, directly or indirectly, at least a 10% interest in the foreign partnership or
  2. The fair market value of the property the domestic life insurance company contributed to the foreign partnership, when added to other contributions of property made to the foreign partnership during the preceding 12-month period, exceeds $100,000.
    
    The domestic life insurance company may also have to file Form 8865 to report certain dispositions by a foreign partnership of property it previously contributed to that partnership if it was a partner at the time of the disposition.
    
    For more details, including penalties for failing to file Form 8865, see Form 8865 and its separate instructions.
Form 8895, Section 965(f) Election for Corporations that are U.S. Shareholders of a Controlled Foreign Corporation. Use this form to elect the 85% dividends-received deduction on repatriated dividends under section 965.

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 life insurance 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(d)(12).

File supporting statements for each corporation included in the consolidated return. Do not use Form 1120-L as a supporting statement. On the supporting statement, use columns to show the following, both before and after adjustments.

To ensure that the corporation's tax return is correctly processed, attach all schedules and other forms after page 8, Form 1120-L, and in the following order:

Complete every applicable entry space on Form 1120-L. Do not enter “See Attached” 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 on 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. Also be sure to enter the corporation's name and EIN on each supporting statement or attachment.

The return of a life insurance company must be filed using the accrual method of accounting or, to the extent permitted under regulations, a combination of the accrual method with any other method, except the cash receipts and disbursements method. In all cases, the method used must clearly show LICTI.

Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when:

All events that determine the liability have occurred,
The amount of the liability can be figured with reasonable accuracy, and
Economic performance takes place with respect to the expense.

There are exceptions to the economic performance rule for certain items, including recurring expenses. See section 461(h) and the related regulations for the rules for determining when economic performance takes place.

To change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item), the corporation must file Form 3115, Application for Change in Accounting Method. For more information, see Form 3115 and Pub. 538, Accounting Periods and Methods.

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.

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.

The corporation can round off cents to whole dollars on its return and schedules. If the corporation does round to whole dollars, it must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar (for example, $1.39 becomes $1 and $2.50 becomes $3).

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.

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 any returns filed. They help in preparing future and amended returns.

The corporation must pay the tax due in full no later than the 15th day of the 3rd month after the end of the tax year. The two methods of depositing corporate income taxes are discussed below.

The corporation must make electronic deposits of all depository taxes (such as employment tax, excise tax, and corporate income tax) using the Electronic Federal Tax Payment System (EFTPS) in 2005 if:

The total deposits of such taxes in 2003 were more than $200,000 or
The corporation was required to use EFTPS in 2004.

If the corporation is required to use EFTPS and fails to do so, it may be subject to a 10% penalty. If the corporation is not required to use EFTPS, it can participate voluntarily. To enroll in or get more information about EFTPS, call 1-800-555-4477 or 1-800-945-8400. To enroll online, visit www.eftps.gov.

If the corporation does not use EFTPS, deposit corporation income tax payments (and estimated tax payments) with Form 8109, Federal Tax Deposit Coupon. If you do not have a preprinted Form 8109, use Form 8109-B to make deposits. You can get this form by calling 1-800-829-4933. Be sure to have your EIN ready when you call.

Do not send deposits directly to an IRS office; otherwise, the corporation may have to pay a penalty. Mail or deliver the completed Form 8109 with the payment to an authorized depositary (a commercial bank or other financial institution authorized to accept federal tax deposits). Make checks or money orders payable to that depositary.

If the corporation prefers, it can mail the coupon and payment to Financial Agent, Federal Tax Deposit Processing, P.O. Box 970030, St. Louis, MO 63197. Make the check or money order payable to “Financial Agent.”

To help ensure proper crediting, enter the corporation's employer identification number, the tax period to which the deposit applies, and “Form 1120-L” on the check or money order. Be sure to darken the “1120” box under “Type of Tax” and the appropriate “Quarter” box under “Tax Period” on the coupon. Records of these deposits will be sent to the IRS. For more information, see “Marking the Proper Tax Period” in the instructions for Form 8109.

For more information on deposits, see the instructions in the coupon booklet (Form 8109) and Pub. 583, Starting a Business and Keeping Records.

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.
Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to compute estimated tax.
If the corporation does not use EFTPS, use the deposit coupons (Forms 8109) to make deposits of estimated tax.

For more information on estimated tax payments, including penalties that apply if the corporation fails to make required payments, see the instructions for line 30 on page 10.

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. 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 15th day of the third month after the end of the tax year. Form 4466 must be filed before the corporation files its income tax return.

General Instructions