Form 1120-PC Instructions
Instructions for Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return
Rev. 2023
Related Forms
- Form 1120-PC - U.S. Property and Casualty Insurance Company Income Tax Return
Department of the Treasury
Internal Revenue Service
2023
Instructions for
Form 1120-PC
U.S. Property and Casualty Insurance Company Income Tax Return
Section references are to the Internal Revenue Code
unless otherwise noted.
Contents
Contents
Page
Page
Future Developments
For the latest information about developments related to
Form 1120-PC and its instructions, such as legislation
enacted after they were published, go to IRS.gov/
What's New
Increase in penalty for failure to file. For tax returns
required to be filed in 2024, the minimum penalty for
failure to file a tax return that is more than 60 days late has
increased to the smaller of the tax due or $485. See Late
filing of return, later.
Expiration of 100% business meal expense deduc-
tion. The temporary 100% business meal expenses
deduction for food and beverages provided by a
restaurant does not apply to amounts paid or incurred
after 2022.
Corporate alternative minimum tax (CAMT). For tax
years beginning after 2022, certain corporations must
determine whether they are subject to the new CAMT and
calculate CAMT, if applicable. See the instructions for
Elective payment election. Applicable entities and
electing taxpayers can elect to treat certain credits as
elective payments. Resulting overpayment may result in
Instructions for Form 3800.
Other Forms and Statements That May Be
Relief from additions to tax for underpayments appli-
cable to the new corporate alternative minimum tax.
For tax year 2023, the IRS will waive the penalty for failure
to make estimated tax payments for taxes attributable to a
CAMT liability for affected corporations. Affected
corporations must still file Form 2220 even if they owe no
estimated tax penalty. However, affected corporations
may exclude the CAMT tax liability when calculating the
required annual payment on Form 2220. Affected
corporations must also include an amount of estimated
tax penalty on page 1, line 17 of Form 1120-PC even if
that amount is zero. Failure to follow these instructions
could result in the corporation receiving a penalty notice
that will require an abatement request to apply the relief
provided by Notice 2023-42. See Notice 2023-42,
2023-26 I.R.B. 1085, available at IRS.gov/irb/
Final Return, Name Change, Address
Jan 29, 2024
Cat. No. 64537I
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General Instructions
Purpose of Form
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Use Form 1120-PC to report the income, gains, losses,
deductions, and credits, and to figure the income tax
liability of insurance companies, other than life insurance
companies.
Who Must File
Every domestic nonlife insurance company and every
foreign corporation that would qualify as a nonlife
insurance company subject to taxation under section 831,
if it were a U.S. corporation, must file Form 1120-PC. This
includes organizations described in section 501(m)(1) that
provide commercial-type insurance and organizations
described in section 833.
The Taxpayer Advocate Service
The Taxpayer Advocate Service (TAS) is an independent
organization within the IRS that helps taxpayers and
protects taxpayer rights. TAS's job is to ensure that every
taxpayer is treated fairly and knows and understands their
Exceptions. A nonlife insurance company that is:
Exempt under section 501(c)(15) should file Form 990,
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As a taxpayer, the corporation has rights that the IRS
must abide by in its dealings with the corporation. TAS can
help the corporation if:
Return of Organization Exempt From Income Tax;
Subject to taxation under section 831, and disposes of
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its insurance business and reserves, or otherwise ceases
to be taxed under section 831, but continues its corporate
existence while winding up and liquidating its affairs,
should file Form 1120, U.S. Corporation Income Tax
Return.
A problem is causing financial difficulty for the business;
The business is facing an immediate threat of adverse
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action; and
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The corporation has tried repeatedly to contact the IRS
but no one has responded, or the IRS hasn't responded
by the date promised.
Life insurance companies. Life insurance companies
should file Form 1120-L, U.S. Life Insurance Company
Income Tax Return.
help the corporation understand these rights.
Foreign-owned domestic disregarded entities. If a
foreign person, including a foreign corporation, wholly
owns a domestic disregarded entity (DE), the domestic
DE is treated as a domestic corporation separate from its
owner (the foreign corporation) for purposes of the
reporting requirements under section 6038A that apply to
25% foreign-owned domestic corporations. These rules
apply to a domestic DE owned by a foreign insurance
company that makes an election under section 953(c)(3)
(C) but do not apply to a domestic DE owned by a foreign
insurance company that makes an election under section
953(d) (for information on these elections, see the
electing under section 953(c)(3)(C) wholly owns a
domestic DE, the DE is required to file Form 5472,
Information Return of a 25% Foreign-Owned U.S.
Corporation or a Foreign Corporation Engaged in a U.S.
Trade or Business. For additional information and
coordination with Form 5472 filing by the domestic DE,
see the Instructions for Form 5472.
TAS has offices in every state, the District of Columbia,
and Puerto Rico. Local advocates' numbers are in their
877-777-4778.
TAS also works to resolve large-scale or systemic
problems that affect many taxpayers. If the corporation
knows of one of these broad issues, please report it to
TAS through the Systemic Advocacy Management
For more information, go to
How To Get Forms
and Publications
Internet. You can access the IRS website 24 hours a day,
7 days a week, at IRS.gov to:
Download forms, instructions, and publications;
Order IRS products online;
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Electronic Filing
IRS.gov/MeF and click on the link for “Modernized e-File
Forms” for information on which forms the corporation can
or must e-file.
Research your tax questions online;
Search publications online by topic or keyword;
View Internal Revenue Bulletins (IRBs) published in
recent years; and
Sign up to receive local and national tax news by email.
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When To File
Tax forms and publications. The corporation can view,
print, or download all of the forms and publications it may
forms mailed to it. The IRS will process your order for
forms and publications as soon as possible.
Generally, a corporation must file its income tax return by
the 15th day of the 4th 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 4th month after the
short period ends. A corporation that has dissolved must
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Instructions for Form 1120-PC (2023)
Where To File
File the corporation's return at the applicable IRS address listed below.
If the corporation's principal business, office, or agency is located in:
Use the following address:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0012
The United States
Internal Revenue Service
P.O. Box 409101
Ogden, UT 84409
A foreign country or U.S. territories
generally file by the 15th day of the 4th month after the
date it dissolved.
Paid Preparer Use Only section. If an employee of the
corporation completes Form 1120-PC, the paid preparer
space should remain blank. Anyone who prepares Form
1120-PC but does not charge the corporation should not
complete that section. Generally, anyone who is paid to
prepare the return must sign it and complete the section.
However, a corporation with a fiscal tax year ending
June 30 must file by the 15th day of the 3rd month after
the end of its tax year. A corporation with a short tax year
ending any time in June will be treated as if the short year
ended on June 30, and must file by the 15th day of the 3rd
month after the end of its tax year.
The paid preparer must complete the required preparer
information and:
Sign the return in the space provided for the preparer's
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If the due date falls on a Saturday, Sunday, or legal
signature,
Include their Preparer Tax Identification Number (PTIN);
holiday, the corporation can file on the next business day.
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and
Private Delivery Services
Give a copy of the return to the taxpayer.
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Corporations can use certain private delivery services
(PDSs) designated by the IRS to meet the “timely mailing
the current list of designated services.
Note. A paid preparer may sign original or amended
returns by rubber stamp, mechanical device, or computer
software program.
The PDS can tell you how to get written proof of the
mailing date.
Paid Preparer Authorization
If the corporation wants to allow the IRS to discuss its
2023 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 Use Only” section
of the return. It does not apply to the firm, if any, shown in
that section.
For the IRS mailing address to use if you are using a
Private delivery services cannot deliver items to
P.O. boxes. You must use the U.S. Postal Service
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CAUTION
to mail any item to an IRS P.O. box address.
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:
Extension of Time To File
File Form 7004, Application for Automatic Extension of
Time To File Certain Business Income Tax, Information,
and Other Returns, to request an extension of time to file.
Generally, the corporation must file Form 7004 by the
regular due date of the return. See the Instructions for
Form 7004.
Give the IRS any information that is missing from the
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return;
Call the IRS for information about the processing of the
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return or the status of any related refund or payment(s);
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Who Must Sign
The return must be signed and dated by:
Respond to certain IRS notices about math errors,
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The president, vice president, treasurer, assistant
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offsets, and return preparation.
treasurer, chief accounting officer; or
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.
The authorization will automatically end no later than
the due date (excluding extensions) for filing the
corporation's 2024 tax return. If the corporation wants to
expand the paid preparer's authorization or revoke the
authorization before it ends, see Pub. 947, Practice Before
the IRS and Power of Attorney.
Any other corporate officer (such as a tax officer)
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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.
Instructions for Form 1120-PC (2023)
3
Electronic Deposit Requirement
Statements
Corporations must use electronic funds transfer to make
all federal tax deposits (such as deposits of employment,
excise, and corporate income tax). Generally, electronic
funds transfers are made using the Electronic Federal Tax
Payment System (EFTPS).
NAIC annual statement. Regulations section
1.6012-2(c) requires that the National Association of
Insurance Commissioners (NAIC) annual statement be
filed with Form 1120-PC. A foreign insurance company
subject to tax under section 831 that is not required to file
an annual statement must file a copy of the pro forma
annual statement. A penalty for the late filing of a return
may be imposed for not including the annual statement
when the return is filed. However, see Electronic filing,
next.
If the corporation does not want to use EFTPS, it can
arrange for its tax professional, financial institution, payroll
service, or other trusted third party to make deposits on its
behalf. Also, it can arrange for its financial institution to
submit a same-day payment (discussed later) on its
behalf. EFTPS is a free service provided by the
Department of the Treasury. Services provided by a tax
professional, financial institution, payroll service, or other
third party may have a fee.
Electronic filing. If the domestic or foreign nonlife
insurance company files Form 1120-PC electronically, do
not attach the annual statement or pro forma annual
statement to the electronically filed return. However, you
must provide a copy of the annual statement or pro forma
annual statement to the IRS if requested and retain it with
your other tax records for the period required by the
regulations.
Reconciliation. Corporations that do not file a
Schedule M-3 (Form 1120-PC), Net Income (Loss)
Reconciliation for U.S. Property and Casualty Insurance
Companies With Total Assets of $10 Million or More, with
Form 1120-PC must attach a statement that reconciles the
NAIC annual statement to Form 1120-PC.
To get more information about EFTPS or to enroll in
contact EFTPS using Telecommunications Relay Services
(TRS) for people who are deaf, hard of hearing, or have a
speech disability, dial 711 and provide the TRS assistant
the 800-555-4477 number above or 800-733-4829.
Depositing on time. To make EFTPS deposits on time,
the corporation must submit the transaction by 8 p.m.
Eastern time the day before the date the deposit is due. If
the corporation uses a third party to make deposits on its
behalf, they may have different cutoff times.
Same-day wire payment option. If the corporation fails
to submit a deposit transaction on EFTPS by 8 p.m.
Eastern time the day before the date a deposit is due, it
can still make the deposit on time by using the Federal Tax
Collection Service (FTCS). Before using the same-day
wire payment method, the corporation will need to make
arrangements with its financial institution ahead of time
regarding availability, deadlines, and costs. Financial
institutions may charge a fee for payments made this way.
To learn more about making a same-day wire payment, go
Assembling the Return
To ensure that the corporation's tax return is correctly
processed, attach all schedules and other forms after
page 9 of Form 1120-PC in the following order.
1. Schedule N (Form 1120).
2. Form 4626.
3. Form 4136.
4. Form 8978.
5. Form 965-B.
6. Form 8941.
7. Form 3800.
8. Additional schedules in alphabetical order.
9. Additional forms in numerical order.
10. Supporting statements and attachments.
Estimated Tax Payments
Generally, the following rules apply to the corporation's
payments of estimated tax.
The corporation must make installment payments of
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Complete every applicable entry space on Form
1120-PC. Do not enter “See Attached” or “Available Upon
Request” 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 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. Enter the
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,
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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.
The corporation must use electronic funds transfer to
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make installment payments of estimated tax.
If, after the corporation figures and deposits estimated
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corporation's name and employer identification number
(EIN) on each supporting statement or attachment.
tax, it finds that its tax liability for the year will be more or
less than originally estimated, it may have to refigure its
required installments. If earlier installments were
underpaid, the corporation may owe a penalty. See
Tax Payments
Generally, the corporation must pay any tax due in full no
later than the due date for filing its tax return (not including
date falls on a Saturday, Sunday, or legal holiday, the
payment is due on the next day that isn't a Saturday,
Sunday, or legal holiday.
If the corporation overpaid estimated tax, it may be able
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to get a quick refund by filing Form 4466, Corporation
Application for Quick Refund of Overpayment of
Estimated Tax. See the instructions for Form 1120-PC,
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Instructions for Form 1120-PC (2023)
See section 6655 and Pub. 542, Corporations, for more
information on estimated taxes.
Form 941, Employer's QUARTERLY Federal Tax
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Return;
Form 944, Employer's ANNUAL Federal Tax Return; or
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Estimated tax penalty. A corporation that does not
make estimated tax payments when due may be subject
to an underpayment penalty for the period of
Form 945, Annual Return of Withheld Federal Income
Tax.
The trust fund recovery penalty may be imposed on all
underpayment. Generally, a corporation is subject to the
penalty if its tax liability is $500 or more and it did not
timely pay at least the smaller of:
persons who are determined by the IRS to be responsible
for collecting, accounting for, or paying over these taxes,
and who acted willfully in not doing so. The penalty is
equal to the full amount of the unpaid trust fund tax. See
the Instructions for Form 720 or Pub. 15 (Circular E),
Employer's Tax Guide, for details, including the definition
of responsible persons.
Its tax liability for the current year, or
Its prior year tax.
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See section 6655 for details and exceptions, including
special rules for large corporations.
Use Form 2220, Underpayment of Estimated Tax by
Corporations, to see if the corporation owes a penalty and
to figure the amount of the penalty. If Form 2220 is
completed, enter the penalty on line 17. See the
Note. The trust fund recovery penalty will not apply to any
amount of trust fund taxes an employer holds back in
anticipation of the credit for qualified sick and family leave
wages or the employee retention credit that they are
entitled to. See Pub. 15 for more information.
Other penalties. Other penalties can be imposed for
negligence, substantial understatement of tax, reportable
transaction understatements, and fraud. See sections
6662, 6662A, and 6663.
Foreign insurance companies, see Notice 90-13,
1990-1 C.B. 321, before computing estimated tax.
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CAUTION
Interest and Penalties
Accounting Methods
Figure taxable income using the method of accounting
regularly used in keeping the corporation's books and
records. In all cases, the method used must clearly show
taxable income. Permissible methods include cash,
accrual, or any other method authorized by the Internal
Revenue Code.
If the corporation receives a notice about penalties
after it files its return, send the IRS an explanation
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CAUTION
and we will determine if the corporation meets the
criteria for the reasonable-cause exception to the
penalties. Do not attach an explanation when the
corporation's return is filed.
The gross amounts of underwriting and investment
income should be computed on the basis of the Statement
of Income of the NAIC annual statement to the extent not
inconsistent with the Internal Revenue Code and its
regulations. In all cases, the method used must clearly
show taxable income.
Change in accounting method. Generally, the
corporation must get IRS consent to change either an
overall method of accounting or the accounting treatment
of any material item for income tax purposes. To obtain
consent, the corporation must generally file Form 3115,
Application for Change in Accounting Method, during the
tax year for which the change was requested. See the
Instructions for Form 3115 and Pub. 538, Accounting
Periods and Methods, for more information and
exceptions, including filing exceptions for qualified small
business taxpayers. Also see the Instructions for Form
3115 for procedures that may apply for obtaining
automatic consent to change certain methods of
accounting, non-automatic change procedures, and
reduced Form 3115 filing requirements.
Interest. Interest is charged on taxes paid late even if an
extension of time to file is granted. Interest is also charged
on penalties imposed for failure to file, negligence, fraud,
substantial valuation misstatements, substantial
understatements of tax, and reportable transaction
understatements from the due date (including extensions)
to the date of payment. The interest charge is figured at a
rate determined under section 6621.
Late filing of return. A corporation that does not file its
tax return by the due date, including extensions, may be
penalized 5% of the unpaid tax for each month or part of a
month the return is late, up to a maximum of 25% of the
unpaid tax. The minimum penalty for a tax return required
to be filed in 2024 that is over 60 days late is the smaller of
the tax due or $485 (adjusted for inflation). The penalty
will not be imposed if the corporation can show that the
failure to file on time was due to reasonable cause. See
Caution, earlier.
Late payment of tax. A corporation that does not pay
the tax when due may generally be penalized 1/2 of 1% of
the unpaid tax for each month or part of a month the tax is
not paid, up to a maximum of 25% of the unpaid tax. See
Caution, earlier.
Safe harbor method of accounting for premium ac-
quisition expenses. Insurance companies subject to tax
under section 831 are provided with a safe harbor method
of accounting for premium acquisition expenses. Form
3115 must be filed in order to change to the safe harbor
method. For more information, see the Instructions for
Form 3115.
Trust fund recovery penalty. This penalty may apply if
certain excise, income, social security, and Medicare
taxes that must be collected or withheld are not collected
or withheld, or these taxes are not paid. These taxes are
generally reported on:
Certain changes in method of accounting for organi-
Form 720, Quarterly Federal Excise Tax Return;
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zations to which section 833 applies. Blue Cross or
Instructions for Form 1120-PC (2023)
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Blue Shield organizations under section 833(c)(2), or
organizations described in section 833(c)(3), can obtain
automatic consent to change the method of accounting for
unearned premiums resulting from either a failure to meet
the medical loss ratio (MLR) requirements of section
833(c)(5), or meeting the MLR requirements after failing to
do so in a prior year. Form 3115 must be filed in order to
make this change in accounting method. See the
Instructions for Form 3115.
section 1.351-3(d)(1)) that receives stock of a corporation
in exchange for property in a nonrecognition event must
include the statement required by Regulations section
1.351-3(a) on or with the transferor's tax return for the tax
year of the exchange. The transferee corporation must
include the statement required by Regulations section
1.351-3(b) on or with its return for the tax year of the
exchange, unless all the required information is included
in any statement(s) provided by a significant transferor
that is attached to the same return for the same section
351 exchange. If the transferor or transferee corporation is
a controlled foreign corporation (CFC), each U.S.
Accounting Period
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.
shareholder (within the meaning of section 951(b)) must
include the required statement on or with its return.
Distributions under section 355. Every corporation that
makes a distribution of stock or securities of a controlled
corporation, as described in section 355 (or so much of
section 356 as it relates to section 355), must include the
statement required by Regulations section 1.355-5(a) on
or with its return for the year of the distribution. A
significant distributee (as defined in Regulations section
1.355-5(c)) that receives stock or securities of a controlled
corporation must include the statement required by
Regulations section 1.355-5(b) on or with its return for the
year of receipt. If the distributing or distributee corporation
is a CFC, each U.S. shareholder (within the meaning of
section 951(b)) must include the statement on or with its
return.
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.
Rounding Off to Whole Dollars
The corporation may enter decimal points and cents when
completing its tax return. However, the corporation should
round off cents to whole dollars on its return, forms, and
schedules to make completing its return easier. The
corporation must either round off all amounts on its return
to whole dollars, or use cents for all amounts. To round,
drop amounts under 50 cents and increase amounts from
50 to 99 cents to the next dollar. For example, $8.40
rounds to $8 and $8.50 rounds to $9.
Dual-consolidated losses. If a domestic corporation
incurs a dual-consolidated loss (as defined in Regulations
section 1.1503(d)-1(b)(5)), the corporation (or
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.
consolidated group) may need to attach a domestic use
agreement and/or an annual certification, as provided in
Regulations sections 1.1503(d)-6(d) and (g).
Election to reduce basis under section 362(e)(2)(C).
If property is transferred to a corporation subject to section
362(e)(2), the transferor and the transferee corporation
may elect, under section 362(e)(2)(C), to reduce the
transferor's basis in the stock received instead of reducing
the transferee corporation's basis in the property
transferred. Once made, the election is irrevocable. For
more information, see section 362(e)(2) and Regulations
section 1.362-4. If an election is made, a statement must
be filed in accordance with Regulations section 1.362-4(d)
(3).
Recordkeeping
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 all filed returns.
They help in preparing future and amended returns and in
the calculation of earnings and profits.
Other forms and statements. See Pub. 542,
Corporations, for a list of other forms and statements a
corporation may need to file in addition to the forms and
statements discussed throughout these instructions.
Other Forms and Statements That
May Be Required
Reportable transaction disclosure statement.
Participants in any reportable transaction must file Form
8886, Reportable Transaction Disclosure Statement. See
the Instructions for Form 8886.
Reportable transactions by material advisors.
Material advisors to any reportable transaction must file
Form 8918, Material Advisor Disclosure Statement. See
the Instructions for Form 8918.
Specific Instructions
Period Covered
Generally, file the 2023 return for calendar year 2023.
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. For a fiscal or short tax year return, fill in the
tax year space at the top of the form.
Transfers to a corporation controlled by the transfer-
or. Every significant transferor (as defined in Regulations
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Instructions for Form 1120-PC (2023)
eliminating entries for intercompany transactions between
corporations within the consolidated group. Attach
consolidated balance sheets and a reconciliation of
consolidated retained earnings.
Name and Address
Enter the corporation's true name (as set forth in the
charter or other legal document creating it), address, and
EIN on the appropriate lines. Enter the address of the
corporation's principal office or place of business. Include
the suite, room, or other unit number after the street
address. If the post office does not deliver mail to the
street address and the corporation has a P.O. box, show
the box number instead.
For more information on consolidated returns, see the
regulations under section 1502.
Note. If a nonlife insurance company is a member of an
affiliated group, file Form 1120-PC as an attachment to the
consolidated return in addition to the supporting
statements discussed earlier. Across the top of page 1 of
Form 1120-PC, enter “Supporting Statement to
Consolidated Return.”
Note. Do not use the address of the registered agent for
the state in which the corporation is incorporated. For
example, if a business is incorporated in Delaware or
Nevada and the corporation's principal office is located in
Little Rock, Arkansas, the corporation should enter the
Little Rock address.
If the corporation has a foreign address, include the city
or town, state or province, country, and foreign postal
code. Do not abbreviate the country name. Follow the
country's practice for entering the name of the state or
province and postal code.
Life-Nonlife Consolidated Return
If the corporation is the common parent of a life-nonlife
consolidated group, check Item A, boxes 1 and 2.
Filing requirements. The common parent of a
life-nonlife consolidated group is required to do the
following.
File the applicable consolidated corporate income tax
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return as one of the following: a Form 1120-L, where the
common parent is a life insurance company; a Form
1120-PC, where the common parent is an insurance
company, other than a life insurance company; or a Form
1120, where the common parent is any other type of
corporation.
If the corporation receives its mail in care of a third
party (such as an accountant or an attorney), enter on the
street address line “C/O” followed by the third party's
name and street address or P.O. box.
Item A. Identifying Information
Consolidated Return
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
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(b)(12).
Indicate clearly on the face of the return that the
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corporate tax return is a life-nonlife return. This
requirement is satisfied by checking Item A, boxes 1 and
2.
Show any setoffs required by paragraphs (e), (h), and
•
(j) of Regulations section 1.1502-47.
Report separately the nonlife consolidated taxable
•
income or loss, determined under Regulations section
1.1502-47(f), on a Form 1120 or 1120-PC (whether filed
by the common parent or as an attachment to the
consolidated return), for all nonlife members of the
consolidated group.
Corporations filing a consolidated return must check
Item A, box 1, and attach Form 851, Affiliations Schedule,
and other supporting statements to the return. Also, for the
first year a subsidiary corporation is being included in a
consolidated return, attach Form 1122, Authorization and
Consent of Subsidiary Corporation To Be Included in a
Consolidated Income Tax Return, to the parent's
Report separately the consolidated life insurance
•
company taxable income (as defined by Regulations
section 1.1502-47(b)(3)) determined under Regulations
section 1.1502-47, on a Form 1120-L (whether filed by the
common parent or as an attachment to the consolidated
return), for all life members of the consolidated group.
consolidated return. Attach a separate Form 1122 for each
new subsidiary being included in the consolidated return.
Schedule M-3 (Form 1120-PC)
A nonlife insurance company with total assets
(nonconsolidated or consolidated for all companies
included within a tax consolidation group) of $10 million or
more on the last day of the tax year must file
File supporting statements for each corporation
included in the consolidated return. Do not use Form
1120-PC as a substitute for the supporting statement. On
the supporting statement, use columns to show the
following, both before and after adjustments.
Schedule M-3 (Form 1120-PC) instead of Schedule M-1.
A corporation filing Form 1120-PC that is not required to
file Schedule M-3 may voluntarily file Schedule M-3
instead of Schedule M-1.
1. Items of gross income and deductions.
2. A computation of taxable income.
3. Balance sheets as of the beginning and end of the
If you are filing Schedule M-3 (Form 1120-PC), check
Item A, box 3, at the top of page 1 of Form 1120-PC. See
the Instructions for Schedule M-3 (Form 1120-PC) for
more details.
tax year.
4. A reconciliation of income per books with income
per return.
5. A reconciliation of retained earnings.
Note. If you do not file Schedule M-3 (Form 1120-PC)
earlier.
Enter on Form 1120-PC the totals for each item of
income, gain, loss, expense, or deduction, net of
Instructions for Form 1120-PC (2023)
7
2. Section 953(d) to be treated as a domestic
corporation.
Item B. Employer Identification
Number (EIN)
Generally, a foreign corporation making either section
953 election must file its return by sending it to:
Enter the corporation's EIN. If the corporation does not
have an EIN, it must apply for one. An EIN can be applied
for in any of the following ways.
Internal Revenue Service Center
P.O. Box 409101
Online—Go to
•
IRS.gov/EIN. The EIN is issued immediately once the
Ogden, UT 84409
application information is validated.
By faxing or mailing Form SS-4, Application for
•
See Notice 87-50, 1987-2 C.B. 357; and Rev. Proc.
2003-47, 2003-28 I.R.B. 55, for the procedural rules,
election statement formats, and filing addresses for
making the respective elections under section 953(c)(3)
(C) or section 953(d).
Once either election is made, it will apply to the tax year
for which made and all subsequent tax years unless
revoked with the consent of the IRS. Also, any loss of a
foreign corporation electing to be treated as a domestic
insurance company under section 953(d) will be treated
as a dual-consolidated loss and may not be used to
reduce the taxable income of any other member of the
affiliated group for this tax year or any other tax year.
Employer Identification Number.
Corporations located in the United States or U.S.
territories can use the online application. Foreign
!
CAUTION
corporations may call 267-941-1099 (not a
toll-free number) for more information on obtaining an EIN.
See the Instructions for Form SS-4.
EIN applied for, but not received. If the corporation has
not received its EIN by the time the return is due, enter
“Applied For” and the date the corporation applied in the
space for the EIN. However, if the corporation is filing its
return electronically, an EIN is required at the time the
return is filed. An exception applies to subsidiaries of
corporations whose returns are filed with the parent's
electronically filed consolidated Form 1120. These
subsidiaries should enter “Applied For” in the space for the
EIN on their returns. The subsidiaries' returns are
identified under the parent corporation's EIN.
If a section 953(d) election is made, include the
additional tax required to be paid on page 1, line 14. On
the dotted line to the left of line 14, enter “Section 953(d)”
and the amount. Attach a statement showing the
computation. See section 953(d) for more details.
Note. A captive insurance company can make an election
under section 831(b) and an election under section 953(d)
if it is a foreign insurance company.
For more information, see the Instructions for Form
SS-4.
Item D. Section 831(b) and Section
953 Elections
Item E. Final Return, Name Change,
Address Change, or Amended Return
Check the applicable box(es) if an election is made under
section(s) 831(b), 953(c)(3)(C), or 953(d).
Indicate a final return, name change, address change, or
amended return by checking the appropriate box.
Section 831(b) election. Check the 831(b) box if the
insurance company elects to be taxed on taxable
investment income in lieu of the tax otherwise applicable
under section 831(a). Section 831(b) applies to a small
company, as defined under section 831(b)(2)(A), if such
company meets the diversification requirements of section
831(b)(2)(B) and such corporation elects the application
of section 831(b) for such tax year under section 831(b)(2)
later. See Regulations section 301.9100-8(a) for the rules
regarding the timing and manner of making the election
under section 831(b)(2)(A)(iii).
Note. The election under section 831(b)(2)(A)(iii) applies
to the tax year for which made and for all subsequent tax
years for which a corporation is a small company, as
defined under section 831(b)(2)(A), and such corporation
meets the diversification requirements of section 831(b)
(2)(B). Once made, an election under section 831(b)(2)(A)
(iii) may only be revoked with the consent of the Secretary.
Note. If a change in address or responsible party occurs
after the return is filed, use Form 8822-B, Change of
Address or Responsible Party — Business, to notify the
IRS. See the instructions for Form 8822-B for details.
Taxable Income
Line 1, Taxable income, and line 2, Taxable invest-
ment income. If the corporation is a small company as
defined in section 831(b)(2) and elects under section
831(b)(2)(A)(iii) to be taxed on taxable investment income,
complete Schedule B (ignore Schedule A) and enter the
amount from Schedule B, line 21, on page 1, line 2. Also,
complete Schedule I, Question 14. All other corporations
should complete Schedule A (ignore Schedule B) and
enter on page 1, line 1, the amount from Schedule A,
line 37.
Tax Computation and Payments
Line 3. Income tax. Multiply taxable income (page 1,
line 1) by 21%. (0.21). Enter this amount on line 3.
Deferred tax under section 1291. If the corporation
was a shareholder in a passive foreign investment
company (PFIC) and received an excess distribution or
disposed of its investment in the PFIC during the year, it
must include the total increase in taxes due under section
Section 953 elections. Check the applicable box if the
corporation is a foreign corporation and elects under:
1. Section 953(c)(3)(C) to treat its related person
insurance income as effectively connected with the
conduct of a trade or business in the United States, or
8
Instructions for Form 1120-PC (2023)
1291(c)(2) from Form 8621 in the amount entered on
line 3. On the dotted line next to line 3, enter “Section
1291” and the amount.
Do not include on line 3 any interest due under section
1291(c)(3). Instead, include the amount of interest owed
on line 12z.
Line 8d. Credit for prior year minimum tax. Enter any
allowable credit from Form 8827, Credit for Prior Year
Minimum Tax—Corporations. Complete and attach Form
8827.
Line 8e. Bond credits from Form 8912. Enter the
allowable credits from Form 8912, Credit to Holders of Tax
Credit Bonds, line 12.
For more information on reporting the deferred tax and
interest, see the Instructions for Form 8621.
Line 8f. Total credits. Add lines 8a through 8e. Enter the
Additional tax under section 197(f). A corporation
that elects to recognize gain and pay tax on the sale of a
section 197 intangible under the related person exception
to the anti-churning rules should include any additional tax
due in the total for line 3. On the dotted line next to line 3,
enter “Section 197” and the amount. See section 197(f)(9)
(B)(ii).
total on line 8f.
Line 10. Foreign corporations. A foreign corporation
carrying on an insurance business in the United States is
taxed as a domestic insurance company on its income
effectively connected with the conduct of a trade or
business in the United States (see sections 864(c) and
897 for a definition).
Generally, any other U.S.-source income received by
the foreign corporation is taxed at 30% (or at a lower treaty
rate) under section 881. If the corporation has this income,
attach a statement showing the kind and amount of
income, the tax rate, and the amount of tax. Enter the tax
later.
Line 4. Enter amount of tax that a reciprocal must in-
clude. A mutual insurance company that is an
interinsurer or reciprocal underwriter may elect, under
section 835, to limit the deduction for amounts paid or
incurred to a qualifying attorney-in-fact to the amount of
the deductions of the attorney-in-fact allocable to the
income received by the attorney-in-fact from the
reciprocal. If this election is made, any increase in taxable
income of a reciprocal as a result of this limitation is taxed
at the highest rate of tax specified in section 11(b).
Note. Interest received from certain portfolio debt
investments that were issued after July 18, 1984, is not
subject to the tax. See section 881(c).
Make no entry on line 4 if the mutual insurance
company's taxable income before including the section
835(b) amount is $100,000 or more. Otherwise, this tax is
21% of the section 835(b) amount. If an entry is made on
line 4, attach a statement showing how the tax was
computed.
Reciprocal underwriters making the section 835(a)
election are allowed a credit on line 15f for the amount of
tax paid by the attorney-in-fact that is related to the
income received by the attorney-in-fact from the reciprocal
in the tax year.
See section 835 and the related regulations for special
rules and information regarding the statements required to
be attached to the return.
Line 5. Base erosion minimum tax amount. If the
corporation had gross receipts of at least $500 million in
any 1 of the 3 preceding tax years, see section 59A and
the Instructions for Form 8991 for further guidance on the
determination of the amount of base erosion minimum tax.
Line 6. Corporate alternative minimum tax. Enter on
line 6 the amount from Form 4626, Alternative Minimum
Tax—Corporations, Part II, line 13, if applicable. See the
Instructions for Form 4626.
Line 8a. Foreign tax credit. To find out when a
corporation can take the credit for payment of income tax
to a foreign country or U.S. territory, see Form 1118,
Foreign Tax Credit—Corporations.
Line 8b. Credit from Form 8834. Enter any qualified
electric vehicle passive activity credits from prior years
allowed for the current tax year from Form 8834, Qualified
Electric Vehicle Credit, line 7. Attach Form 8834.
Line 8c. General business credit. Enter on line 8c the
allowable credit from Form 3800, General Business
Credit, Part II, line 38. See the Instructions for Form 3800.
See section 842 for more information.
Minimum effectively connected net investment
income. See section 842(b) and Notice 89-96, 1989-2
C.B. 417, for the general rules for computing this amount.
Also, see Rev. Proc. 2023-21, 2023-19 I.R.B. 837 (or any
successor), available at IRS.gov/irb/2023-19_IRB#REV-
PROC-2023-21, for the domestic asset/liability
percentages and domestic investment yields needed to
compute this amount.
Any additional income required by section 842(b) must
be included in taxable income (for example, Schedule A,
line 13).
Reduction of section 881 tax. Additional taxes
resulting from the net investment income adjustment may
offset a corporation's section 881 tax on U.S.-source
income. The tax reduction is determined by multiplying the
section 881 tax by the ratio of the amount of income
adjustment to income subject to the section 881 tax,
computed without the exclusion for interest on state and
local bonds or income exempted from taxation by treaty.
See section 842(c)(1). Attach a statement showing how
the reduction under section 881 was figured. Enter the net
tax imposed by section 881 on line 10.
Line 11. Personal holding company tax. A corporation
(other than a corporation described in section 542(c)) is
taxed as a personal holding company (PHC) under
section 542 if:
At least 60% of its adjusted ordinary gross income for
•
the tax year is PHC income, and
At any time during the last half of the tax year more than
•
50% in value of its outstanding stock is directly or
indirectly owned by five or fewer individuals.
Instructions for Form 1120-PC (2023)
9
See Schedule PH (Form 1120), U.S. Personal Holding
Company (PHC) Tax, for definitions and details on how to
figure the tax.
Line 12a. Recapture of investment credit. If the
corporation disposed of investment credit property or
changed its use before the end of the 5-year recapture
period under section 50(a), enter the increase in tax from
Form 4255, Recapture of Investment Credit. See the
Instructions for Form 4255.
Line 12b. Recapture of low-income housing credit. If
the corporation disposed of property (or there was a
reduction in the qualified basis of the property) for which it
took the low-income housing credit, and the corporation
did not follow the procedures that would have prevented
recapture of the credit, it may owe a tax. See Form 8611,
Recapture of Low-Income Housing Credit. Complete and
attach Form 8611.
Line 15f. Credit by reciprocal for tax paid by attor-
ney-in-fact under section 835(d). Enter the amount of
tax paid by an attorney-in-fact as a result of income
received by the attorney-in-fact from the reciprocal during
the tax year. For more information, see section 835 and
the related regulations, and the instructions for line 4,
earlier.
Line 15g. Elective payment election amount from
Form 3800. Enter on line 15g the total net elective
payment election amount from Form 3800, Part III, line 6,
column (i). See the Instructions for Form 3800.
Line 15z. Other credits and payments. Enter the
amount of any other credits the corporation may take
and/or payments made. Enter an explanation of the entry
to the left of the entry space.
Backup withholding. If the corporation had federal
income tax withheld from any payments it received
because, for example, it failed to give the payer its correct
EIN, include the amount withheld in the total for line 15z.
Enter the amount withheld and the words “Backup
Withholding” on the dotted line to the left of the entry
space for line 15z.
Line 12z. Other. If the corporation includes any
additional taxes and interest such as the items discussed
below, attach a statement showing the computation of
each item included in the total for line 12z and identify the
applicable Code section and the type of tax or interest.
Recapture of Indian employment credit. Generally, if an
•
Line 16. Total. Combine the amounts on lines 15d
employer terminates the employment of a qualified
employee less than 1 year after the date of initial
employment, any Indian employment credit allowed for a
prior tax year because of wages paid or incurred to that
employee must be recaptured. See Form 8845 and
section 45A.
through 15z and enter the total on line 16.
Line 17. Estimated tax penalty. Generally, the
corporation does not have to file Form 2220 with its
income tax return because the IRS will figure the amount
of any penalty and notify the corporation of any amount
due. However, see the Instructions for Form 2220 for
circumstances where the corporation must file Form 2220
even if it owes no penalty.
Recapture of new markets credit (see Form 8874, New
•
Markets Credit, and Form 8874-B, Notice of Recapture
Event for New Markets Credit).
Recapture of employer-provided childcare facilities and
•
If Form 2220 is attached, check the box on line 17 and
services credit (see Form 8882).
Interest on deferred tax attributable to certain nondealer
enter any penalty on this line.
•
If the corporation's tax liability includes a CAMT
installment obligations (see section 453A(c)).
liability, the corporation must complete and attach
!
Interest due on deferred gain (see section 1260(b)).
Interest due under section 1291(c)(3). See Form 8621
•
•
CAUTION
Form 2220. The affected corporation must also
include an amount of estimated tax penalty on Form
1120-PC, line 17, even if that amount is zero. Failure to
follow these instructions could result in the corporation
receiving a penalty notice that will require an abatement
and its instructions.
Alternative tax on qualifying shipping activities (see
•
Form 8902).
Line 14. Total tax. Include any deferred tax on the
termination of a section 1294 election applicable to
shareholders in a qualified electing fund (QEF) in the
amount entered on line 14.
Subtract any deferred tax on the corporation's share of
undistributed earnings of a QEF (see Form 8621).
How to report. Attach a statement showing the
computation of each item included in, or subtracted from,
the total for line 14. On the dotted line next to line 14,
specify (a) the applicable Code section, (b) the type of tax,
and (c) the amount of tax.
Line 15c. Current year’s refund applied for on Form
4466. If the corporation overpaid estimated tax, it may be
able to get a quick refund by filing Form 4466. 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 due date for filing the corporation’s tax
return. Form 4466 must be filed before the corporation
files its tax return. See the instructions for Form 4466.
Line 18. Amount owed. If the corporation cannot pay
the full amount of tax owed, it can apply for an installment
information.
Line 20. Electronic deposit of tax refund of $1 million
or more. If the corporation is due a refund of $1 million or
more and wants it electronically deposited into its
checking or savings account at any U.S. bank or other
financial institution instead of having a check sent to the
corporation, complete Form 8302 and attach it to the
corporation's tax return.
Schedule A—Taxable Income
Gross income. Under section 832, gross amounts of
underwriting and investment income should be computed
on the basis of the Statement of Income of the NAIC
10
Instructions for Form 1120-PC (2023)
annual statement to the extent not inconsistent with the
Internal Revenue Code and its regulations.
The net capital loss for these corporations is the
amount by which losses for the year from sales or
exchanges of capital assets exceed the gains from these
sales or exchanges plus the smaller of:
Income from qualifying shipping activities. Gross
income does not include income from qualifying shipping
activities if the corporation makes an election under
section 1354 to be taxed on its notional shipping income
(as defined in section 1353) at the highest corporate tax
rate specified in section 11. If the election is made, the
corporation may generally not claim any loss, deduction,
or credit with respect to qualifying shipping activities. A
corporation making this election may also elect to defer
gain on the disposition of a qualifying vessel.
1. Taxable income (computed without gains or losses
from sales or exchanges of capital assets); or
2. Losses from the sale or exchange of capital assets
sold or exchanged to obtain funds to meet abnormal
insurance losses and to provide for the payment of
dividends and similar distributions to policyholders.
Subject to the limitations in section 1212(a), a net
capital loss can be carried back 3 years and forward 5
years as a short-term capital loss.
Line 8. Certain mutual fire or flood insurance compa-
ny premiums. A mutual fire or flood insurance company
whose principal business is the issuance of policies (1) for
which the premium deposits are the same (regardless of
the length of the term the policies are written for), and (2)
under which the unabsorbed portion of such premium
deposits not required for losses, expenses, or
Use Form 8902, Alternative Tax on Qualifying Shipping
Activities, to figure the tax. Include the alternative tax on
Form 1120-PC, page 1, line 12z.
Note. In computing the amounts for lines 2, 3, and 4, take
all interest, dividends, or rents received during the year;
add interest, dividends, or rents due and accrued at the
end of the tax year; and deduct interest, dividends, or
rents due and accrued at the end of the preceding tax
year. For rules regarding the accrual of dividends, see
Regulations section 1.301-1(b).
Line 3a, column (a). Interest (including tax-exempt
interest). Enter the gross amount of interest income,
including all tax-exempt interest.
establishment of reserves is returned or credited to the
policyholder on cancellation or expiration of the policy,
must include in income an amount equal to 2% of the
premiums earned on insurance contracts during the tax
year with respect to such policies after deduction of
premium deposits returned or credited during the same
tax year.
Line 9. Income on account of special income and de-
duction accounts. Corporations which write the kinds of
insurance below must maintain the following special
accounts. A corporation which writes:
Line 3b, column (a). Interest exempt under section
103. Section 103(a) excludes interest on state or local
bonds from gross income.
This exclusion does not apply to any:
1. Private activity bond which is not a qualified bond,
as defined by section 141;
1. Mortgage guaranty insurance must maintain a
2. Arbitrage bond, as defined by section 148; or
mortgage guaranty account,
3. Bonds not meeting the requirements of section 149
2. Lease guaranty insurance must maintain a lease
guaranty account, and
(regarding the registration of tax-exempt bonds).
3. Insurance on obligations the interest on which is
excludable from gross income under section 103 must
maintain an account with respect to insurance on state
and local obligations.
Lines 3a and 3b, column (b). Amortization of premi-
um. Enter on line 3a, column (b), the total amortization of
bond premium, including amortization on tax-exempt
bonds. Enter on line 3b, column (b), the amortization of
bond premium on tax-exempt bonds only.
Amounts required to be subtracted from these
accounts under sections 832(e)(5) and 832(e)(6) must be
reported as income on line 9. See section 832(e) for more
information.
Line 10. Income from protection against loss ac-
count. Although section 1024 of P.L. 99-514 repealed
section 824 relating to the protection against loss (PAL)
account, PAL account balances are includible in income
as though section 824 were still in effect. Attach a
statement showing the computation.
Line 11. Mutual interinsurers or reciprocal underwrit-
ers—decrease in subscriber accounts. Enter the
decrease for the tax year in savings credited to subscriber
accounts of a mutual insurance company that is an
interinsurer or a reciprocal underwriter.
Line 13. Other income. Enter any other taxable income
not reported on lines 1 through 11. List the type and
amount of income on an attached statement. If the
corporation has only one item of other income, describe it
Note. Insurance companies electing to amortize discount
for tax purposes must reduce the amortization of premium
by any amortization of discount.
Line 4. Gross rents. Enter gross rents, computed as
indicated under Gross income, earlier. Deduct expenses,
such as repairs, interest, taxes, and depreciation, on the
proper lines for deductions.
Line 6. Capital gain net income. Every sale or
exchange of a capital asset must be reported in detail on
Schedule D (Form 1120), Capital Gains and Losses, even
if there is no gain or loss.
Generally, losses from sales or exchanges of capital
assets are only allowed to the extent of gains. However,
corporations taxed under section 831 may claim losses
from capital assets sold or exchanged to get funds to
meet abnormal insurance losses and to pay dividends and
similar distributions to policyholders. Do not include those
types of losses here; instead, report them on Schedule G.
Instructions for Form 1120-PC (2023)
11
in parentheses on line 13. Examples of other income to
report on line 13 include the following.
the last day of any calendar quarter in which the credit is
allowed.
Any income under P.L. 115-97, section 13517(c)(3)(B)
•
Note. A credit is available only if the leave was taken after
March 31, 2020, and before October 1, 2021, and only
after the qualified leave wages were paid, which might,
under certain circumstances, not occur until a quarter
after September 30, 2021, including quarters in 2023.
(ii) (transitional relief for change in reserve).
Any amount includible in income from Form 6478,
•
Biofuel Producer Credit.
Any amount includible in income from Form 8864,
•
Biodiesel, Renewable Diesel, or Sustainable Aviation
Fuels Credit.
Deductions
Refunds of taxes deducted in prior years to the extent
•
they reduced income subject to tax imposed. See section
111 and the related regulations. Do not offset current-year
taxes against tax refunds.
Limitations on Deductions
Section 263A uniform capitalization rules. The
uniform capitalization rules of section 263A require
corporations to capitalize certain costs.
A small business taxpayer is not required to capitalize
costs under section 263A. A small business taxpayer that
wants to discontinue capitalizing costs under section
263A must change its method of accounting. See section
263A(i) and Regulations section 1.263A-1(j). Also, see the
Instructions for Form 3115.
For more information on the uniform capitalization rules,
see Pub. 538. Also, see Regulations sections 1.263A-1
through 1.263A-3.
Transactions between related taxpayers. Generally,
an accrual basis taxpayer can only deduct business
expenses and interest owed to a related party in the year
the payment is included in the income of the related party.
See sections 163(e)(3) and 267 for limitations on
deductions for unpaid interest and expenses.
Limitations on business interest expense. Business
interest expense may be limited. See section 163(j) and
Form 8990, Limitation on Business Interest Expense
the instructions for Schedule A, Line 20a and Schedule I,
Question 18, later.
Section 291 limitations. Corporations may be required
to adjust certain deductions. See section 291 to determine
the amount of the adjustment.
Golden parachute payments. A portion of the
payments made by a corporation to key personnel that
exceeds their usual compensation may not be deductible.
This occurs when the corporation has an agreement
(golden parachute) with these key employees to pay them
these excess amounts if control of the corporation
changes. See section 280G and Regulations section
Business start-up and organizational costs. A
corporation can elect to deduct a limited amount of
start-up and organizational costs it paid or incurred. Any
remaining costs must generally be amortized over a
180-month period. See sections 195 and 248 and the
related regulations.
Ordinary income from trade or business activities of a
•
partnership from Schedule K-1 (Form 1065). Do not offset
ordinary losses against ordinary income. Instead, include
the losses on line 31. Show the partnership's name,
address, and EIN on a separate statement attached to this
return. If the amount entered is from more than one
partnership, identify the amount from each partnership.
The transferred loss amount identified as “Section 91
•
Transferred Loss Amount.” This amount is required to be
recognized under section 91 resulting from a transfer of
substantially all the assets of a foreign branch (within the
meaning of section 367(a)(3)(C), as in effect before its
repeal) to a specified 10%-owned foreign corporation (as
defined in section 245A(b)) with respect to which the
corporation was a U.S. shareholder immediately after the
transfer as other income. Under section 91(d), transferred
loss amounts recognized are treated as derived from
sources within the United States.
Part or all of the proceeds received from certain
•
corporate-owned life insurance contracts issued after
August 17, 2006. Corporations that own one or more
employer-owned life insurance contracts issued after
August 17, 2006, must file Form 8925, Report of
Employer-Owned Life Insurance Contracts. See Form
8925.
One-eighth of any adjustment attributable to the
•
application of the discount factors published in Rev. Proc.
2019-06, 2019-02 I.R.B 284, available at IRS.gov/irb/
2019-02_IRB#RP-2019-06, to unpaid losses for the tax
year preceding the first tax year beginning after December
31, 2017.
The corporation's share of the following income from
•
Form 8621, Information Return by a Shareholder of a
Passive Foreign Investment Company or Qualified
Electing Fund.
1. Ordinary earnings of a QEF.
2. Gain or loss from marking PFIC stock to market.
3. Gain or loss from sale or other disposition of section
1296 stock.
4. Excess distributions from a section 1291 fund
allocated to the current year and pre-PFIC years, if any.
See Form 8621 and its instructions for details.
Time for making an election. The corporation
generally elects to deduct startup or organizational costs
by claiming the deduction on its income tax return filed by
the due date (including extensions) for the tax year in
which the active trade or business begins. For more
details including special rules for costs paid or incurred
Any payroll tax credit taken by an employer on its 2023
•
employment tax returns (Forms 941, 943, and 944) for
qualified paid sick leave and qualified paid family leave
under the FFCRA and the ARP (both the nonrefundable
and refundable portions). The corporation must include
the full amount of the credit for qualified sick and family
leave wages in gross income for the tax year that includes
12
Instructions for Form 1120-PC (2023)
before September 9, 2008, see the Instructions for Form
4562, Depreciation and Amortization.
Limitation on tax benefits for remuneration under the
Patient Protection and Affordable Care Act. The $1
million compensation limit is reduced to $500,000 for
remuneration for services provided by individuals for or on
behalf of certain health insurance providers. The
If the corporation timely filed its return for the year
without making an election, it can still make an election by
filing an amended return within 6 months of the due date
of the return (excluding extensions). Clearly indicate the
election on the amended return and enter “Filed pursuant
to Regulations section 301.9100-2” at the top of the
amended return. File the amended return at the same
address the corporation filed its original return. The
election applies when figuring taxable income for the
current tax year and all subsequent years.
The corporation can choose to forgo the election by
affirmatively electing to capitalize its start-up or
organizational costs on its income tax return filed by the
due date (including extensions) for the tax year in which
the active trade or business begins.
$500,000 limitation applies to remuneration that is
deductible in the tax year during which the services were
performed and remuneration for services during the year
that is deductible in a future tax year (called “deferred
deduction remuneration”). The $500,000 limitation is
reduced by any amounts disallowed as excess parachute
payments. See section 162(m)(6) and Regulations section
1.162-31 for definitions and other special rules. Also, see
Notice 2011-2, 2011-2 I.R.B. 260.
Line 15. Compensation of officers. Enter deductible
officers' compensation on line 15. See Employment
credits, later, for employment credits that may reduce your
deduction for officers' compensation. Do not include
compensation deductible elsewhere on the return, such
as elective contributions to a section 401(k) cash or
deferred arrangement, or amounts contributed under a
salary reduction SEP agreement or a SIMPLE IRA plan.
Include only the deductible part of each officer's
compensation on line 15. (See Disallowance of deduction
Attach a statement for all officers using the following
columns.
Note. The election to either amortize or capitalize start-up
costs is irrevocable and applies to all start-up costs that
are related to the trade or business.
Report the deductible amount of such costs and any
amortization on Schedule A, line 31. For amortization that
begins during the current tax year, complete and attach
Form 4562.
Reducing certain expenses for which credits are al-
lowable. If the corporation claims certain credits, it may
need to reduce allowable deductions for expenses used to
figure the credit. This applies to credits such as the
following.
1. Name of officer.
2. Social security number.
3. Percentage of time devoted to business.
4. Amount of compensation.
Credit for increasing research activities (Form 6765).
Orphan drug credit (Form 8820).
•
•
•
•
•
If a consolidated return is filed, each member of an
affiliated group must furnish this information.
Disallowance of deduction for employee compensa-
tion in excess of $1 million. Publicly held corporations
cannot deduct compensation to a “covered employee” to
the extent that the compensation exceeds $1 million.
Generally, a covered employee is:
Disabled access credit (Form 8826).
Employer credit for social security and Medicare taxes
paid on certain employee tips (Form 8846).
Credit for small employer pension plan start-up costs
•
(Form 8881).
Credit for employer-provided childcare facilities and
•
services (Form 8882).
The principal executive officer of the corporation (or an
Credit for small employer health insurance premiums
•
•
individual acting in that capacity) as of the end of the tax
year, or
(Form 8941).
If the corporation has any of these credits, figure the
current year credit before figuring the deduction for
expenses on which the credit is based. If the corporation
capitalized any costs on which it figured the credit, it may
need to reduce the amount capitalized by the credit
attributable to these costs.
An employee whose total compensation must be
•
reported to shareholders under the Securities Exchange
Act of 1934 because the employee is among the three
highest compensated officers for that tax year (other than
the principal executive officer).
For this purpose, compensation does not include the
See the instructions for the form used to figure the
following.
applicable credit for more details.
Income from certain employee trusts, annuity plans, or
•
Limitations on deductions related to property leased
to tax-exempt entities. If a corporation leases property
to a governmental or other tax-exempt entity, the
corporation cannot claim deductions related to the
property to the extent that they exceed the corporation's
income from the lease payments. This disallowed
tax-exempt use loss can be carried over to the next tax
year and treated as a deduction with respect to the
property for that tax year. See section 470(d) for
exceptions.
pensions.
Any benefit paid to an employee that is excluded from
•
the employee's income.
The deduction limit does not apply to:
Commissions based on individual performance;
Qualified performance-based compensation; and
Income payable under a written, binding contract in
•
•
•
effect on February 17, 1993.
The $1 million limit is reduced by amounts disallowed
as excess parachute payments under section 280G.
Instructions for Form 1120-PC (2023)
13
See section 162(m) and Regulations section 1.162-27.
Also, see Notice 2007-49, 2007-25 I.R.B. 1429.
And the vehicle's FMV on the
first day of the lease exceeded:
The lease term began:
Cars (excluding trucks and vans)
Limitations on tax benefits for executive compensa-
tion under the Treasury Troubled Asset Relief Pro-
gram (TARP). The $1 million compensation limit is
reduced to $500,000 for executive remuneration and
deferred deduction executive remuneration paid to
covered executives by any entity that receives or has
received financial assistance under the TARP. The limit
applies for each period in which obligations arising from
financial assistance under the TARP remain outstanding.
The $500,000 is reduced by any amounts disallowed as
excess parachute payments. See section 162(m)(5) for
definitions and other special rules. Also, see Notice
2008-94, 2008-44 I.R.B. 1070, for additional guidance.
After 12/31/22 but before 1/1/2024
After 12/31/21 but before 1/1/23
After 12/31/20 but before 1/1/22
After 12/31/17 but before 1/1/21
After 12/31/12 but before 1/1/18
Trucks and Vans
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$60,000
$56,000
$51,000
$50,000
$19,000
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.
After 12/31/22 but before 1/1/24
After 12/31/21 but before 1/1/23
After 12/31/20 but before 1/1/22
After 12/31/17 but before 1/1/21
After 12/31/13 but before 1/1/18
After 12/31/09 but before 1/1/14
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$60,000
$56,000
$51,000
$50,000
$19,500
$19,000
In addition, a portion of any parachute payments made
to a covered executive by an applicable employer
participating in a TARP is not deductible as compensation
if the payments are made because of a severance from
employment during an applicable tax year. For this
purpose, a parachute payment is any payment to a senior
executive officer for departure from a company for any
reason, except for payments for services performed or
benefits accrued. These limits do not apply to a payment
already treated as a parachute payment. See section
280G(e) and Notice 2008-94.
Line 16. Salaries and wages. Enter the total salaries
and wages paid for the tax year. Do not include salaries
and wages deductible elsewhere on the return, such as
amounts included in officers' compensation, elective
contributions to a section 401(k) cash or deferred
arrangement, or amounts contributed under a salary
reduction SEP agreement or a SIMPLE IRA plan.
See Pub. 463, Travel, Gift, and Car Expenses, for
instructions on figuring the inclusion amount.
Note. The inclusion amount for lease terms beginning in
2024 will be published in the Internal Revenue Bulletin in
early 2024.
Line 19. Taxes and licenses. Enter taxes paid or
accrued during the tax year, but do not include the
following.
Federal income taxes.
•
Foreign or U.S. territories income taxes if a tax credit is
•
claimed.
Taxes not imposed on the corporation.
•
Taxes, including state or local sales taxes, that are paid
•
or incurred in connection with an acquisition or disposition
of property (these taxes must be treated as a part of the
cost of the acquired property or, in the case of a
disposition, as a reduction in the amount realized on the
disposition).
If the corporation provided taxable fringe benefits to its
employees, such as the personal use of a car, do not
deduct as wages the amount allocated for depreciation
and other expenses that are claimed elsewhere on the
return (for example, on Schedule A, line 22 or line 31).
Taxes assessed against local benefits that increase the
•
value of the property assessed (such as for paving, etc.).
Taxes deducted elsewhere on the return.
See section 164(d) for information on the
•
If the corporation claims a credit for any wages
apportionment of taxes on real property between a seller
and a purchaser.
paid or incurred, it may need to reduce any
!
CAUTION
corresponding deduction for salaries and wages.
See Employment credits below.
Note. Section 9010 of the Patient Protection and
Affordable Care Act imposes a fee on each covered entity
engaged in the business of providing health insurance for
U.S. health risks. The fee is treated as a tax described in
section 275 relating to taxes for which no deduction is
allowed. For more information, see the final regulations
and Rev. Rul. 2013-27.
Employment credits. If the corporation claims a credit
on any of the forms below, it may need to reduce its
deduction for officers’ compensation and salaries and
wages. See the applicable form for details.
Form 5884, Work Opportunity Credit.
•
•
•
Form 8844, Empowerment Zone Employment Credit.
Form 8932, Credit for Employer Differential Wage
Do not reduce the corporation's deduction for
social security and Medicare taxes by the
!
Payments.
CAUTION
nonrefundable and refundable portions of any
Form 8994, Employer Credit for Paid Family and
•
FFCRA and ARP credits for qualified sick and family leave
wages claimed on its employment tax returns. Instead,
report this amount as income on line 13.
Medical Leave.
Line 18. Rents. If the corporation rented or leased a
vehicle, enter the total annual rent or lease expense paid
or incurred during the year. Also, complete Form 4562,
Part V. If the corporation leased a vehicle for a term of 30
days or more, the deduction for the vehicle lease expense
may have to be reduced by an amount includible in
income called the inclusion amount. The corporation may
have an inclusion amount if:
Line 20a. Interest.
Note. Do not offset interest income against interest
expense.
The corporation must allocate the interest expense if
the proceeds of a loan were used for more than one
14
Instructions for Form 1120-PC (2023)
purpose (for example, to purchase a portfolio investment
and to acquire an interest in a passive activity). See
Temporary Regulations section 1.163-8T for the interest
allocation rules.
For other special rules that apply to corporations, see Pub.
542.
Line 22. Depreciation. Include on line 22 depreciation
and the cost of certain property that the corporation
elected to expense under section 179. See Form 4562
and the Instructions for Form 4562.
Line 23. Depletion. If the corporation has an economic
interest in mineral property or standing timber, it can take
a deduction for depletion. In the case of leased property,
the depletion deduction is divided between the lessor and
the lessee.
See sections 613 and 613A for percentage depletion
rates applicable to natural deposits. Also, see section 291
for the limitation on the depletion deduction for iron ore
and coal (including lignite).
Do not deduct the following interest.
Interest on indebtedness incurred or continued to
•
purchase or carry obligations if the interest is wholly
exempt from income tax. See section 265(b) for special
rules and exceptions for financial institutions. Also, see
section 265(b)(7) for a temporary de minimis exception for
financial institutions for certain tax-exempt bonds issued in
2009 and 2010.
Interest and carrying charges on straddles. Generally,
•
these amounts must be capitalized. See section 263(g).
Interest on debt allocable to the production of
•
designated property by a corporation for its own use or for
sale. The corporation must capitalize this interest. Also,
capitalize any interest on debt allocable to an asset used
to produce the property. See section 263A(f) and
Regulations sections 1.263A-8 through 1.263A-15 for
definitions and more information.
Attach Form T (Timber), Forest Activities Schedule, if a
deduction for depletion of timber is taken.
There are special rules for intangible drilling and
development costs incurred outside the United States.
See section 263(i).
Line 24. Pension, profit-sharing, etc., plans. Enter the
deduction for contributions to qualified pension,
profit-sharing, or other funded deferred compensation
plans.
Interest on unpaid taxes attributable to nondisclosed
•
reportable transactions. See section 163(m).
Limitation on deduction. Under section 163(j),
business interest expense is generally limited to the sum
of business interest income, 30% of the adjusted taxable
income, and floor plan financing interest. The amount of
any business interest expense that is not allowed as a
deduction for the tax year is carried forward to the
following year. If section 163(j) applies, use Form 8990 to
figure the amount of business interest expense the
corporation can deduct for the current tax year and the
amount that can be carried forward to the next year. See
the Instructions for Form 8990. Also see Schedule I,
Question 18, later.
Note. Employers who maintain a plan are generally
required to file Form 5500, Form 5500-SF, or Form
Form5500EZ for more information.
Line 25. Employee benefit programs. Enter
contributions to employee benefit programs not claimed
elsewhere on the return (for example, insurance, health
and welfare programs, etc.) that are not an incidental part
of a pension, profit-sharing, etc., plan included on line 24.
Special rules apply to the following.
Forgone interest on certain below-market-rate loans
•
Line 29. Dividends to policyholders. Enter the total
dividends and similar distributions paid or declared to
policyholders, as policyholders, except in the case of a
mutual fire insurance company exclusively issuing
perpetual policies. Whether dividends have been paid or
declared should be determined according to the method
of accounting employed by the insurance company.
Dividends and similar distributions. Include amounts
returned or credited to policyholders on cancellation or
expiration of policies issued by a mutual fire or flood
insurance company:
(see section 7872).
Original issue discount (OID) on certain high-yield
•
discount obligations. See section 163(e)(5) to determine
the disqualified amount of the deduction for OID that is
deferred and the amount that is disallowed on a high-yield
discount obligation. The rules under section 163(e)(5) do
not apply to certain high-yield discount obligations issued
before January 1, 2011. See section 163(e)(5)(F), and
Notice 2010-11, 2010-4 I.R.B. 326.
Interest which is allocable to unborrowed policy cash
•
values of life insurance, endowment, or annuity contracts
issued after June 8, 1997. See section 264(f). Attach a
statement showing the computation of the deduction.
1. Where the premium deposits for the policy are the
same (regardless of the length of the policy); and
2. The unabsorbed portion of the premium deposits
not required for losses, expenses, or establishment of
reserves is returned or credited to the policyholder on
cancellation or expiration of the policy.
Line 20b. Less tax-exempt interest expense. Enter
interest paid or accrued during the tax year on
indebtedness incurred or continued to purchase or carry
obligations if the interest is wholly exempt from income
tax. See section 265.
Line 21. Charitable contributions. Include charitable
contributions, as provided in section 170. See section 170
and its regulations for limitations, carryover, exclusions,
requirements, substantiation, and other rules.
In the case of a qualified group self-insurers fund, the
fund's deduction for policyholder dividends is allowed no
earlier than the date the state regulatory authority
determines the amount of the policyholder dividend that
may be paid. See section 6076 of the Technical and
Miscellaneous Revenue Act of 1988.
For more information on charitable contributions,
including substantiation and recordkeeping requirements,
see section 170 and the related regulations and Pub. 526.
Line 30. Mutual interinsurers or reciprocal underwrit-
ers—increase in subscriber accounts. A mutual
Instructions for Form 1120-PC (2023)
15
insurance company that is an interinsurer or reciprocal
underwriter may deduct the increase in savings credited
to subscriber accounts for the tax year.
Savings credited to subscriber accounts means the
surplus credited to the individual accounts of subscribers
before the 16th day of the 3rd month following the close of
the tax year. This is true only if the corporation would be
required to pay this amount promptly to a subscriber if the
subscriber ended the contract when the corporation's tax
year ends.
Line 31. Other deductions. Attach a statement listing by
type and amount all allowable deductions under sections
832(c)(1) and (10) (net of the annual statement change in
undiscounted unpaid loss adjustment expenses) that are
not deductible on lines 15 through 30.
Lobbying expenses. However, see the exceptions
•
discussed later.
Amounts paid or incurred for any settlement, payout, or
•
attorney fees related to sexual harassment or sexual
abuse, if such payments are subject to a nondisclosure
agreement. See section 162(q).
Travel, meals, and entertainment. Subject to limitations
and restrictions discussed below, a corporation can
deduct ordinary and necessary travel, meals, and
non-entertainment expenses paid or incurred in its trade
or business. Generally, entertainment expenses,
membership dues, and facilities used in connection with
these activities cannot be deducted. In addition, no
deduction is generally allowed for qualified transportation
fringe benefits. Also, special rules apply to deductions for
gifts, luxury water travel, and convention expenses. See
section 274 and Pub. 463 for details.
Examples of other deductions may include the
following.
Travel. The corporation cannot deduct travel expenses
of any individual accompanying a corporate officer or
employee, including a spouse or dependent of the officer
or employee, unless:
Any deduction under P.L. 115-97, section 13517(c)(3)
•
(B)(i) (transitional relief for change in reserve).
Any energy efficient commercial buildings deduction for
•
property placed in service during the tax year. Complete
and attach Form 7205.
That individual is an employee of the corporation, and
That individual’s travel is for a bona fide business
•
•
Certain business startup and organizational costs
•
purpose and would otherwise be deductible by that
individual.
(discussed earlier under Limitations on Deductions).
Legal and professional fees.
•
•
•
Meals. Generally, the corporation can deduct only 50%
of the amount otherwise allowable for
Supplies used and consumed in the business.
Travel, meals, and entertainment expenses. Special
non-entertainment-related meal expenses paid or incurred
in its trade or business. Meals not separately stated from
entertainment are generally not deductible.
rules apply (discussed later).
Utilities.
•
•
Ordinary losses from trade or business activities of a
In addition (subject to exceptions under section 274(k)
partnership from Schedule K-1 (Form 1065). Do not offset
ordinary income against ordinary losses. Instead, include
the income on line 13. Show the partnership's name,
address, and EIN on a separate statement attached to this
return. If the amount entered is from more than one
partnership, identify the amount from each partnership.
(2)):
Meals must not be lavish or extravagant, and
•
•
An employee of the corporation must be present at the
meal.
Membership dues. The corporation can deduct
Any extraterritorial income exclusion from Form 8873,
amounts paid or incurred for membership dues in civic or
public service organizations, professional organizations
(such as bar and medical associations), business
leagues, trade associations, chambers of commerce,
boards of trade, and real estate boards. However, no
deduction is allowed if a principal purpose of the
organization is to entertain or provide entertainment
facilities for members or their guests. This includes
country clubs, golf and athletic clubs, airline and hotel
clubs, and clubs operated to provide meals under
conditions favorable to business discussion.
•
Extraterritorial Income Exclusion.
Dividends paid in cash on stock held by an employee
•
stock ownership plan (ESOP). However, a deduction may
only be taken for the dividends above if, according to the
plan, the dividends are:
1. Paid in cash directly to the plan participants or
beneficiaries;
2. Paid to the plan, which distributes them in cash to
the plan participants or their beneficiaries no later than 90
days after the end of the plan year in which the dividends
are paid;
3. At the election of the participants or their
beneficiaries (a) payable as provided under (1) or (2)
above, or (b) paid to the plan and reinvested in qualifying
employer securities; or
Qualified transportation fringes (QTFs). Generally,
no deduction is allowed under section 274(a)(4) for QTFs
provided by employers to their employees. QTFs are
defined in section 132(f)(1) and include:
Transportation in a commuter highway vehicle between
•
the employee’s residence and place of employment,
4. Used to make payments on a loan described in
Any transit pass, and
Qualified parking.
•
•
section 404(a)(9).
See section 404(k) for more details and the limitation
on certain dividends.
See section 274; Pub. 15-B, Employer’s Tax Guide to
Fringe Benefits, for details.
Entertainment facilities. Generally, the corporation
cannot deduct an expense paid or incurred for a facility
(such as a yacht or hunting lodge) used for an activity
usually considered entertainment, amusement, or
recreation.
Do not deduct expenses such as the following.
Amounts paid to, or at the direction of, a government or
•
specified nongovernmental entity for the violation, or
investigation or inquiry, of a law. However, see the
exceptions discussed later.
16
Instructions for Form 1120-PC (2023)
Amounts treated as compensation. Generally, the
corporation may be able to deduct otherwise
Line 36b. Net operating loss deduction. Section 172
provides for an NOL deduction, limitation, carryovers, and
carrybacks. Attach a statement showing the computation
of the NOL deduction.
nondeductible entertainment, amusement, or recreation
expenses if the amounts are treated as compensation to
the recipient and reported on Form W-2 for an employee
or on Form 1099-NEC for an independent contractor.
The following special rules apply.
Section 382 provides a limitation on NOL carryforwards
•
However, if the recipient is an officer, director, beneficial
owner (directly or indirectly), or other “specified individual”
(as defined in section 274(e)(2)(B) and Regulations
section 1.274-9(b)), special rules apply.
Fines and penalties. Generally, no deduction is allowed
for fines or similar penalties paid or incurred to, or at the
direction of, a government or governmental entity for
violating any law, or for the investigation or inquiry into the
potential violation of a law, except:
and certain built-in losses following ownership change.
If a corporation acquires control of another corporation
•
(or acquires its assets in a reorganization), the amount of
pre-acquisition losses that may offset recognized built-in
gain may be limited (see section 384).
If a corporation elects the alternative tax on qualifying
•
shipping activities under section 1354, no deduction is
allowed for an NOL attributable to the qualifying shipping
activities to the extent that the loss is carried forward from
a tax year preceding the first tax year for which the
Amounts that constitute restitution,
•
•
•
alternative tax election was made. See section 1358(b)(2).
Amounts paid to come into compliance with the law,
Amounts paid or incurred as the result of certain court
Section 831(b)(3) provides for a limitation on use of
•
NOLs.
orders or agreements in which no government or
governmental entity is a party, and
For more details on the NOL deduction, see section
Amounts paid or incurred for taxes due. No deduction is
•
172 and the Instructions for Form 1139, Corporation
Application for Tentative Refund.
allowed unless the amounts are specifically identified in
the order or agreement and the corporation establishes
that the amounts were paid for that purpose. Also, any
amount paid or incurred as reimbursement to the
government for the costs of any investigation or litigation
are not eligible for the exceptions and are nondeductible.
See section 162(f).
Line 37. Taxable income. If line 37 (figured without
regard to the items listed under Minimum taxable income
below) is zero or less, the corporation may have an NOL
that can be carried back or forward as a deduction to other
tax years.
Minimum taxable income. The corporation's taxable
income cannot be less than the largest of the following
amounts.
Lobbying expenses. Generally, lobbying expenses are
not deductible. These expenses include:
Amounts paid or incurred in connection with influencing
•
The inversion gain of the corporation for the tax year, if
•
federal, state, or local legislation (but not amounts paid or
incurred before December 22, 2017, in connection with
local legislation); or
the corporation is an expatriated entity or a partner in an
expatriated entity. See section 7874(a).
The sum of the corporation's excess inclusions from its
•
Amounts paid or incurred in connection with any
•
residual interest in a real estate mortgage investment
conduit (REMIC) from Schedules Q (Form 1066), line 2c,
and the corporation's taxable income determined solely
with respect to its ownership and high-yield interests in
financial asset securitization investment trusts (FASITs).
See section 860E(a).
communication with certain federal executive branch
officials in an attempt to influence the official actions or
positions of the officials. See Regulations section 1.162-
29 for the definition of “influencing legislation.”
Dues and other similar amounts paid to certain tax-
exempt organizations may not be deductible. If certain in-
house lobbying expenditures do not exceed $2,000, they
are deductible.
Line 32. Total deductions. Section 848 (capitalization of
certain policy acquisition expenses) requires insurance
companies to capitalize specified policy acquisition
expenses and deduct them ratably over time. Attach a
statement showing all computations. See section 848 and
its regulations.
Line 34b. Deduction on account of the special in-
come and deduction accounts. Enter the total of the
amounts required to be added under sections 832(e)(4)
and (6). However, no deduction is permitted unless tax
and loss bonds are purchased in an amount equal to the
tax benefit of the deduction. See section 832(e).
Net operating loss. Only certain losses can be carried
back. The carryback period for these losses is 2 years.
For NOLs that can be carried back, the corporation can
elect to waive the carryback period and instead carry the
NOL forward to future tax years.
See the Instructions for Form 1139. See the
making the election to waive the entire carryback period.
The NOL deduction for tax year 2023 generally cannot
exceed the aggregate amount of NOLs arising in tax years
beginning before January 1, 2018, carried to such year
plus the lesser of:
1. The aggregate amount of NOLs arising in tax years
beginning after December 31, 2017, carried to such tax
year; or
Note. The deduction on account of the special income
and deduction accounts is limited to taxable income for
the tax year (computed without regard to this deduction or
to any carryback of a net operating loss (NOL)).
2. 80% of the excess, if any, of taxable income
determined without any NOL deduction, section 199A
deduction, or section 250 deduction, over any NOL
carryover to the tax year from tax years beginning before
January 1, 2018.
Instructions for Form 1120-PC (2023)
17
An exception applies for NOLs of insurance companies
other than life insurance companies. The 80% taxable
income limit does not apply to these entities. See sections
172(b) and (f).
Deductions
Line 9. Real estate taxes. Enter taxes paid or accrued
on real estate owned by the corporation and deductible
under section 164.
See the Instructions for Form 1139 for other special
Line 10. Other real estate expenses. Enter all ordinary
and necessary real estate expenses, such as fire
insurance, heat, light, and labor. Also, enter the cost of
incidental repairs, such as labor and supplies, that do not
add to the property's value or appreciably prolong its life.
Do not include any amount paid for new buildings or for
permanent improvements or betterments made to
increase the value of any property. Do not include any
amount spent on foreclosed property before the property
is held for rent.
Line 11. Depreciation. Enter depreciation on assets
only to the extent that the assets are used to produce
gross investment income reported on Schedule B, lines 1
through 7. For more information, see the instructions for
rules and elections.
Schedule B, Part I—Taxable
Investment Income of Electing Small
Companies
Note. (1) Once an election under section 831(b) is made
to be taxed only on investment income, it can only be
revoked with the consent of the Secretary; and (2) a
corporation making this election must include on
Schedule B, line 8, any amount subtracted from a PAL
account.
Income
Line 1a, column (a). Interest (including tax-exempt
interest). Enter the gross amount of interest income,
including all tax-exempt interest income.
Note. See section 834(d)(1) regarding the limitation of
expenses on real estate owned and occupied in part or in
whole by a mutual insurance company.
Line 1b, column (a). Interest exempt under section
103. Enter the amount of interest on state and local
bonds that is exempt from taxation under section 103. See
more information.
Lines 1a and 1b, column (b). Amortization of premi-
um. Enter on line 1a, column (b), the total amortization of
bond premium, including amortization on tax-exempt
bonds.
Line 12. Depletion. Enter any allowable depletion on
royalty income reported on Schedule B, line 4. See the
Line 13. Trade or business deductions. Enter the total
deductions related to any trade or business income
included in gross investment income under section 834(b)
(2). Do not include deductions for any insurance business.
Do not include losses from sales or exchanges of capital
assets or property used in the business, or from the
compulsory or involuntary conversion of property used in
the trade or business.
Enter on line 1b, column (b), the amortization of bond
premium on tax-exempt bonds.
Line 14. Interest. See the instructions for Schedule A,
Note. Insurance companies electing to amortize discount
for tax purposes must reduce the amortization of premium
by any amortization of discount.
Line 3. Rents. Enter the gross rents received or accrued
during the tax year. Deduct rental expenses such as
repairs, interest, taxes, and depreciation on the proper
lines in the Deductions section.
Line 5. Gross income from a trade or business, other
than an insurance business, and from Form 4797.
Enter the gross income from a trade or business, other
than an insurance business, carried on by the insurance
company or by a partnership of which the insurance
company is a partner. Include section 1245 and section
1250 gains (as modified by section 291) and other gains
from Form 4797, on investment assets only.
Line 6. Income from leases described in sections
834(b)(1)(B) and 834(b)(1)(C). Enter gross income
from entering into, changing, or ending any lease,
mortgage, or other instrument or agreement from which
the company earns interest, rents, or royalties.
Line 17. Investment expenses. Enter expenses that are
properly chargeable as investment expenses. If general
expenses are allocated to investment expenses, the total
deduction cannot be more than the amount on
Schedule B, Part II, line 39. Attach a statement showing
the kind and amount of general expenses. Minor items
may be grouped together.
See section 267 for the limitation on deductions for
unpaid expenses and interest in transactions between
related taxpayers.
Schedule B, Part II—Invested Assets
Book Values
Use Schedule B, Part II, to compute the limitation on
investment expenses under section 834(c)(2) when any
general expenses are in part assigned to, or included in,
the investment expenses deducted on Schedule B, Part I,
line 17.
Line 8. Gross investment income. If gross investment
income includes an amount subtracted from the PAL
account, enter on the dotted line next to line 8, “PAL” and
the amount.
18
Instructions for Form 1120-PC (2023)
subject to income tax and that are subject to the 65%
deduction under section 243(c), and
Schedule C—Dividends, Inclusions,
Dividends-Received Deduction, and
Other Special Deductions
Taxable distributions from an interest charge domestic
•
international sales corporation (IC-DISC) or former
domestic international sales corporation (DISC) that are
considered eligible for the 65% deduction.
Definitions
Line 3. Enter the following.
Dividends received on certain debt-financed stock
Prorated amounts. Prorated amounts mean tax-exempt
interest and dividends for which a deduction is allowable
under section 243, 244 (as affected by P.L. 113-295, Div.
A, section 221(a)(41)(A), December 19, 2014, 128 Stat.
4043), or 245 (other than 100% dividends).
100% dividend. 100% dividend means any dividend if
the percentage used for purposes of determining the
deduction allowable under section 243, 244 (as affected
by P.L. 113-295, Div. A, section 221(a)(41)(A), December
19, 2014, 128 Stat. 4043), or 245(b) is 100%. See section
243, section 244 as affected by P.L. 113-295, and section
245.
•
acquired after July 18, 1984, from domestic and foreign
corporations subject to income tax that would otherwise
be subject to the dividends-received deduction under
section 243(a)(1), 243(c), or 245(a). Generally,
debt-financed stock is stock that the corporation acquired
by incurring a debt (for example, it borrowed money to buy
the stock).
Dividends received from a regulated investment
•
company (RIC) on certain debt-financed stock. The
amount of dividends eligible for the dividends-received
deduction is limited by section 854(b). The corporation
should receive a notice from the RIC specifying the
amount of dividends that qualify for the deduction.
Lines 1 Through 25
Line 4. Enter dividends received on preferred stock of a
less-than-20%-owned public utility that is subject to
income tax and is allowed the deduction provided in
section 247 (as affected by P.L. 113-295, Div. A, section
221(a)(41)(A), December 19, 2014, 128 Stat. 4043) for
dividends paid.
For purposes of the 20% ownership test on lines 1 through
7, the percentage of stock owned by the corporation is
based on voting power and value of the stock. Preferred
stock described in section 1504(a)(4) is not taken into
account.
Line 5. Enter dividends received on preferred stock of a
20%-or-more-owned public utility that is subject to income
tax and is allowed the deduction provided in section 247
(as affected by P.L. 113-295, Div. A, section 221(a)(41)(A),
December 19, 2014, 128 Stat. 4043) for dividends paid.
Consolidated returns. Corporations filing consolidated
returns should see Regulations sections 1.1502-13,
1.1502-26, and 1.1502-27 before completing Schedule C.
Lines 1 through 9, column (a). Enter in column (a) of
the appropriate line those dividends that are subject to the
provisions of section 832(b)(5)(B).This will include:
Line 6. Enter the U.S.-source portion of dividends that:
Are received from less-than-20%-owned foreign
•
1. All dividends (other than 100% dividends) received
corporations, and
on stock acquired after August 7, 1986; and
Qualify for the 50% deduction under section 245(a). To
•
2. 100% dividends received on stock acquired after
August 7, 1986, to the extent that such dividends are
attributable to prorated amounts (see definition earlier).
qualify for the 50% deduction, the corporation must own at
least 10% of the stock of the foreign corporation by vote
and value.
Also, include dividends received from a
less-than-20%-owned foreign sales corporation (FSC)
that:
In the case of an insurance company that files a
consolidated return, the determination with respect to any
dividend paid by a member to another member of the
affiliated group is made as if no consolidated return was
filed. See section 832(g).
Are attributable to income treated as effectively
•
connected with the conduct of a trade or business within
the United States (excluding foreign trade income), and
Line 1. Enter dividends (except those received on certain
debt-financed stock acquired after July 18, 1984 (see
section 246A)) that are:
Qualify for the 50% deduction under section 245(c)(1)
•
(B).
Line 7. Enter the U.S.-source portion of dividends that:
Received from less-than-20%-owned domestic
•
Are received from 20%-or-more-owned foreign
•
corporations subject to income tax, and
Qualified for the 50% deduction under section 243(a)
corporations, and
•
Qualify for the 65% deduction under sections 245(a)
•
(1).
and 242 by reference.
See section 246 and section 854 for limitations and
Also, include dividends received from a
exclusions.
20%-or-more-owned FSC that:
Report so-called dividends or earnings received from
mutual savings banks, etc., as interest. Do not treat them
as dividends.
Are attributable to income treated as effectively
•
connected with the conduct of a trade or business within
the United States (excluding foreign trade income), and
Line 2. Enter on line 2:
Qualify for the 65% deduction provided in section
•
Dividends (except those received on certain
•
245(c)(1)(B).
debt-financed stock acquired after July 18, 1984) that are
received from 20%-or-more-owned domestic corporations
Instructions for Form 1120-PC (2023)
19
should equal the sum of the amounts reported by the U.S.
shareholder on Form(s) 5471, Schedule I, line 1b.
Line 12c, column (b). Enter all other amounts included
in income under section 951, other than amounts on
line 15. This should equal the sum of the amounts
reported by the U.S. shareholder on Form(s) 5471,
Schedule I, lines 1c–1h, 2, and 4.
Line 13, column (b). Enter amounts included in income
under the section 951. See Form 8992, Part II, line 5; and
the Instructions for Form 8992. If you also have a Form
5471 reporting requirement, attach Form 5471.
Line 8. Enter dividends received from wholly owned
foreign subsidiaries that are eligible for the 100%
deduction under section 245(b).
In general, the deduction under section 245(b) applies
to dividends paid out of the earnings and profits of a
foreign corporation for a tax year during which:
All of its outstanding stock is directly or indirectly owned
•
by the domestic corporation receiving the dividends, and
All of its gross income from all sources is effectively
•
connected with the conduct of a trade or business within
the United States.
Also, include on line 8 dividends from FSCs that are
attributable to foreign trade income and that are eligible for
the 100% deduction provided in section 245(c)(1)(A).
Line 15, column (b). Reserved for future use.
Line 16, column (b). Include the following.
1. Dividends (other than capital gain distributions
reported on Schedule D (Form 1120) and exempt-interest
dividends) that are received from RICs and that are not
subject to the 50% deduction.
Line 9. Enter only those dividends that qualify under
section 243(b) for the 100% dividends-received deduction
described in section 243(a)(3).
The 100% deduction does not apply to affiliated group
members that are joining in the filing of a consolidated
return.
2. Dividends from tax-exempt organizations.
3. Dividends (other than capital gain distributions)
received from a real estate investment trust (REIT) that,
for the tax year of the trust in which the dividends are paid,
qualifies under sections 856 through 860.
Line 10, column (b). Enter the foreign-source portion of
dividends that:
Are received from specified 10%-owned foreign
•
4. Dividends not eligible for a dividends-received
corporations (as defined in section 245A(b)), including, for
example, gain from the sale of stock of a foreign
corporation that is treated as a dividend under sections
1248(a) and (j); and
deduction, which include the following.
a. Dividends received on any share of stock held for
less than 46 days during the 91-day period beginning 45
days before the ex-dividend date. When counting the
number of days the corporation held the stock, you cannot
count certain days during which the corporation's risk of
loss was diminished. See section 246(c)(4) and
Qualify for the 100% deduction under section 245A(a)
•
(excluding any hybrid dividends; see the instructions for
line 11 below).
Line 11, column (b). Enter the foreign dividends not
Regulations section 1.246-5 for more details.
reportable on line 3, 6, 7, 8, or 10 of column (b).
b. Dividends received on any share of preferred stock
which are attributable to periods totaling more than 366
days, if such stock was held for less than 91 days during
the 181-day period that began 90 days before the
ex-dividend date. When counting the number of days the
corporation held the stock, you cannot count certain days
during which the corporation's risk of loss was diminished.
See section 246(c)(4) and Regulations section 1.246-5 for
more details. Preferred dividends attributable to periods
totaling less than 367 days are subject to the 46-day
holding period rule above.
Include on line 11 the foreign-source portion of any
dividend that does not qualify for the section 245A
deduction (for example, hybrid dividends within the
meaning of section 245A(e), ineligible amounts of
dividends within the meaning of Regulations section
1.245A-5(b), dividends that fail to meet the holding period
requirement under section 246(c)(5), etc.).
Also, include on line 11 the corporation's share of
distributions from a section 1291 fund from Form 8621, to
the extent that the amounts are taxed as dividends under
section 301. See Form 8621 and its instructions.
Attach a statement identifying the amount of each
dividend reported on line 11 and the provision pursuant to
which a deduction is not allowed with respect to such
dividend.
Line 12a, column (b). Enter the foreign-source portion
of any subpart F inclusions attributable to the sale or
exchange by a CFC of stock in another foreign corporation
described in section 964(e)(4). This should equal the sum
of the amounts reported by the U.S. shareholder on
Form(s) 5471, Schedule I, line 1a. (Do not include on
line 12a any portion of such subpart F inclusion that is not
eligible for the section 245A deduction pursuant to
Regulations section 1.245A-5(g)(2). Include such
amounts on line 12c.)
c. Dividends on any share of stock to the extent the
corporation is under an obligation (including a short sale)
to make related payments with respect to positions in
substantially similar or related property.
5. Any other taxable dividend income not properly
reported elsewhere on Schedule C.
Line 20. Dividends received on certain debt-financed
stock acquired after July 18, 1984, are not entitled to the
full 50% or 65% dividends-received deduction. The 50%
or 65% deduction is reduced by a percentage that is
related to the amount of debt incurred to acquire the
stock. See section 246A. Also, see section 245(a) before
making this computation for an additional limitation that
applies to dividends received from foreign corporations.
Attach a statement showing how the amount on line 20
was figured.
Line 12b, column (b). Enter the total subpart F
inclusions attributable to tiered hybrid dividends. This
20
Instructions for Form 1120-PC (2023)
Keep for Your Records
Worksheet for Schedule C, Line 26
1. Refigure the amount from Schedule A, line 35, or Schedule B, line 19, whichever applies, without
any adjustment under section 1059, and without any capital loss carryback to the tax year under
section 1212(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Enter the sum of the amounts from line 25, column (b) (without regard to wholly owned foreign
subsidiary dividends), and line 9, column (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Multiply line 3 by 65% (0.65) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Add lines 19, 22, 24, and 25, column (b) (without regard to FSC dividends), and the portion of the
deduction on line 20, column (b), that is attributable to dividends received from
20%-or-more-owned corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Enter the smaller of line 4 or line 5. If line 5 is greater than line 4, stop here; enter the amount from
line 6 on line 26, column (b), and do not complete the rest of this worksheet . . . . . . . . . . . . . . . . . . .
7. Enter the total amount of dividends received from 20%-or-more-owned corporations that are
included on lines 2, 3, 5, 7, and 8, column (b) (without regard to FSC dividends) . . . . . . . . . . . . . . .
8. Subtract line 7 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Multiply line 8 by 50% (0.50) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Subtract line 5 from line 26, column (b) (without regard to FSC dividends) . . . . . . . . . . . . . . . . . . . . .
11. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Dividends-received deduction after limitation (section 246(b)). Add lines 6 and 11. Enter the
result here and on line 26, column (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
and Blue Shield organizations described in section 833(c)
Line 26, column (b). Generally, line 26, column (b),
cannot exceed the amount from the Worksheet for
Schedule C, Line 26, above. However, in a year in which
an NOL occurs, this limitation does not apply even if the
loss is created by the dividends-received deduction. See
sections 172(d) and 246(b).
(2), and other organizations described in section 833(c)
(3), to those with an MLR of 85% or more. Organizations
with an MLR less than 85% are allowed to deduct only
80% of unearned premiums. See section 833(c)(5) and
Regulations section 1.833-1.
Line 1. Enter gross premiums written on insurance
contracts during the tax year, less return premiums and
premiums paid for reinsurance. See Regulations section
1.832-4.
Line 28, column (b). Enter the section 250 deduction
claimed for foreign-derived intangible income (FDII) and
global intangible low-taxed income (GILTI). This should
equal the sum of Form 8993, Part III, lines 28 and 29.
Lines 2a and 4a. Include on lines 2a and 4a the
Line 29. Reserved for future use.
following.
1. All life insurance reserves, as defined in section
Schedule E—Premiums Earned
816(b) (but determined under section 807).
2. Generally, all section 833 organizations with an
MLR of 85% or more (discussed earlier) are permitted to
enter 100% of unearned premiums on lines 2a and 4a.
Section 833 organizations with an MLR of less than 85%
must change to an 80% Unearned Premium Reserve. For
earlier.
Definitions
Undiscounted unearned premiums. Undiscounted
unearned premiums means the unearned premiums
shown in the annual statement filed for the year ending
with or within the tax year.
Applicable interest rate. Applicable interest rate means
the annual rate determined under section 846(c)(2) for the
calendar year the premiums are received.
Applicable statutory premium recognition pattern.
Applicable statutory premium recognition pattern means
the statutory premium recognition pattern in effect for the
calendar year the premiums are received, and is based on
the statutory premium recognition pattern which applies to
premiums received by the corporation in that calendar
year. For purposes of the preceding sentence, premiums
received during any calendar year will be treated as
received in the middle of such year.
Lines 2b and 4b. Include on lines 2b and 4b 90% of
unearned premiums for insurance against default in the
payment of principal or interest on securities described in
section 165(g)(2)(C) (relating to worthless securities) with
maturities of more than 5 years. See section 832(b)(7)(B).
Lines 2c and 4c. The amount of discounted unearned
premiums at the end of any tax year must be the present
value of those premiums (as of such time and separately
with respect to premiums received in each calendar year)
determined by using:
1. The amount of the undiscounted unearned
Medical loss ratio (MLR). Section 833(c)(5) limits the
premiums at such time,
100% deduction of unearned premiums by Blue Cross
Instructions for Form 1120-PC (2023)
21
2. The applicable interest rate, and
annual statement (as defined by section 846(e)(3)) filed
for the calendar year ending with or within the tax year.
See section 1.832-4(b) relating to the determination of
unpaid losses.
Section 832(b)(5)(A) provides rules for figuring losses
incurred. Section 832(b)(5)(B) provides rules for reducing
the deduction figured in section 832(b)(5)(A).
3. The applicable statutory premium recognition
pattern.
Lines 2d and 4d. Include on lines 2d and 4d 80% of the
total of all unearned premiums not reported on lines 2a
through 2c, or 4a through 4c, respectively.
A reciprocal or interinsurer required under state law to
reflect unearned premiums on its annual statement net of
premium acquisition expenses should increase its
unearned premiums by the amount of such acquisition
expenses prior to making the computation on lines 2d and
4d. See section 832(b)(7)(E).
Line 6. Transitional adjustments apply to companies
which become taxable under section 831(a). See section
832(b)(7)(D).
Rev. Proc. 2023-41, 2023-52, I.R.B. 1607, available at
prescribes discount factors for the 2023 accident year for
use by insurance companies in computing discounted
unpaid losses under section 846 and discounted
estimated salvage recoverable under section 832. Rev.
Proc. 2023-41 also provides, for convenience, discount
factors for losses incurred in earlier accident years for use
in tax years beginning in 2023. The discount factors set
forth in Rev. Proc. 2023-41 are determined under section
846 and Regulations section 1.846-1.
Schedule F—Losses Incurred
Note. P.L. 115-97, section 13523, modified discounting
rules for property and casualty insurance companies,
modified the rate of interest used to discount unpaid
losses, modified computational rules for loss payment
patterns, and repealed the historical payment pattern
election. These amendments apply to tax years beginning
after 2017. An 8-year transition rule also applies. See
section 846 of the Internal Revenue Code, as modified by
P.L. 115-97, section 13523.
Line 1. Losses paid. Enter the total losses paid on
insurance contracts during the tax year less salvage and
reinsurance recovered during the tax year. Attach a
statement that reconciles the amount entered on line 1 to
the amount reported on the corporation's annual
statement.
Lines 2a and 4a. Unpaid losses on life insurance con-
tracts. Unpaid losses must be adjusted for recoveries of
reinsurance. The amounts of expected recoveries should
be estimated based on the facts in each case and the
corporation's experience with similar cases. See
Regulations section 1.832-4(b).
Lines 2b and 4b. Discounted unpaid losses outstand-
ing. Enter all discounted unpaid losses, as defined in
section 846.
Section 846 provides that the amount of discounted
unpaid losses must be figured separately by each line of
business (multiple peril lines must be treated as a single
line of business) and by each accident year and must be
equal to the present value of those losses determined by
using the:
Note. There is a special application of the “fresh start”
provision for an insurance company that is not subject to
tax under section 831(a) for its first tax year beginning
after December 31, 1986, because (1) it is described in
section 501(c), or (2) it is subject to tax under section
831(b) on its investment income.
If the insurance company later becomes subject to tax
under section 831(a), the rules relating to the fresh start
under the discounting provisions are applied by treating
the last tax year before the year in which the insurance
company becomes subject to tax under section 831(a) as
the insurance company's last tax year beginning before
1987. See section 1010(e) of the Technical and
Miscellaneous Revenue Act of 1988 and Notice 88-100,
1988-2 C.B. 439.
1. Amount of the undiscounted unpaid losses,
2. Applicable interest rate, and
3. Applicable loss payment pattern.
Lines 6 and 7. Estimated salvage and reinsurance re-
coverable. Enter on lines 6 and 7 the amount of
Section 846(e)(6) provides that any determination
under section 846(a) (discounted losses determined) with
respect to unpaid losses relating to accident and health
insurance lines of businesses (other than credit disability
insurance) must be made (a) in the case of unpaid losses
relating to disability income, by using the general rules
prescribed under section 807(d) applicable to
estimated salvage and reinsurance recoverable. See Rev.
Proc. 2023-41 for the latest information and guidance.
Line 9. Tax-exempt interest subject to section 832(b)
(5)(B). Enter the amount of tax-exempt interest received
or accrued during the tax year on investments made after
August 7, 1986. For information regarding the
noncancelable accident and health insurance contracts
and using a mortality or morbidity table reflecting the
taxpayer’s experience, except that the limitation of section
846(a)(3) (Limitation on amount of discounted losses) will
apply; and (b) in all other cases, by using an assumption
(in lieu of a loss payment pattern) that unpaid losses are
paid in the middle of the year following the accident year.
determination of the acquisition date of an investment, see
Line 13. Reduction of deduction under section 832(b)
(5)(B). Multiply line 12 by the applicable percentage,
which is 25% (5.25% divided by the highest corporate tax
rate).
A separate series of discount factors are computed for,
and applied to, undiscounted unpaid losses attributable to
each accident year of each line of business shown on the
22
Instructions for Form 1120-PC (2023)
Note. Any determination under section 833(b) must be
made by only taking into account items from the
health-related business of the corporation.
Line 8a. Adjusted tax-exempt income. Reduce the
total tax-exempt interest received or accrued during the
tax year by any amount (not otherwise deductible) which
would have been allowable as a deduction for the tax year
if such interest were not tax exempt. Enter the result on
line 8a.
Line 8b. Adjusted dividends-received deduction.
Reduce the total amount allowed as a deduction under
sections 243, 244 (as affected by P.L. 113-295, Div. A,
section 221(a)(41)(A), December 19, 2014, 128 Stat.
4043), and 245 by the amount of any decrease in
deductions allowable for the tax year because of section
832(b)(5)(B) when the decrease is caused by the
deductions under sections 243, 244 (as affected by P.L.
113-295, Div. A, section 221(a)(41)(A), December 19,
2014, 128 Stat. 4043), and 245. Enter the result on
line 8b.
Schedule G—Other Capital Losses
Capital assets are considered sold or exchanged to
provide funds to meet abnormal insurance losses and to
pay dividends and make similar distributions to
policyholders to the extent that the gross receipts from
their sale or exchange are not more than the amount by
which the sum of dividends and similar distributions paid
to policyholders, losses paid, and expenses paid for the
tax year is more than the total on Schedule G, line 9.
Total gross receipts from sales of capital assets
(line 12, column (c)) must not be more than line 10. If
necessary, the corporation may report part of the gross
receipts from a particular sale of a capital asset on this
schedule and the rest on Schedule D (Form 1120).
Otherwise, do not include on Schedule D (Form 1120) any
sales reported on this schedule.
Schedule H—Special Deduction and
Ending Adjusted Surplus for Section
833 Organizations
Schedule I—Other Information
Section 833(c)(5) provides that section 833(a)(2) and
section 833(a)(3) do not apply to any organization with an
MLR of less than 85%. See section 833(c)(5). Also, see
Medical loss ratio, earlier.
Complete all items that apply to the corporation.
Question 4
Check the “Yes” box if:
The corporation is a subsidiary in an affiliated group
•
Line 5. Beginning adjusted surplus. If the corporation
was a section 833 organization in 2022, it should enter the
amount from its 2022 Form 1120-PC, Schedule H, line 10.
Generally, the adjusted surplus as of the beginning of
any tax year is an amount equal to the adjusted surplus as
of the beginning of the preceding tax year:
(defined later), but is not filing a consolidated return for the
tax year with that group; or
The corporation is a subsidiary in a parent-subsidiary
•
controlled group. For a definition of parent-subsidiary
controlled group, see the Instructions for Schedule O
(Form 1120).
1. Increased by the amount of any adjusted taxable
Any corporation that meets either of the requirements
above should check the “Yes” box. This applies even if the
corporation is a subsidiary member of one group and the
parent corporation of another.
income for the preceding tax year, or
2. Decreased by the amount of any adjusted NOL for
the preceding tax year.
If 2023 is the first tax year the taxpayer qualifies as a
section 833 organization, see section 833(c)(3)(C) to
determine the adjusted surplus as of the beginning of the
2023 tax year.
For purposes of the computation of the adjusted
surplus, the terms “adjusted taxable income” and
“adjusted net operating loss” mean the taxable income or
the NOL, respectively, determined with the following
modifications.
Note. If the corporation is an “excluded member” of a
controlled group (see the definition in the Instructions for
Schedule O (Form 1120)), it is still considered a member
of a controlled group for this purpose.
Affiliated group. An affiliated group is one or more
chains of includible corporations (as defined in section
1504(b)) connected through stock ownership with a
common parent corporation. See section 1504(a). The
common parent must be an includible corporation and the
following requirements must be met.
1. Without regard to the deduction determined under
section 833(b)(1).
1. The common parent must own directly stock that
represents at least 80% of the total voting power and at
least 80% of the total value of the stock of at least one of
the other includible corporations.
2. Stock that represents at least 80% of the total voting
power and at least 80% of the total value of the stock of
each of the other corporations (except for the common
parent) must be owned directly by one or more of the
other includible corporations.
2. Without regard to any carryover or carryback to that
tax year.
3. By increasing gross income by an amount equal to
the net exempt income for the tax year.
Line 6. Special deduction. The special deduction under
section 833(b) cannot be taken if the MLR is less than
85%. If the MLR is less than 85%, enter zero on line 6 and
Schedule A, line 34a.
For this purpose, the term “stock” generally does not
include any stock that (a) is nonvoting, (b) is
Note. The deduction for any tax year is limited to taxable
income for that tax year determined without regard to this
deduction.
nonconvertible, (c) is limited and preferred as to dividends
Instructions for Form 1120-PC (2023)
23
and does not participate significantly in corporate growth,
and (d) has redemption and liquidation rights that do not
exceed the issue price of the stock (except for a
reasonable redemption or liquidation premium).
tax years. To do so, check the box on line 10 and file the
tax return by its due date, including extensions. Do not
attach the statement described in Temporary Regulations
section 301.9100-12T. Generally, once made, the election
is irrevocable.
If the corporation timely filed its return for the loss year
without making the election, it can make the election on an
amended return filed within 6 months of the due date of
the loss year return (excluding extensions). Attach the
election to the amended return and enter "Filed pursuant
to section 301.9100-2" on the election statement. See the
Instructions for Form 1139.
Question 6
Check the “Yes” box if one foreign person owned at least
25% of the total voting power of all classes of stock of the
corporation entitled to vote, or at least 25% of the total
value of all classes of stock of the corporation.
The constructive ownership rules of section 318 apply
in determining if a corporation is foreign owned. See
section 6038A(c)(5) and the related regulations.
Corporations filing a consolidated return that elect to
waive the entire carryback period for the group must also
attach the statement required by Regulations section
1.1502-21(b)(3) or the election will not be valid.
Enter on line 6a the percentage owned by the foreign
person specified in question 6. On line 6b, enter the name
of the owner's country.
Item 11
Note. If there is more than one 25%-or-more foreign
owner, complete lines 6a and 6b for the foreign person
with the highest percentage of ownership.
Enter the amount of the NOL carryover to this tax year
from prior years, even if some of the loss is used to offset
income on this return. The amount to enter is the total of
all NOLs generated in prior years but not used to offset
income (either as a carryback or carryover) in a tax year
prior to 2023. Do not reduce the amount by any NOL
deduction reported on Schedule A, line 36b.
Foreign person. The term “foreign person” means:
An individual who is not a citizen or resident of the
•
United States;
An individual who is a citizen or resident of a U.S.
•
territory who is not otherwise a citizen or resident of the
United States;
Question 12
Any partnership, association, company, or corporation
•
Schedule UTP (Form 1120) asks for information about tax
positions that affect the U.S. federal income tax liabilities
of certain corporations that issue or are included in
audited financial statements and have assets that equal or
exceed $10 million. For details, see the Instructions for
Schedule UTP.
that is not created or organized in the United States;
Any foreign estate or trust within the meaning of section
•
7701(a)(31); or
A foreign government (or one of its agencies or
•
instrumentalities) to the extent that it is engaged in the
conduct of a commercial activity, as described in section
892.
Attach Schedule UTP to the corporation's income tax
return. Do not file it separately. A taxpayer that files a
protective Form 1120-PC must also file Schedule UTP if it
satisfies the requirements set forth above.
However, the term “foreign person” does not include
any foreign person who consents to the filing of a joint
income tax return.
Question 13
Owner's country. For individuals, the term “owner's
country” means the country of residence. For all others, it
is the country where incorporated, organized, created, or
administered.
Requirement to file Form 5472. If the corporation
checked “Yes,” it may have to file Form 5472. Generally, a
25% foreign-owned corporation that had a reportable
transaction with a foreign or domestic related party during
the tax year must file Form 5472. See the Instructions for
Form 5472 for filing instructions and penalties for failure to
file.
Section 833(c)(5) provides that section 833(a)(2) and
section 833(a)(3) do not apply to a Blue Cross or Blue
Shield organization described in section 833(c)(2), or
other organization described in section 833(c)(3), unless it
has an MLR of 85% or more for the tax year.
For purposes of section 833(c)(5), the MLR is equal to
the amount expended on reimbursement for clinical
services provided to enrollees (as defined in 45 C.F.R.
158.140) and for activities that improve health care quality
(as defined in 45 C.F.R. 158.150) under its policies during
the tax year (section 833(c)(5) MLR numerator) divided by
the total premium revenue (section 833(c)(5) MLR
denominator). See section 833(c)(5) and Regulations
Check the “Yes” box if the corporation is a Blue Cross
or Blue Shield organization described in section 833(c)(2),
or other organization described in section 833(c)(3), that
has satisfied the MLR requirements of section 833(c)(5).
Item 9
Show any tax-exempt interest received or accrued.
Include any exempt-interest dividends received as a
shareholder in a mutual fund or other RIC. Also, if
required, include the same amount on Schedule M-1,
line 7 (or Schedule M-3 (Form 1120-PC), Part II, line 13, if
applicable).
Item 10
If you checked “Yes,” you must enter:
Generally, if the corporation has an NOL for tax year 2023,
it can generally elect to waive the entire carryback period
for the NOL and instead carry the NOL forward to future
The section 833(c)(5) MLR numerator on line 13(a),
The section 833(c)(5) MLR denominator on line 13(b),
•
•
and
24
Instructions for Form 1120-PC (2023)
The section 833(c)(5) percentage on line 13(c).
•
Question 16
If the corporation paid or accrued any interest or royalty for
which a deduction is not allowed under section 267A,
check "Yes" and enter the total amount of interest and
royalty paid or accrued by the corporation (including the
corporation's allocable share through a partnership) for
which a deduction is not allowed.
Payments to which section 267A applies. Interest or
royalty paid or accrued by a domestic corporation
(including, in the case of a domestic corporation that is a
partner in a partnership, the domestic corporation's
allocable share of interest or royalty paid or accrued by the
partnership) is subject to section 267A. Section 267A
generally applies to interest or royalty paid or accrued
according to a hybrid arrangement (such as, for example,
a payment according to a hybrid instrument, or a payment
to a reverse hybrid), provided that the payment or accrual
is to a related party (or according to a structured
If you checked “No,” enter zero on Schedule H, line 6,
and Schedule A, line 34a. You cannot take the special
Also, if you checked “No,” your deduction of unearned
premiums is limited. See the instructions for Schedule E
for more information.
Question 14
Only a corporation that qualifies as a small company
under section 831(b)(2) is eligible to elect to be taxed on
taxable investment income under section 831(b) in lieu of
the tax otherwise applicable under section 831(a). See
section 831(b)(2)(A)(iii). Section 831(b)(2)(A)(ii) provides
that a corporation must meet the diversification
requirements in section 831(b)(2)(B) to qualify as a small
company. A corporation meets the diversification
requirements if under section 831(b)(2)(B)(i)(I) no more
than 20% of the net written premiums (or, if greater, direct
written premiums) of such corporation for the tax year is
attributable to any one policyholder. However, a
arrangement). In addition, under an imported mismatch
rule, section 267A generally applies to interest or royalties
paid or accrued according to a non-hybrid arrangement
where the income attributable to that payment or accrual
is directly or indirectly offset by certain deductions
involving hybridity incurred by a related party or according
to a structured arrangement. However, section 267A does
not apply if a de minimis exception is satisfied. See
Regulations section 1.267A-1(c). For purposes of section
267A, interest and royalties are defined broadly. For
additional information about arrangements subject to
section 267A, see Regulations sections 1.267A-2 and
1.267A-4. Also, see the anti-avoidance rule under
Regulations section 1.267A-5(b)(6).
corporation that does not meet this 20% test can meet the
diversification requirement under section 831(b)(2)(B) if
no person who holds (directly or indirectly) an interest in
such insurance company is a specified holder who holds
(directly or indirectly) aggregate interest in such insurance
company which constitutes a percentage of the entire
interests in such insurance company which is more than
2% higher than the percentage of interests in the specified
assets with respect to such insurance company held
(directly or indirectly) by such specified holder under
section 831(b)(2)(B)(i)(II).
Extent to which deduction is disallowed. When
section 267A applies to interest or royalties paid or
accrued pursuant to a hybrid arrangement, it generally
disallows a deduction for the amount to the extent that,
under the foreign tax law, there is not a corresponding
income inclusion (including long-term deferral). However,
the deduction is not disallowed to the extent the amount is
directly or indirectly included in income in the United
States, such as if the amount is taken into account with
respect to a U.S. shareholder under section 951(a) or
section 951A. For additional information, see Regulations
sections 1.267A-2 through 1.267A-4. For examples
illustrating the application of section 267A, see
A corporation making an election under section 831(b)
(2)(A)(iii) must complete question 14 to indicate whether it
qualifies as a small company, and, therefore, is eligible to
make the election to be taxed on taxable investment
income because it meets the diversification requirements
of the 20% test in section 831(b)(2)(B)(i)(I). If the
corporation answers “No” for question 14(a), then the
corporation must satisfy the specified holder/specified
asset test in section 831(b)(2)(B)(i)(II) to qualify to make
the section 831(b)(2)(A)(iii) election to be taxed on taxable
investment income. If the corporation satisfies the
specified holder/specified asset test in section 831(b)(2)
(B)(i)(II), the corporation should answer “Yes” for question
14(b). If the corporation does not satisfy either the
diversification requirements of section 831(b)(2)(B)(i)(I) or
section 831(b)(2)(B)(i)(II) for the tax year (answering “No”
for both questions), the corporation is not a small
Regulations section 1.267A-6.
Question 17
Check “Yes” if the corporation has an election in effect to
exclude a real property trade or business or a farming
business from section 163(j). For more information, see
section 163(j) and the Instructions for Form 8990.
company and, therefore, is not eligible to be taxed on
taxable investment income under section 831(b) in lieu of
the tax otherwise applicable under section 831(a).
Question 18
Question 15
Generally, a taxpayer with a trade or business must file
Form 8990 to claim a deduction for business interest. In
addition, Form 8990 must be filed by any taxpayer that
owns an interest in a partnership with current-year, or
prior-year carryover, excess business interest expense
allocated from the partnership.
If the corporation had gross receipts of at least $500
million in any 1 of the 3 preceding tax years, complete
Form 8991 and attach it to this return. For this purpose,
the corporation's gross receipts include the gross receipts
of all persons aggregated with the corporation, as
specified in section 59A(e)(3). See the Instructions for
Form 8991 to determine if the corporation is subject to the
base erosion minimum tax.
Exclusions from filing. A taxpayer is not required to file
Form 8990 if the taxpayer is a small business taxpayer
Instructions for Form 1120-PC (2023)
25
(defined below) and does not have excess business
interest expense from a partnership. A taxpayer is also not
required to file Form 8990 if the taxpayer only has
business interest expense from the following excepted
trades or businesses.
Line 5. Tax-exempt securities. Include on this line:
State and local government obligations, the interest on
•
which is excludable from gross income under section
103(a); and
Stock in a mutual fund or other RIC that distributed
•
An electing real property trade or business.
An electing farming business.
•
•
•
exempt-interest dividends during the tax year of the
corporation.
Certain utility businesses.
Line 18. Insurance liabilities. Include on this line:
Small business taxpayer. A small business taxpayer is
not subject to the business interest expense limitation and
is not required to file Form 8990. A small business
taxpayer is a taxpayer that (a) is not a tax shelter (as
defined in section 448(d)(3)); and (b) meets the gross
receipts test of section 448(c), discussed next.
Gross receipts test. For tax years beginning in 2023, a
taxpayer meets the gross receipts test if the taxpayer has
average annual gross receipts of $29 million or less for the
3 prior tax years. See section 448(c) and the Instructions
for Form 8990 for additional information.
Undiscounted unpaid losses,
Loss adjustment expenses, and
Unearned premiums.
•
•
•
See section 846 for more information.
Line 27. Adjustments to shareholders' equity. Some
examples of adjustments to report on this line include:
Unrealized gains and losses on securities held
•
“available for sale,”
Foreign currency translation adjustments,
The excess of additional pension liability over
•
•
unrecognized prior service cost,
Guarantees of ESOP debt, and
•
•
Question 19
Compensation related to employee stock award plans.
If the corporation is a member of a controlled group, check
the “Yes” box. Complete and attach Schedule O (Form
1120), Consent Plan and Apportionment Schedule for a
Controlled Group. Component members of a controlled
group must use Schedule O to report the apportionment
of certain tax benefits between the members of the group.
See Schedule O and the Instructions for Schedule O for
more information.
If the total adjustment to be entered on line 27 is a
negative amount, enter the amount in parentheses.
Schedule M-1— Reconciliation of
Income (Loss) per Books With
Income (Loss) per Return
In completing Schedule M-1, the following apply.
Question 20
All insurance companies required to file Form 1120-PC
•
Check the appropriate boxes to indicate if the corporation
is required to file Form 4626. If the corporation does not
meet the requirements of the safe harbor method, as
provided under section 59(k)(3)(A) and Notice 2023-7,
2023-3 I.R.B. 390, available at IRS.gov/irb/
with total assets (nonconsolidated or consolidated for all
corporations included within the tax consolidation group)
of $10 million or more on the last day of the tax year must
file Schedule M-3 (Form 1120-PC) instead of
earlier.
4626 to the corporation's return. See the Instructions for
Form 4626.
A corporation filing Form 1120-PC that is not required to
•
file Schedule M-3 (Form 1120-PC) may voluntarily file
Schedule M-3 (Form 1120-PC) instead of Schedule M-1.
See the Instructions for Schedule M-3 (Form 1120-PC) for
more information.
Schedule L—Balance Sheets per
Books
Note. All insurance companies required to file Form
1120-PC must complete Schedule L.
The balance sheets should agree with the corporation's
books and records.
Line 5c. Travel and entertainment. Include on line 5c
any of the following.
Entertainment expenses not deductible under section
•
274(a).
Meal expenses not deductible under section 274(n).
•
•
•
•
Expenses for the use of an entertainment facility.
The part of business gifts over $25.
If filing a consolidated return, report total consolidated
assets, liabilities, and shareholders’ equity for all
corporations joining in the return. See Consolidated
returns, earlier.
Expenses of an individual over $2,000, allocable to
conventions on cruise ships.
Employee achievement awards of nontangible or
•
tangible property over $400 ($1,600 if part of a qualified
plan).
Corporations with total assets (nonconsolidated or
consolidated for all corporations included within the tax
consolidation group) of $10 million or more on the last day
of the tax year must file Schedule M-3 (Form 1120-PC)
instead of Schedule M-1. See the separate Instructions for
Schedule M-3 (Form 1120-PC) for provisions that also
affect Schedule L.
The cost of skyboxes.
•
•
•
Nondeductible club dues.
The part of luxury water travel expenses not deductible
under section 274(m).
Expenses for travel as a form of education.
Other nondeductible travel and entertainment
•
•
Line 1. Cash. Include certificates of deposit as cash on
expenses.
this line.
26
Instructions for Form 1120-PC (2023)
The time needed to complete and file this form will vary
depending on individual circumstances. The estimated
burden for business taxpayers filing this form is approved
under OMB control number 1545-0123 and is included in
the estimates shown in the instructions for their business
income tax return.
Line 7a. Tax-exempt interest. Report any tax-exempt
interest received or accrued, including any
exempt-interest dividends received as a shareholder in a
mutual fund or other RIC. Also, report this same amount
on Schedule I, item 10.
Paperwork Reduction Act Notice. We ask for the
information on these forms to carry out the Internal
Revenue laws of the United States. You are required to
give us the information. We need it to ensure that you are
complying with these laws and to allow us to figure and
collect the right amount of tax.
You are not required to provide the information
requested on a form that is subject to the Paperwork
Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or its
instructions must be retained as long as their contents
may become material in the administration of any Internal
Revenue law. Generally, tax returns and return information
are confidential, as required by section 6103.
If you have comments or suggestions for making this
form and related schedules simpler, we would be happy to
hear from you. You can send us comments through
IRS.gov/FormComments. Or you can write to:
Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
Do not send the tax form to this address. Instead, see
Instructions for Form 1120-PC (2023)
27
Index
A
Estimated tax:
Payments 4
F
R
Adjustments to shareholders'
Recordkeeping 6
equity 26
Amortization 12
S
Schedule:
A 10
C 19
B
G
E 21
F 22
I
G 23
H 23
C
I 23
L 26
CAMT 9
M-1 26
M-3 7
L
Limitation on dividends-received
deduction 21
T
D
Deductions 12
M
Definitions 19
Minimum tax:
Applicable statutory premium
U
N
Depository methods of tax
payment 4
W
E
Who must file:
O
Exceptions 2
Electronic deposit of tax refund of $1
Electronic federal tax payment
P
Employer identification number
(EIN) 8
28