Micro-Captive/Small Insurance Company Election

§ 831. Tax on insurance companies other than life insurance companies(a) General ruleTaxes computed as provided in section 11 shall be imposed for each taxable year on the taxable income of every insurance company other than a life insurance company. (b) Alternative tax for certain small companies(1) In generalIn lieu of the tax otherwise applicable under subsection (a), there is hereby imposed for each taxable year on the income of every insurance company to which this subsection applies a tax computed by multiplying the taxable investment income of such company for such taxable year by the rates provided in section 11(b). (2) Companies to which this subsection applies(A) In generalThis subsection shall apply to every insurance company other than life if—(i) the net written premiums (or, if greater, direct written premiums) for the taxable year do not exceed $2,200,000, (ii) such company meets the diversification requirements of subparagraph (B), and (iii) such company elects the application of this subsection for such taxable year. The election under clause (iii) shall apply to the taxable year for which made and for all subsequent taxable years for which the requirements of clauses (i) and (ii) are met. Such an election, once made, may be revoked only with the consent of the Secretary. (B) Diversification requirements(i) In generalAn insurance company meets the requirements of this subparagraph if—(I) no more than 20 percent of the net written premiums (or, if greater, direct written premiums) of such company for the taxable year is attributable to any one policyholder, or (II) such insurance company does not meet the requirement of subclause (I) and no person who holds (directly or indirectly) an interest in such insurance company is a specified holder who holds (directly or indirectly) aggregate interests in such insurance company which constitute a percentage of the entire interests in such insurance company which is more than a de minimis percentage higher than the percentage of interests in the relevant specified assets with respect to such insurance company held (directly or indirectly) by such specified holder. (ii) Aggregation of certain spousal interestsFor purposes of clause (i)(II), any interest in the insurance company referred to in such clause which is held (directly or indirectly) by an individual who is a spouse of the specified holder, and who is a citizen of the United States, shall be treated as held by the specified holder. (iii) Specified holderFor purposes of this subparagraph, the term “specified holder” means, with respect to any insurance company, any individual who holds (directly or indirectly) an interest in such insurance company and who—(I) is a lineal descendent (including by adoption) of an individual who holds an interest (directly or indirectly) in the specified assets with respect to such insurance company or of such individual’s spouse,