[Federal Register Volume 71, Number 177 (Wednesday, September 13, 2006)]
[Rules and Regulations]
[Pages 53967-53971]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-15117]


-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9287]
RIN 1545-BE53


Attained Age of the Insured Under Section 7702

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulation.

-----------------------------------------------------------------------

SUMMARY: This document contains final regulations explaining how to 
determine the attained age of an insured for purposes of testing 
whether a contract qualifies as a life insurance contract for Federal 
income tax purposes.

DATES: Effective Date: These regulations are effective September 13, 
2006.
    Applicability Dates: For dates of applicability, see Sec.  1.7702-
2(f).

FOR FURTHER INFORMATION CONTACT: Ann H. Logan, 202-622-3970 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    Section 7702(a) of the Internal Revenue Code (Code) provides that, 
for a contract to qualify as a life insurance contract for Federal 
income tax purposes, the contract must be a life insurance contract 
under the applicable law and must either (1) Satisfy the cash value 
accumulation test of section 7702(b), or (2) both meet the guideline 
premium requirements of section 7702(c) and fall within the cash value 
corridor of section 7702(d). To determine whether a contract satisfies 
the cash value accumulation test, or meets the guideline premium 
requirements and falls within the cash value corridor, it is necessary 
to determine the attained age of the insured.
    A contract meets the cash value accumulation test of section 
7702(b) if, by the terms of the contract, the cash surrender value of 
the contract may not at any time exceed the net single

[[Page 53968]]

premium that would have to be paid at that time to fund future benefits 
under the contract. Under section 7702(e)(1)(B), the maturity date of 
the contract is deemed to be no earlier than the day on which the 
insured attains age 95, and no later than the day on which the insured 
attains age 100, for purposes of applying the cash value accumulation 
test.
    A contract meets the guideline premium requirements of section 
7702(c) if the sum of the premiums paid under the contract does not at 
any time exceed the greater of the guideline single premium or the sum 
of the guideline level premiums as of such time. The guideline single 
premium is the premium that is needed at the time the policy is issued 
to fund the future benefits under the contract based on the following 
three elements enumerated in section 7702(c)(3)(B):
    (i) Reasonable mortality charges that meet the requirements (if 
any) prescribed in regulations and that (except as provided in 
regulations) do not exceed the mortality charges specified in the 
prevailing commissioners' standard tables (as defined in section 
807(d)(5)) as of the time the contract is issued;
    (ii) Any reasonable charges (other than mortality charges) that (on 
the basis of the company's experience, if any, with respect to similar 
contracts) are reasonably expected to be actually paid; and
    (iii) Interest at the greater of an annual effective rate of six 
percent or the rate or rates guaranteed on issuance of the contract.
    The guideline level premium is the level annual amount, payable 
over a period not ending before the insured attains age 95, computed on 
the same basis as the guideline single premium but using a minimum 
interest rate of four percent, rather than six percent. Like the cash 
value accumulation test, the guideline premium requirements are applied 
by deeming the maturity date of the contract to be no earlier than the 
day on which the insured attains age 95, and no later than the day on 
which the insured attains age 100. The deemed maturity date generally 
is the determination date set forth in the contract or the end of the 
mortality table (which, when section 7702 was enacted in 1984, was age 
100).
    A contract falls within the cash value corridor if the death 
benefit of the contract at any time is not less than the applicable 
percentage of the cash surrender value. The applicable percentage is 
determined based on the attained age of the insured as of the beginning 
of the contract year, as follows:

                                              Applicable Percentage
----------------------------------------------------------------------------------------------------------------
    In the case of an insured with an attained age as of the beginning of the        The applicable percentage
                                contract year of:                                   shall decrease by a ratable
---------------------------------------------------------------------------------   portion for each full year:
                                                                   But not more  -------------------------------
                           More than:                                  than:           From:            To:
----------------------------------------------------------------------------------------------------------------
0...............................................................              40             250             250
40..............................................................              45             250             215
45..............................................................              50             215             185
50..............................................................              55             185             150
55..............................................................              60             150             130
60..............................................................              65             130             120
65..............................................................              70             120             115
70..............................................................              75             115             105
75..............................................................              90             105             105
90..............................................................              95             105             100
----------------------------------------------------------------------------------------------------------------

    The Code does not define the attained age of the insured for 
purposes of applying the cash value corridor, the guideline premium 
limitations, or the computational rules of section 7702(e). The Senate 
Finance Committee explanation of the Deficit Reduction Act of 1984, 
Public Law 98-369 (98 Stat. 494), however, states that the attained age 
of the insured means the insured's age determined by reference to 
contract anniversaries (rather than the individual's actual birthdays), 
so long as the age assumed under the contract is within 12 months of 
the actual age. See S. Prt. No. 98-169, Vol. 1, at 576 (1984).
    Section 7702A defines a modified endowment contract (MEC) as a 
contract that meets the requirements of section 7702 (that is, a 
contract that is a life insurance contract), but that fails to meet the 
7-pay test set forth in section 7702A(b). A contract fails to meet the 
7-pay test if the accumulated amount paid under the contract at any 
time during the first 7 contract years exceeds the sum of the net level 
premiums that would have been paid on or before that time if the 
contract provided for paid-up future benefits after the payment of 7 
level annual premiums. Section 7702A(c)(1)(B) provides that, for 
purposes of this test, the computational rules of section 7702(e) 
generally apply, including the contract's deemed maturity no earlier 
than the day on which the insured attains age 95, and no later than the 
day on which the insured attains age 100.
    In sum, the attained age of an insured under a contract that is a 
life insurance contract under the applicable law must be determined to 
test whether the contract complies with the guideline premium 
requirements of section 7702(c), the cash value corridor of section 
7702(d), and (by reason of the computational rules of section 7702(e)) 
the cash value accumulation test of section 7702(b) and the 7-pay test 
of section 7702A(b), as applicable.
    On May 24, 2005, the IRS and Treasury Department published a notice 
of proposed rulemaking (REG-168892-03), (2005-25 I.R.B. 1293, June 20, 
2005) in the Federal Register (70 FR 29671) (the proposed regulations). 
The proposed regulations provide guidance on how to determine the 
attained age of an individual insured under a contract that is a life 
insurance contract under the applicable law, for purposes of testing 
whether the contract qualifies as a life insurance contract under 
section 7702 and is a modified endowment contract under section 7702A. 
Under the proposed regulations, the attained age of the insured is 
either (i) The insured's age determined by reference to the 
individual's actual birthday as of the date of determination (actual 
age) or (ii) the insured's age determined by reference to contract 
anniversary (rather than the individual's actual birthday),

[[Page 53969]]

so long as the age assumed under the contract (contract age) is within 
12 months of the actual age. The proposed regulations provide that the 
attained age of the insured under a contract insuring multiple lives on 
a last-to-die basis is the attained age of the youngest insured, and 
the attained age of the insured under a contract insuring multiple 
lives on a first-to-die basis is the attained age of the oldest 
insured.
    The sole party requesting a public hearing timely withdrew its 
request. One written comment regarding the notice of proposed 
rulemaking was received.

Explanation of Provisions

    After consideration of the written comment received, this Treasury 
decision adopts the regulations as proposed, with the modifications 
noted below.

A. Identity of the Insured Individual

    The proposed regulations provide that, in the case of a last-to-die 
contract, the attained age of the insured means the age of the youngest 
individual insured under the contract. The comment letter pointed out 
that, in the case of such a contract, the death of the youngest insured 
raises a question whether the attained age under the contract should 
continue to be determined based on the attained age of the deceased 
insured, or should instead be based on the attained age of the youngest 
surviving insured. Some last-to-die life insurance contracts undergo a 
change in both cash value and future mortality charges as a result of 
the death of an insured. These changes take into account the identity 
of the surviving insured or insureds. Other last-to-die life insurance 
contracts treat the death of an insured as a non-event for purposes of 
measuring cash value and future mortality charges under the contract. 
The comment letter suggested a rule for last-to-die contracts that 
would take into account the age of the youngest surviving insured if 
the contract undergoes modifications to both the cash value and future 
mortality charges under the contract, so that the attained age 
assumptions used for Federal income tax purposes are consistent with 
those used under the terms of the contract. The final regulations 
include such a rule in Sec.  1.7702-2(c)(2).

B. Changes in Benefits Between Policy Anniversaries

    The proposed regulations provide that the age of an individual 
insured under a life insurance contract is either (i) The insured's age 
determined by reference to the individual's actual birthday as of the 
date of determination (actual age), or (ii) the insured's age 
determined by reference to contract anniversary (rather than the 
individual's actual birthday), so long as the age assumed under the 
contract (contract age) is within 12 months of the actual age. The 
proposed regulations do not, however, define the attained age to be 
used if there is an increase in death benefits between policy 
anniversary dates. Specifically, should the attained age as of the 
beginning of the contract year continue to be used at the time of the 
benefit increase, even if the date of change is closer to the next 
contract anniversary? The comment letter requests flexibility to use 
the attained age as of either the previous or subsequent policy 
anniversary, or any age between those two ages. The final regulations 
address this issue by clarifying that the attained age of the insured 
under a contract, once determined, changes annually. This rule is set 
forth in Sec.  1.7702-2(b)(2).

C. Use of Derived Ages for Multiple Life Contracts

    Under the proposed regulations, the attained age of the insured 
under a contract insuring multiple lives is either the attained age of 
the youngest insured (in the case of a last-to-die contract) or the 
attained age of the oldest insured (in the case of a first-to-die 
contract). Some issuers, however, determine mortality charges under 
such contracts using a single, derived age that does not correspond to 
the attained age of any single insured under the contract. In addition, 
in some cases issuers currently account for substandard risks by 
determining mortality charges based on an age that is older than the 
actual attained age of the insured under the contract. The comment 
letter requested a rule that would permit the use of the same derived 
age as the attained age of the insured in these circumstances, to avoid 
whatever administrative complexities could result from the use of 
different ages for different purposes in the course of testing 
compliance of the contracts with sections 7702 and 7702A.
    The final regulations do not make this change. The manner in which 
age is used to determine reasonable mortality charges under section 
7702(c)(3)(B)(i) is independent of the age that is treated as the 
attained age of the insured for purposes of determining the guideline 
level premium under section 7702(c)(4), or applying the cash value 
corridor of section 7702(d) or the computational rules of section 
7702(e). The final regulations do not, nor are they intended to, 
endorse or prohibit any methodology for determining reasonable 
mortality charges under section 7702(c). Reasonable mortality charges 
were the subject of regulations proposed July 5, 1991, (FI-069-89) 
(1991-2 C.B. 963) in the Federal Register (56 FR 30718), and also were 
addressed in Notice 88-128, 1988-2 C.B. 540, and Notice 2004-61, 2004-2 
C.B. 596. See Sec.  601.601(d)(2)(ii). This prior guidance is not 
modified, clarified, or in any other way affected by these final 
regulations.

D. Contract Anniversary

    The comment letter requested that the regulations include a 
definition of contract anniversary other than the issue date of the 
contract and subsequent anniversaries of that date. The final 
regulations do not include such a definition because the terms issue 
date and contract year have broad application, and it would be 
inappropriate to address the matter for the first time in these final 
regulations.

E. Effective Date

    The proposed regulations were proposed to apply to contracts issued 
on or after the date that is one year after the regulations are 
published as final regulations in the Federal Register. A taxpayer 
would be permitted, however, to apply these final regulations 
retroactively for contracts issued before that date provided the 
taxpayer does not later determine qualification of those contracts in a 
manner that is inconsistent with these regulations.
    The comment letter requested that the final regulations conform 
more closely to the adoption dates for the 2001 Commissioners' Standard 
Ordinary mortality and morbidity tables (2001 CSO tables). These tables 
are now prevailing within the meaning of section 807(d)(5) and have a 
mandatory effective date of January 1, 2009. In some States, insurers 
have the option to use either the 1980 CSO tables or the 2001 CSO 
tables for contracts issued before January 1, 2009. Either changing 
from the 1980 CSO mortality tables to the 2001 CSO tables or adopting 
changes to the determination of the insured's attained age under this 
regulation (or both) may require filing new contract forms with the 
relevant state insurance commissioners and may require changes to 
existing compliance systems. Accordingly, the effective date of this 
final regulation has been adjusted to take into account the transition 
period for adoption of the new mortality tables. Specifically, the 
final regulations apply to life insurance contracts that are either (1) 
Issued after December 31, 2008, or (2) issued on or October 1, 2007 and 
based upon the 2001 CSO tables.

[[Page 53970]]

This modification will enable issuers to make any changes required by 
this final regulation concurrently with the changes required by the 
adoption of the 2001 CSO mortality tables. In addition, taxpayers may 
apply the regulations for contracts issued before October 1, 2007, 
provided they do not later determine qualification of those contracts 
under section 7702 in a manner inconsistent with the regulations.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It also has been 
determined that section 553(b) and (d) of the Administrative Procedure 
Act (5 U.S.C. chapter 5) does not apply to these regulations, and 
because the regulations do not impose a collection of information on 
small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) 
does not apply. Pursuant to section 7805(f) of the Code, the notice of 
proposed rulemaking preceding this Treasury decision was submitted to 
the Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business.

Drafting Information

    The principal author of these final regulations is Ann H. Logan, 
Office of the Associate Chief Counsel (Financial Institutions and 
Products), Office of Chief Counsel, Internal Revenue Service. However, 
personnel from other offices of the IRS and the Treasury Department 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding 
entries in numerical order to read as follows:

    Authority: 26 U.S.C. 7805 * * *.
    Section 1.7702-2 also issued under 26 U.S.C. 7702(k). * * *

0
Par. 2. Section 1.7702-0 is added to read as follows:


Sec.  1.7702-0  Table of contents.

    This section lists the captions that appear in Sec. Sec.  1.7702-1, 
1.7702-2, and 1.7702-3.


Sec.  1.7702-1  Mortality charges.

    (a) General rule.
    (b) Reasonable mortality charges.
    (1) Actually expected to be imposed.
    (2) Limit on charges.
    (c) Safe harbors.
    (1) 1980 C.S.O. Basic Mortality Tables.
    (2) Unisex tables and smoker/nonsmoker tables.
    (3) Certain contracts based on 1958 C.S.O. table.
    (d) Definitions.
    (1) Prevailing commissioners' standard tables.
    (2) Substandard risk.
    (3) Nonparticipating contract.
    (4) Charge reduction mechanism.
    (5) Plan of insurance.
    (e) Effective date.

Sec.  1.7702-2  Attained age of the insured under a life insurance 
contract.

    (a) In general.
    (b) Contract insuring a single life.
    (c) Contract insuring multiple lives on a last-to-die basis.
    (1) In general.
    (2) Modifications to cash value and future mortality charges 
upon the death of insured.
    (d) Contract insuring multiple lives on a first-to-die basis.
    (e) Examples.
    (f) Effective dates.
    (1) In general.
    (2) Contracts issued before the general effective date.

Sec.  1.7702-3  Definitions.

    (a) In general.
    (b) Cash value.
    (1) In general.
    (2) Amounts excluded from cash value.
    (c) Death benefit.
    (1) In general.
    (2) Qualified accelerated death benefit treated as death 
benefit.
    (d) Qualified accelerated death benefit.
    (1) In general.
    (2) Determination of present value of the reduction in death 
benefit.
    (3) Examples.
    (e) Terminally ill defined.
    (f) Certain other additional benefits.
    (1) In general.
    (2) Examples.
    (g) Adjustments under section 7702(f)(7).
    (h) Cash surrender value.
    (1) In general.
    (2) For purposes of section 7702(f)(7).
    (i) Net surrender value.
    (j) Effective date and special rules.
    (1) In general.
    (2) Provision of certain benefits before July 1, 1993.
    (i) Not treated as cash value.
    (ii) No effect on date of issuance.
    (iii) Special rule for addition of benefit or loan provision 
after December 15, 1992.
    (3) Addition of qualified accelerated death benefit.
    (4) Addition of other additional benefits.


0
Par. 3. Section 1.7702-2 is added to read as follows:


Sec.  1.7702-2  Attained age of the insured under a life insurance 
contract.

    (a) In general. This section provides guidance on determining the 
attained age of an insured under a contract that is a life insurance 
contract under the applicable law, for purposes of determining the 
guideline level premium of the contract under section 7702(c)(4), 
applying the cash value corridor of section 7702(d) or applying the 
computational rules of section 7702(e), as applicable.
    (b) Contract insuring a single life. (1) If a contract insures the 
life of a single individual, either of the following two ages may be 
treated as the attained age of the insured with respect to that 
contract--
    (i) The insured's age determined by reference to the individual's 
actual birthday as of the date of determination (actual age); or
    (ii) The insured's age determined by reference to contract 
anniversary (rather than the individual's actual birthday), so long as 
the age assumed under the contract (contract age) is within 12 months 
of the actual age as of that date.
    (2) Once determined under paragraph (b)(1) of this section, the 
attained age with respect to an individual insured under a contract 
changes annually. Moreover, the same attained age must be used for 
purposes of applying sections 7702(c)(4), 7702(d), and 7702(e), as 
applicable.
    (c) Contract insuring multiple lives on a last-to-die basis--(1) In 
general. Except as provided in paragraph (c)(2) of this section, if a 
contract insures the lives of more than one individual on a last-to-die 
basis, the attained age of the insured is determined by applying 
paragraph (b) of this section as if the youngest individual were the 
only insured under the contract for purposes of sections 7702(c)(4), 
7702(d), and 7702(e), as applicable.
    (2) Modifications to cash value and future mortality charges upon 
the death of insured. If both the cash value and future mortality 
charges under a contract change by reason of the death of one or more 
insureds to no longer take into account the attained age of the 
deceased insured or insureds, the youngest surviving insured shall 
thereafter be treated as the only insured under the contract.
    (d) Contract insuring multiple lives on a first-to-die basis. If a 
contract insures the lives of more than one individual on a first-to-
die basis, the attained age of the insured is determined by applying 
paragraph (b) of this section as if the oldest individual were the only 
insured under the contract for purposes of

[[Page 53971]]

sections 7702(c)(4), 7702(d), and 7702(e), as applicable.
    (e) Examples. The following examples illustrate the determination 
of the attained age of the insured for purposes of sections 7702(c)(4), 
7702(d), and 7702(e), as applicable. The examples are as follows:

    Example 1. (i) X was born on May 1, 1947. X became 60 years old 
on May 1, 2007. On January 1, 2008, X purchases from IC a contract 
insuring X's life. January 1 is the contract anniversary date for 
all future years. IC determines X's annual premiums on an age-last-
birthday basis. Based on the method used by IC to determine age, X 
has an attained age of 60 for the first contract year, 61 for the 
second contract year, and so on.
    (ii) Section 1.7702-2(b)(1) permits the determination of 
attained age under either of two alternative approaches. Section 
1.7702-2(b)(1)(i) provides that, if a contract insures the life of a 
single insured individual, the attained age may be determined by 
reference to the individual's actual birthday as of the date of 
determination. Under this provision, X has an attained age of 60 for 
the first contract year, 61 for the second contract year, and so on. 
Alternatively, Sec.  1.7702-2(b)(1)(ii) provides that the insured's 
age may be determined by reference to contract anniversary (rather 
than the individual's actual birthday), so long as the age assumed 
under the contract is within 12 months of the actual age as of that 
date. If IC determines X's attained age under Sec.  1.7702-
2(b)(1)(ii), X likewise has an attained age of 60 for the first 
contract year, 61 for the second contract year, and so on. Whichever 
provision IC uses to determine X's attained age must be used 
consistently from year to year for purposes of sections 7702(c)(4), 
7702(d), and 7702(e), as applicable.
    Example 2. (i) The facts are the same as in Example 1 except 
that, under the contract, X's annual premiums are determined on an 
age-nearest-birthday basis. X's nearest birthday to January 1, 2008, 
is May 1, 2008, when X will become 61 years old. Based on the method 
used by IC to determine age, X has an attained age of 61 for the 
first contract year, 62 for the second contract year, and so on.
    (ii) Section 1.7702-2(b)(1) permits the determination of 
attained age under either of two alternative approaches. Section 
1.7702-2(b)(1)(i) provides that, if a contract insures the life of a 
single insured individual, the attained age may be determined by 
reference to the individual's actual birthday as of the date of 
determination. Under this provision, X has an attained age of 60 for 
the first contract year, 61 for the second contract year, and so on. 
Alternatively, Sec.  1.7702-2(b)(1)(ii) provides that the insured's 
age may be determined by reference to contract anniversary (rather 
than the individual's actual birthday), so long as the age assumed 
under the contract is within 12 months of the actual age as of that 
date. If IC determines X's attained age under Sec.  1.7702-
2(b)(1)(ii), X has an attained age of 61 for the first contract 
year, 62 for the second contract year, and so on. Whichever 
provision IC uses to determine X's attained age must be used 
consistently from year to year for purposes of sections 7702(c)(4), 
7702(d), and 7702(e), as applicable.
    Example 3. (i) The facts are the same as in Example 1 except 
that the face amount of the contract is increased on May 15, 2011. 
During the contract year beginning January 1, 2011, the age assumed 
under the contract on an age-last-birthday basis is 63 years. 
However, X has an actual age of 64 as of the date the face amount of 
the contract is increased.
    (ii) Section 1.7702-2(b)(1)(ii) provides that the insured's age 
may be determined by reference to contract anniversary (rather than 
the individual's actual birthday), so long as the age assumed under 
the contract is within 12 months of the actual age. Section 1.7702-
2(b)(2) provides that, once determined under paragraph (b)(1) of 
this section, the attained age with respect to an individual insured 
under a contract changes annually. Accordingly, X continues to be 63 
years old throughout the contract year beginning January 1, 2011, 
for purposes of sections 7702(c)(4), 7702(d), and 7702(e), as 
applicable.
    Example 4. (i) The facts are the same as in Example 1 except 
that in addition to X (born in 1947), the insurance contract also 
insures the life of Y, born on September 1, 1942. The death benefit 
will be paid when the second of the two insureds dies.
    (ii) Section 1.7702-2(c)(1) provides that if a life insurance 
contract insures the lives of more than one individual on a last-to-
die basis, the attained age of the insured is determined by applying 
Sec.  1.7702-2(b) as if the youngest individual were the only 
insured under the contract. Because X is younger than Y, the 
attained age of X must be used for purposes of sections 7702(c)(4), 
7702(d), and 7702(e), as applicable.
    Example 5. (i) The facts are the same as Example 4 except that X 
(the younger of the two insureds) dies in 2012. After X's death, 
both the cash value and mortality charges of the life insurance 
contract are adjusted to take into account only the life of Y.
    (ii) Section 1.7702-2(c)(1) provides that if a life insurance 
contract insures the lives of more than one individual on a last-to-
die basis, the attained age of the insured is determined by applying 
Sec.  1.7702-2(b) as if the youngest individual were the only 
insured under the contract. Paragraph (c)(2) of this section 
provides that if both the cash value and future mortality charges 
under a contract change by reason of the death of an insured to no 
longer take into account the attained age of the deceased insured, 
the youngest surviving insured is thereafter treated as the only 
insured under the contract. Because both the cash value and 
mortality charges are adjusted after X's death to take into account 
only the life of Y, only the attained age of Y is taken into account 
after X's death for purposes of sections 7702(c)(4), 7702(d), and 
7702(e), as applicable.
    Example 6. (i) The facts are the same as Example 1 except that 
in addition to X (born in 1947), the insurance contract also insures 
the life of Z, born on September 1, 1952. The death benefit will be 
paid when the first of the two insureds dies.
    (ii) Section 1.7702-2(d) provides that if a life insurance 
contract insures the lives of more than one individual on a first-
to-die basis, the attained age of the insured is determined by 
applying Sec.  1.7702-2(b) as if the oldest individual were the only 
insured under the contract. Because X is older than Z, the attained 
age of X must be used for purposes of sections 7702(c)(4), 7702(d), 
and 7702(e), as applicable.

    (f) Effective dates--(1) In general. Except as provided in 
paragraph (f)(2) of this section, these regulations apply to all life 
insurance contracts that are either--
    (i) Issued after December 31, 2008; or
    (ii) Issued on or after October 1, 2007 and based upon the 2001 CSO 
tables.
    (2) Contracts issued before the general effective date. Pursuant to 
section 7805(b)(7), a taxpayer may apply these regulations 
retroactively for contracts issued before October 1, 2007, provided 
that the taxpayer does not later determine qualification of those 
contracts in a manner that is inconsistent with these regulations.

Deborah M. Nolan,
Acting Deputy Commissioner for Services and Enforcement.
    Approved: September 6, 2006.
Eric Solomon,
Acting Deputy Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E6-15117 Filed 9-12-06; 8:45 am]
BILLING CODE 4830-01-P