insurance company test

  • One of the three tests a company must meet to determine if it will be taxed as an insurance company. It requires that a company meet the statutory definition of an "insurance company." To meet this definition, more than half of a company’s business activity must be related to the issuing of insurance or annuity contracts or the reinsuring of risks underwritten by insurance companies. The definition is based on all of the relevant facts and circumstances, such as the number of employees in various business activities, the amount of space allocated to the various business activities, and the net income derived from the various business activities.

    Internal Revenue Service 1

1Internal Revenue Service, Internal Revenue Manual 4.42.6 Glossary, http://­www.irs.gov/­irm/­part4/­irm_04-042-006.html (last accessed Dec. 22, 2009).