[Code of Federal Regulations]
[Title 26, Volume 8]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.801-1]

[Page 592-593]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.801-1  Definitions.

    (a) Life insurance company. The term life insurance company as used 
in subtitle A of the Code is defined in section 801. For the purpose of 
determining whether a company is a ``life insurance company'' within the 
meaning of that term as used in section 801, it must first be determined 
whether the company is taxable as an insurance company under the Code. 
For the definition of an ``insurance company'', see paragraph (b) of 
this section. In determining whether an insurance company is a life 
insurance company, the life insurance reserves (as defined in section 
803(b)) plus any unearned premiums and unpaid losses on noncancellable 
life, health, or accident policies, not included in ``life insurance 
reserves'' must comprise more than 50 percent of its total reserves (as 
defined in section 801). An insurance company writing only 
noncancellable life, health, or accident policies and having no ``life 
insurance reserves'' may qualify as a life insurance company if its 
unearned premiums and unpaid losses on such policies comprise more than 
50 percent of

[[Page 593]]

its total reserves. A noncancellable insurance policy means a contract 
which the insurance company is under an obligation to renew or continue 
at a specified premium and with respect to which a reserve in addition 
to the unearned premium must be carried to cover that obligation. For 
the purpose of the preceding sentence, the term ``unearned premium'' 
means the amount which will cover the cost of carrying the insurance 
risk for the period for which the premium has been paid in advance. A 
burial or funeral benefit insurance company qualifying as a life 
insurance company engaged directly in the manufacture of funeral 
supplies or the performance of funeral services will be taxable under 
section 821 or section 831 as an insurance company other than life.
    (b) Insurance companies. (1) Insurance companies include both stock 
and mutual companies, as well as mutual benefit insurance companies. A 
voluntary unincorporated association of employees formed for the purpose 
of relieving sick and aged members and the dependents of deceased 
members is an insurance company, whether the fund for such purpose is 
created wholly by membership dues or partly by contributions from the 
employer. A corporation which merely sets aside a fund for the insurance 
of its employees is not required to file a separate return for such 
fund, but the income therefrom shall be included in the return of the 
corporation.
    (2) Though its name, charter powers, and subjection to State 
insurance laws are significant in determining the business which a 
corporation is authorized and intends to carry on, the character of the 
business actually done in the taxable year determines whether it is 
taxable as an insurance company under the Code. For example, during the 
year 1954 the M Corporation, incorporated under the insurance laws of 
the State of R, carried on the business of lending money in addition to 
guaranteeing the payment of principal and interest of mortgage loans. Of 
its total income for the year, one-third was derived from its insurance 
business of guaranteeing the payment of principal and interest of 
mortgage loans and two-thirds was derived from its noninsurance business 
of lending money. The M Corporation is not an insurance company for the 
year 1954 within the meaning of the Code and the regulations thereunder.