rp-08-71.pdf

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# Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.201: Rulings and determination letters.
(Also Part I, Sections 832, 846; 1.832-4, 1.846-1.)

Rev. Proc. 2008-71

## SECTION 1. PURPOSE

This revenue procedure prescribes the salvage discount factors for the 2008 accident
year. These factors must be used to compute discounted estimated salvage recoverable under
§ 832 of the Internal Revenue Code.

## SECTION 2. BACKGROUND

Section 832(b)(5)(A) requires that all estimated salvage recoverable (including that which
cannot be treated as an asset for state accounting purposes) be taken into account in computing
the deduction for losses incurred. Under § 832(b)(5)(A), paid losses are to be reduced by salvage
and reinsurance recovered during the taxable year. This amount is adjusted to reflect changes in
discounted unpaid losses on nonlife insurance contracts and in unpaid losses on life insurance

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contracts. An adjustment is then made to reflect any changes in discounted estimated salvage
recoverable and in reinsurance recoverable.

Pursuant to § 832(b), the amount of estimated salvage is determined on a discounted
basis in accordance with procedures established by the Secretary.

## SECTION. 3. SCOPE

This revenue procedure applies to any taxpayer that is required to discount estimated
salvage recoverable under § 832.

## SECTION 4. APPLICATION

.01 The following tables present separately for each line of business the discount factors
under § 832 for the 2008 accident year. All the discount factors presented in this section were
determined using the applicable interest rate under § 846(c) for 2008, which is 4.06 percent, and
by assuming all estimated salvage is recovered in the middle of each calendar year. See Rev.
Proc. 2008-11, 2008-3 I.R.B. 439, for background regarding the tables.

.02 These tables must be used by taxpayers irrespective of whether they elected to
discount unpaid losses using their own historical experience under § 846.

.03 Section V of Notice 88-100, 1988-2 C.B. 439, provides a composite discount factor
to be used in determining the discounted unpaid losses for accident years that are not separately
reported on the NAIC Annual Statement. The tables separately provide discount factors for
taxpayers who elect to use the composite method. Rev. Proc. 2002-74, 2002-2 C.B. 980,
clarifies that for certain insurance companies subject to tax under § 831 the composite method
for discounting unpaid losses set forth in Notice 88-100, section V, 1988-2 C.B. 439, is permitted
but not required. This revenue procedure further provides alternative methods for computing
discounted unpaid losses that are permitted for insurance companies not using the composite

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method, and sets forth a procedure for insurance companies to obtain automatic consent of the

Commissioner to change to one of the methods described in Rev. Proc. 2002-74.

# Tables of Factors to be Used to Discount Salvage Recoverable With Respect to Losses Incurred in Accident Year 2008

(Interest rate: 4.06 percent)

## Accident and Health (Other Than Disability Income or Credit Disability Insurance)

Taxpayers that do not use the composite method of Notice 88-100 should use 98.0298
percent to discount salvage recoverable with respect to losses incurred in this line of
business in the 2008 accident year as of the end of the 2008 and later taxable years.

Taxpayers that use the composite method of Notice 88-100 should use 98.0298 percent
to discount all salvage recoverable in this line of business as of the end of the 2008
taxable year.

### Auto Physical Damage

Tax Year

Discount Factors (%)

2008

97.2331

2009

96.1174

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2010 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount

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salvage recoverable as of the end of the 2010
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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### Commercial Auto/Truck Liability/Medical

Tax Year

Discount Factors (%)

2008

92.3526

2009

92.2970

2010

92.6408

2011

92.9897

2012

93.7281

2013

93.5170

2014

91.9508

2015

92.8642

2016

96.2378

2017

98.0298

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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### Composite

Tax Year

Discount Factors (%)

2008

92.3690

2009

92.1172

2010

91.9402

2011

91.7659

2012

91.1438

2013

90.2174

2014

91.0647

2015

92.4105

2016

94.4361

2017

96.2605

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 96.8444 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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### Fidelity/Surety

Tax Year

Discount Factors (%)

2008

93.6954

2009

96.1174

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2010 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2010
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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### Financial Guaranty/Mortgage Guaranty

Tax Year

Discount Factors (%)

2008

94.7421

2009

96.1174

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2010 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2010
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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#### International (Composite)

Tax Year

Discount Factors (%)

2008

92.3690

2009

92.1172

2010

91.9402

2011

91.7659

2012

91.1438

2013

90.2174

2014

91.0647

2015

92.4105

2016

94.4361

2017

96.2605

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 96.8444 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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#### Medical Malpractice -- Claims-Made

Tax Year

Discount Factors (%)

2008

92.6642

2009

93.7424

2010

92.1505

2011

92.7778

2012

92.0831

2013

87.6889

2014

84.3189

2015

90.2868

2016

96.4445

2017

98.0298

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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##### Medical Malpractice -- Occurrence

Tax Year

Discount Factors (%)

2008

85.5177

2009

89.9300

2010

92.2898

2011

84.2693

2012

94.7905

2013

91.4234

2014

93.0145

2015

95.8751

2016

97.0989

2017

98.0298

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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##### Miscellaneous Casualty

Tax Year

Discount Factors (%)

2008

96.5837

2009

96.1174

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2010 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2010
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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#### Multiple Peril Lines (Homeowners/Farmowners, Commercial Multiple Peril, and Special Liability (Ocean Marine, Aircraft (All Perils), Boiler and Machinery))

Tax Year

Discount Factors (%)

2008

93.0068

2009

92.3990

2010

92.3201

2011

92.2569

2012

91.4462

2013

89.8725

2014

91.0239

2015

93.4483

2016

94.8485

2017

96.6142

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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### Other (Including Credit)

Tax Year

Discount Factors (%)

2008

95.6448

2009

96.1174

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2010 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2010
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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Other Liability -- Claims-Made

Discount

Tax Year

Factors (%)

2008

88.4208

2009

89.5374

2010

87.6521

2011

90.8781

2012

92.3590

2013

94.2379

2014

93.1673

2015

91.7716

2016

97.3613

2017

98.0298

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0675 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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Other Liability -- Occurrence

Discount

Tax Year

Factors (%)

2008

87.1236

2009

88.1600

2010

90.4878

2011

91.2470

2012

90.6851

2013

90.8000

2014

90.2668

2015

93.0020

2016

95.7619

2017

97.5722

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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### Private Passenger Auto Liability/Medical

Discount

Tax Year

Factors (%)

2008

94.5329

2009

94.5579

2010

94.3102

2011

93.4459

2012

92.8620

2013

92.0891

2014

92.9858

2015

94.5440

2016

94.6149

2017

96.4088

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018and later years

98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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Products Liability -- Claims-Made

Tax Year

Discount Factors (%)

2008

88.9426

2009

51.3741

2010

53.7803

2011

90.7115

2012

80.1341

2013

91.4320

2014

59.5121

2015

90.5055

2016

91.6367

2017

92.7680

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factors to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018

94.5598

2019

96.3623

2020 and later years

98.0298

Taxpayers that use the composite method of Notice
88-100 should use 95.2929 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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Products Liability -- Occurrence

Tax Year

Discount Factors (%)

2008

87.6369

2009

89.7198

2010

91.6030

2011

92.4224

2012

92.8704

2013

90.4185

2014

91.0511

2015

94.0066

2016

94.2757

2017

96.1335

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 95.9730 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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#### Reinsurance -- Nonproportional Assumed Property

Tax Year

Discount Factors (%)

2008

91.0976

2009

92.7443

2010

95.6984

2011

80.1417

2012

89.8643

2013

81.5378

2014

51.4095

2015

92.8399

2016

73.3181

2017

88.1043

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factors to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018

89.8547

2019

91.6751

2020

93.5877

2021

95.6459

2022 and later years

98.0298

Taxpayers that use the composite method of Notice
88-100 should use 90.7540 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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#### Reinsurance -- Nonproportional Assumed Liability

Tax Year

Discount Factors (%)

2008

86.7636

2009

90.0422

2010

91.4998

2011

88.6312

2012

90.7036

2013

91.5709

2014

91.4636

2015

93.2257

2016

95.1632

2017

96.9140

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 94.8390 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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#### Reinsurance -- Nonproportional Assumed Financial Lines

Tax Year

Discount Factors (%)

2008

87.1652

2009

85.9016

2010

89.9069

2011

78.5011

2012

90.2511

2013

80.2802

2014

90.4154

2015

90.8197

2016

97.5152

2017

98.0298

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018 and later years
98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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### Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary and Theft)

Tax Year

Discount Factors (%)

2008

94.8844

2009

96.1174

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factor to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2010 and later years

98.0298

Taxpayers that use the composite method of Notice
88-100 should use 98.0298 percent to discount
salvage recoverable as of the end of the 2010
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

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## Workers' Compensation

Tax Year

Discount Factors (%)

2008

88.3785

2009

90.4189

2010

91.2195

2011

91.1364

2012

89.6372

2013

88.2223

2014

88.8169

2015

88.5309

2016

90.7105

2017

92.4766

Taxpayers that do not use the composite method of
Notice 88-100 should use the following factors to
discount salvage recoverable as of the end of the tax
year shown with respect to losses incurred in this
line of business in the 2008 accident year.

2018

94.2879

2019

96.1430

2020 and later years

98.0298

Taxpayers that use the composite method of Notice
88-100 should use 95.7028 percent to discount
salvage recoverable as of the end of the 2018
taxable year with respect to losses incurred in this
line of business in 2008 and prior years.

The principal author of this revenue procedure is Katherine A. Hossofsky of the Office of
the Associate Chief Counsel (Financial Institutions & Products). For further information
regarding this revenue procedure, contact Ms. Hossofsky at (202)622-8435 (not a toll free call).