SECTION 6. REVISED DISCOUNT

FACTORS

.01 If revised unpaid loss discount factors for the 2018 accident year are published after final regulations are published in the Federal Register, the Treasury Department and IRS propose to issue guidance providing that taxpayers must use, for taxable years ending on or after the date the final regulations are published, the revised discount factors for purposes of determining, for all accident years ending with or before calendar year 2018, the unpaid losses and expenses unpaid (as defined in § 832(b)(5) and (6)) and the unpaid losses (as defined in §§ 805(a)(1) and 807(c)(2)). .02 The Treasury Department and IRS propose that such guidance would instruct any taxpayer that used the discount factors prescribed in this revenue procedure in a taxable year beginning after December 31, 2017, and that does not amend the return filed for such taxable year to use the revised discount factors, to take into account the difference between the amount of the TCJA adjustment determined using the unpaid loss discount factors prescribed in this revenue procedure and the amount of the TCJA adjustment determined using the revised unpaid loss discount factors. The difference would be taken into account ratably over the taxable years remaining in the TCJA period of adjustment, beginning with the first taxable year in which the taxpayer uses the revised discount factors.

.03 Such guidance would also instruct any taxpayer that used the discount factors prescribed in this revenue procedure in a taxable year beginning after December 31, 2017, and that does not amend the return filed for such taxable year to use the revised discount factors, to compute, with respect to the last taxable year in which the discount factors prescribed in this revenue procedure were used, the adjustment to the amount of the discounted unpaid losses under § 846 at the end of that taxable year and the amount of discounted estimated salvage recoverable under § 832 at the end of that taxable year due to computing those amounts using the revised discount factors rather than the discount factors prescribed in this revenue procedure. The adjustment would be computed as follows: (1) from discounted unpaid

losses computed using the discount factors prescribed in this revenue procedure subtract discounted unpaid losses computed using the revised discount factors, and (2) to the result so obtained, add estimated salvage computed using the revised discount factors and subtract estimated salvage computed using the discount factors prescribed in this revenue procedure. A positive adjustment would be taken into account as an addition to gross income, and a negative adjustment would be taken into account as a reduction to gross income. The adjustment would be taken into account either (1) in the first taxable year in which the taxpayer uses the revised discount factors, or (2) ratably over the taxable years remaining in the TCJA period of adjustment, beginning with the first taxable year in which the taxpayer uses the revised discount factors. For the first taxable year in which a taxpayer uses the revised discount factors, the taxpayer would determine each of the following as if the revised discount factors had applied in the preceding taxable year: (1) the unpaid losses and expenses unpaid (as defined in § 832(b)(5) and (6)) at the end of the preceding taxable year, (2) the unpaid losses (as defined in §§ 805(a)(1) and 807(c)(2)) at the end of the preceding taxable year, and (3) the estimated salvage recoverable under § 832 at the end of the preceding taxable year.