35 Miss. Admin. Code Pt. III, Subpt. 10, Ch. 03 — Insurance Companies

100 GROSS INCOME:

# 1.

Gross receipts or gross income of all insurance companies, including mutuals,
reciprocals, and all types of insurance companies or associations, of whatever
nature or by whatever term designated, shall include premiums, reinsurance
premiums, considerations for annuities and supplementary contracts, interest
including interest income on mortgage loans secured by real estate located in
Mississippi, rent, dividends, and all other income, regardless of character or
designation, unless otherwise exempted or provided for, under the provisions of the
act. Gross income shall be computed on an accrual basis unless, because of
taxpayer's accounting system, a more accurate computation can be made on a
receipts basis.

# 2.

If reserve funds maintained for the purpose of liquidating policies and contracts at
maturity or on surrender are transferred to surplus, the portion, so transferred that
has been taken as a deduction from Mississippi gross income in the current year or
prior years shall be included in Mississippi gross income for the year in which such
transfer is made.

# 3.

Code Section 27-7-15(4)(g), provides for the exclusion of gross income received by
domestic corporations taxable in another state, and derived from business activity
conducted outside this state. The Commissioner has construed the provision as
permitting a domestic company to exclude only direct premiums and insurance
considerations derived from other taxable states and jurisdictions when such
income is earned through the operation of a bona fide office, agency or place of
business without the State of Mississippi. When a company excludes income, it
must exclude all expenses incurred in earning that income, including retaliatory
premium taxes. All reinsurance assumed premiums of a domestic company and all
other income must be included in Mississippi income, unless earned from sources
without the state as defined in the statute.

# 4.

Mississippi gross income from foreign insurance companies shall include all direct
premiums and considerations derived from within this state as shown by the
company's annual statement, and all reinsurance assumed premiums received from
Mississippi companies. There also shall be included the income from intangible
property including interest income on mortgage loans secured by real estate located
in Mississippi, if the evidence of ownership has acquired a business, commercial or
actual situs in this state; rentals or royalties from property or any interest in property
within the state, and income from the operation, ownership or sale of any property
within this state.

# 5.

Life insurance companies must report their income under the direct accounting
method. Other insurance companies in lieu of the direct accounting method may
determine their Mississippi net income from underwriting by apportioning to this
state a part of their total net underwriting income. Companies electing to use the
apportionment method should compute their Mississippi net income in the
following manner:
a. From a company -wide net underwriting gain, as shown by the company's
annual statement, deduct policy dividends, which qualify as a deduction.
b. Apply to the remainder so computed, the ratio between Mississippi net
premiums written and company-wide net premiums written.
c. To the Mississippi net income thus apportioned add the net income from
intangible property if the evidence of ownership has acquired a business,
commercial or actual situs in this state; the net rental and royalty income
from property or any interest in property within this state; and net income
from the operation, ownership or sale of any property within this state.
d. Deduct from the total so computed any net losses from the rental, lease,
operation, ownership or sale of any property within this state.
e. Add or deduct other income or other losses, which are not specific to any
state, in the ratio of Mississippi net premiums written to company- wide net
premiums written.

# 6.

Once the apportionment method of reporting is elected, it must follow for
subsequent years unless permission is granted by the Commissioner to change to
the direct accounting method. One of a group of affiliated companies may use the
apportioned method of reporting only if all the non -life companies of the same
group use said method.
101 DEDUCTIONS:
1. Insurance companies may deduct from gross income the deductions provided by
statute on the same basis and the same measure as other corporations. Deductions
shall be computed on an incurred basis except that, where taxpayer reports income
on a receipts basis, deductions must be computed on a paid basis.
2. Amounts representing rebates, return premiums and premiums on policies not taken
may be deducted from income when such amounts have been included in income in
the current year or prior years. Dividends (other than dividends paid to stockholders
as stock dividends) or distributions which represent a return of premiums paid, or
deposited, by policy holders are deductible when actually paid to policy holders, or
are definitely and irrevocably placed to the credit of policy holders subject to
withdrawal on demand; or treated and consummated as a reduction of premiums
due from policy holders. Dividends or distributions, which are credited to future
premiums payable by policy holders, are not deductible from gross income when
such dividends or distributions are not credited or paid to the prospective policy
holder unless the policy is renewed. Deductible policy dividends on direct business
and reinsurance assumed must be reduced by dividends on reinsurance ceded.
3. Foreign, non-life companies using the apportionment method of reporting income
will determine underwriting income on a net basis. No other companies may deduct
reinsurance ceded unless the assuming company is, or would be, required to report
the income therefrom under the direct accounting method. Generally, this will
permit domestic companies to deduct reinsurance ceded to Mississippi companies.
4. In computing losses and claims any estimate for losses incurred but not reported
during the taxable year should not be included. As payments on policies, there shall
be reported all death, disability and other policy claims paid within the year on
Mississippi contracts, including fire, accident and liability losses, matured
endowments, annuities, payments on installment policies and surrender values
actually paid. All losses and claims paid must be reduced by recoveries from
reinsurance ceded, when the reinsurance premiums paid have been taken as a
deduction from gross income.
5. The statute provides that there may be deducted "the net additions required by law
to be made within the taxable year to reserve funds when such reserve funds are
maintained for the purpose of liquidating policies at maturity." Such deductible
reserve additions do not include additions to a security reserve, investment reserve
or any reserve other than those reserves normally included with and recognized as a
part of the true policy reserves.
6. Said additions must reflect reinsurance to the extent that same is reflected in
premium income reported. Life companies which do not include in gross income
the increase in deferred and uncollected premiums must reduce the net increase in
reserves by the increase in net deferred and uncollected premiums.

# 7.

When Mississippi unearned premiums cannot be accounted for specifically by
companies which use the direct accounting method of reporting, said premiums
shall be computed by taking the ratios on a net basis between company -wide
unearned premiums and company-wide net premiums written, by line of business
and applying said ratios to the premium income reported, less return premiums, by
line of business.
102 OPERATING EXPENSE:
1. Insurance companies should compute their deductions for operating expenses in a
manner consistent with the computations of such deductions as shown by the
annual statement filed with the Commissioner of Insurance, provided that,
adjustments must be made for deductions not allowable under the statute and,
provided further that, accruals will be allowed only if income is reported on the
accrual basis. Returns, with supporting schedules where necessary, must be
reconcilable with the annual statement.
2. The method used in the annual statement in computing home office rent and
furniture and equipment expense should be followed on the return. Companies
having unrecovered costs in furniture and equipment, because of their departure
from the annual statement in prior years, may continue charging depreciation on
such items until cost has been recovered.
3. In the case of income determined by direct accounting, when an expense which is
specific to Mississippi has been claimed as a direct deduction from Mississippi
income, the corresponding expense for all other jurisdictions must be excluded
from expenses to be apportioned. When a particular type of income is not
reportable to this state because it is beyond its taxing jurisdiction, no expense
incurred in earning such income shall be deducted on the return.
4. Companies reporting a part of their investment income to this state must separately
apportion non-allocable expenses of the investment department by using the ratio of
Mississippi investment income to company-wide investment income. A supplement
should be attached to the return for this purpose.
5. Life companies and accident and health companies shall apportion to this state a
part of allowable, non -allocable expenses by using the ratio between Mississippi
gross premiums and annuity considerations reported and company -wide gross
premiums and annuity considerations. "Gross premiums" shall mean direct writing,
less return premiums, plus reinsurance assumed. The Commissioner will allow
modifications of this formula when it can be shown that greater accuracy will be
achieved thereby. Companies having both life and accident and health business
must separately apportion expenses of each department. A supplement should be
attached to the return for this purpose.
6. The following provisions of this regulation are applicable only to non -life
companies determining their Mississippi income by the direct accounting method:
a. A part of nonspecific loss adjustment expense shall be apportioned to this
state by using the ratio between Mississippi direct losses and company-wide
direct losses.
b. A part of other allowable non -allocable expenses shall be apportioned to
this state by using the ratio between Mississippi gross premiums reported
and company-wide gross premiums. "Gross premiums" shall mean direct
writings less return premiums, plus reinsurance assumed.
103 (Reserved)
104 (Reserved)