Rev. Proc. 2023-41

Rev. Proc. 2023-41

SECTION 1. PURPOSE

This revenue procedure prescribes discount factors for the 2023 accident year for use by insurance companies in computing discounted unpaid losses under § 846 of the Internal Revenue Code and discounted estimated salvage recoverable under § 832. This revenue procedure also provides, for convenience, discount factors for losses incurred in the 2022 accident year and earlier accident years for use in taxable years beginning in 2023. The discount factors for accident years before 2023 were prescribed in earlier revenue procedures. See, e.g., Rev. Proc. 2023-10, 2023-3 I.R.B. 411. For background concerning the loss payment patterns and application of the discount factors, see Rev. Proc. 2023-10.

SECTION 2. SCOPE

This revenue procedure applies to any insurance company that is required to discount unpaid losses under § 846 for a line of business using the discount factors published by the Secretary. This revenue procedure also applies to any insurance company that is required to discount estimated salvage recoverable under § 832.

SECTION 3. DISCOUNT FACTORS FOR THE 2023 ACCIDENT YEAR

.01 The tables in this section 3 separately present for each line of business the discount factors for losses incurred in the 2023 accident year for use by insurance companies in computing discounted unpaid losses under § 846 and estimated salvage recoverable under § 832. The discount factors presented in this section are generally determined by using the applicable interest rate for 2023 under § 846(c), which is 2.90 percent, determined using semiannual compounding. The exceptions are the discount factors for long-tail lines of business determined using the composite method described in section V of Notice 88-100, 1988-2 C.B. 439. These discount factors are to be used in taxable years beginning in 2033 for losses incurred in accident years not separately reported on the annual statement for 2033. For taxable years beginning after 2033, the discount factors to be used for losses incurred in the 2023 accident year will be those determined using the composite method for later accident years. These discount factors will be published in later years. All discount factors are determined by assuming that all loss payments occur in the middle of the calendar year.

.02 Section V of Notice 88-100 sets forth a composite method for computing discounted unpaid losses for accident years that are not separately reported on the annual statement. Tables 1 and 2 separately provide discount factors for insurance companies that have elected to use the composite method of Notice 88-100. See Rev. Proc. 2002-74, 2002-2 C.B. 980. The discount factors computed using the composite method are unrelated to the composite discount factors referred to in § 1.846-1(b)(1)(ii) and (4) of the Income Tax Regulations, which apply to lines of business for which the Secretary has not published discount factors. The composite discount factors for use with respect to such lines of business are labelled “Short-Tail Composite” (in Table 1, part B) and “Long-Tail Composite” (in Table 2, part B). The “Miscellaneous Casualty” discount factors referenced in § 1.846-1(b)(2) are not set forth in tables but are equivalent to the “Short-Tail Composite” discount factors.

Table 1 (part A) Discount Factors Under Section 846 (percent) For Losses Incurred in Accident Year 2023 in Short-Tail Lines of Business

*For the Accident and Health line of business (other than disability income or credit disability insurance), the discount factor for taxable year 2023 is 98.5707 percent. This is also the discount factor used in later taxable years for taxpayers not using the composite method. For taxpayers using the composite method, the discount factor for losses incurred in 2023 is the discount factor published for Accident and Health lines of business for losses incurred in the accident year coinciding with the taxable year.

**The relevant accident year is the accident year that is two years prior to the specified taxable year.

Table 1 (part B) Discount Factors Under Section 846 (percent) For Losses Incurred in Accident Year 2023 in Short-Tail Lines of Business

**The relevant accident year is the accident year that is two years prior to the specified taxable year.

Table 2 (part A) Discount Factors Under Section 846 (percent) For Losses Incurred in Accident Year 2023 in Long-Tail Lines of Business

**The relevant accident year is the accident year that is ten years prior to the specified taxable year.

Table 2 (part B) Discount Factors Under Section 846 (percent) For Losses Incurred in Accident Year 2023 in Long-Tail Lines of Business

**The relevant accident year is the accident year that is ten years prior to the specified taxable year.

SECTION 4. DISCOUNT FACTORS FOR TAXABLE YEARS BEGINNING IN 2023

.01 The tables in this section 4 present separately for each line of business discount factors for losses incurred in the 2023 accident year and earlier accident years for use by insurance companies in computing discounted unpaid losses under § 846 and estimated salvage recoverable under § 832 in taxable years beginning in 2023.

.02 Tables 3 and 4 separately provide discount factors for insurance companies that have elected to use the composite method of Notice 88-100. See Rev. Proc. 2002-74. The discount factors computed using the composite method are unrelated to the composite discount factors referred to in § 1.846-1(b)(1)(ii) and (4), which apply to lines of business for which the Secretary has not published discount factors. The composite discount factors for use with respect to such lines of business are labelled “Short-Tail Composite” (in Table 3, part B) and “Long-Tail Composite” (in Table 4, part B). The “Miscellaneous Casualty” discount factors referenced in § 1.846-1(b)(2) are not set forth in tables but are equivalent to the “Short-Tail Composite” discount factors.

Table 3 (part A) Discount Factors Under Section 846 (percent) For Taxable Year(s) Beginning in 2023 Short-Tail Lines of Business

*For the Accident and Health line of business (other than disability income or credit disability insurance), the discount factor for taxable year 2023 is 98.5707 percent.

Table 3 (part B) Discount Factors Under Section 846 (percent) For Taxable Year(s) Beginning in 2023 Short-Tail Lines of Business

Table 4 (part A) Discount Factors Under Section 846 (percent) For Taxable Year(s) Beginning in 2023 Long-Tail Lines of Business

Table 4 (part B) Discount Factors Under Section 846 (percent) For Taxable Year(s) Beginning in 2023 Long-Tail Lines of Business

SECTION 5. DRAFTING INFORMATION

The principal author of this revenue procedure is James G. Carpino of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure contact Mr. Carpino at (202) 317-6995 (not a toll-free number).