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Blue Cross also contends that its estimate of salvage
recoverable and related deductions under the special deduction
rule qualify for safe harbor relief. Under section 1.832-
4(f)(2), Income Tax Regs., it is provided that, if the
requirements for safe harbor are satisfied, respondent may be
precluded from making an adjustment to the amounts of “bona fide”
estimated salvage recoverable reported and claimed by health
insurance companies.
Health insurance companies seeking to qualify under the safe
harbor provision, among other things, were required to file with
State insurance regulators by September 16, 1991, a statement
that identifies the extent to which the companies' incurred
losses for each line of business, as reported on their 1989
Annual Statements, were reduced by bona fide estimated salvage
recoverable. The pertinent language of section 1.832-4(f)(2)(i),
Income Tax Regs., provides as follows:
(2) Safe Harbor. The requirements of paragraph
(f)(1) of this section are deemed satisfied and the amount
that the company reports as bona fide estimated salvage
recoverable is not subject to adjustment by the district
director, if–-
(i) The company files with the insurance
regulatory authority of the company's state of
domicile, on or before September 16, 1991, a
statement disclosing the extent to which losses
incurred for each line of business reported on its
1989 annual statement were reduced by estimated
salvage recoverable.
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