Atlantic Mutual Insurance Company v. Commissioner of Internal Revenue (523 U.S. 382)
U.S. Supreme Court · decided April 21, 1998 · Supreme Court Database (Spaeth)
- Citation
- 523 U.S. 382 · 118 S. Ct. 1413
- Decided
- April 21, 1998
- Term
- October Term 1997
- Vote
- 9–0
- Majority author
- Justice Scalia
- Issue area
- Federal Taxation
- Disposition
- Affirmed
- Outcome
- Petitioning party lost
- Ideological direction
- Liberal
Opinion excerpt
Justice Scalia delivered the opinion of the Court. Property and casualty insurance companies maintain accounting reserves for “unpaid losses.” Under the Tax Reform Act of 1986, increases in loss reserves that constitute “reserve strengthening” do not qualify for a certain one-time tax benefit. We must decide whether the term “reserve strengthening” reasonably encompasses any increase in reserves, or only increases that result from changes in the methods or assumptions used to compute them. HH Atlantic Mutual Insurance Co. is the common parent of an affiliated group of corporations, including Centennial Insurance Co., a property and casualty (PC) insurer. From 1985 to 1993, the two corporations (Atlantic) maintained what insurers call “loss reserves.” Loss reserves are estimates of amounts insurers will have to pay for losses that have been reported but not yet paid, for losses that have been incurred but not yet reported, and for administrative costs of resolving claims. Before enactment of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085, the Internal Revenue Code gave PC insurers a full deduction for loss reserves as “losses incurred.” In each taxable year, not only losses paid, but the full amount of the loss reserves, reduced by the amount of the loss reserves claimed for the prior taxable year, would be treated as a business expense. 26 U. S. C. §§ 832(b)(5)…
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