Cite as: 523 U. S. 382 (1998)
Opinion of the Court
1987 tax computation, to discount 1986 reserves as well. 100 Stat. 2404, note following 26 U. S. C. § 846.
Because the requirement that PC insurers discount 1986 reserves changed the "method of accounting" for computing taxable income, PC insurers, absent another transitional rule, would have been required to recognize as income the difference between undiscounted and discounted year-end 1986 loss reserves. See 26 U. S. C. § 481(a) (1988 ed.). To avoid this consequence, § 1023(e)(3)(A) of the 1986 Act afforded PC insurers a "fresh start," to wit, an exclusion from taxable income of the difference between undiscounted and discounted year-end 1986 loss reserves. 100 Stat. 2404, note following 26 U. S. C. § 846. Of course the greater the 1986 reserves, the greater the exclusion. Section 1023(e)(3)(B) of the 1986 Act foreclosed the possibility that insurers would inflate reserves to manipulate the "fresh start" by excepting "reserve strengthening" from the exclusion:
"(B) Reserve strengthening in years after 1985.—Subparagraph (A) [the fresh-start provision] shall not apply to any reserve strengthening in a taxable year beginning in 1986, and such strengthening shall be treated as occurring in the taxpayer's 1st taxable year beginning after December 31, 1986." 100 Stat. 2404, note following 26 U. S. C. § 846.
Regulations promulgated by the Treasury Department set forth rules for determining the amount of "reserve strengthening":
"(1) In general. The amount of reserve strengthening (weakening) is the amount that is determined under paragraph (c)(2) or (3) to have been added to (subtracted from) an unpaid loss reserve in a taxable year beginning in 1986. For purposes of section 1023(e)(3)(B) of the 1986 Act, the amount of reserve strengthening (weakening) must be determined separately for each unpaid loss
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