The IRS today publicly released a legal advice memorandum* addressing application of section 481(a) to an insurance company—i.e., a Blue Cross or Blue Shield organization—that changes its method of accounting for unearned premiums using the automatic change procedures of Rev. Proc. 2015-13 and Rev. Proc. 2015-14 by reason of failing or subsequently meeting the section 833(c)(5) medical loss ratio requirement. AM2016-002 (release date April 22, 2016, and dated April 1, 2016)
*The memorandum is legal advice, signed by executives in the National Office of the Office of Chief Counsel and issued to IRS personnel who are national program executives and managers. The memo is issued to assist IRS personnel in administering their programs by providing authoritative legal opinions on certain matters, such as industry-wide issues. It is not to be used or cited as precedent.
The legal advice memo concludes:
The legal advice memo [PDF 92 KB] includes three examples illustrating this conclusion.
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