- 16 -
refers to "a change in the formula or mechanism for calculating a
reserve". Id. at 352. Moreover, the Court noted, Congress had
defined the term as including only changes in assumptions or
methodology when it enacted certain life insurance rules and a
fresh start provision in the Deficit Reduction Act of 1984, Pub.
L. 98-369, sec. 216(b), 98 Stat. 494, 758. Id. at 353. In
rejecting the Commissioner's argument that "reserve
strengthening" has a different meaning in the P&C insurance
industry than in the life insurance industry, the Court concluded
that "Congress could not have expected a different quantitative
or qualitative meaning for the term" depending on the type of
insurer. Id. at 354.
Although section 1.846-3(c), Income Tax Regs., provided a
definition of "reserve strengthening" consistent with the
conference committee report, the Court in essence concluded that
priority must be accorded to the statute, which "contains a term
of art used in an unconditional manner." Id. at 355. Moreover,
the Court noted, the conference committee report states that the
fresh start was "intended to prevent taxpayers from artificially
increasing the amount of income that is forgiven". Id. at 356
n.19 (quoting H. Conf. Rept. 99-841 (Vol. II), supra at II-367,
1986-3 C.B. (Vol. 4) at 367). The Court concluded that the word
"artificially" refers to changes in assumptions or methodology.
Id. By contrast, the taxpayer in Western National merely had
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