WASHINGTON, Feb. 6 -- The U.S. Department of the Treasury's Internal Revenue Service issued the following tax decision on transfers of property to regulated investment companies and real estate investment trust (T.D. 9810):

SUMMARY:

This document contains final regulations effecting the repeal of the General Utilities doctrine by the Tax Reform Act of 1986. The final regulations address the length of time during which a RIC or a REIT may be subject to corporate level tax on certain dispositions of property. The final regulations affect RICs and REITs.

DATES:

Effective Date: These regulations are effective January 18, 2017.

Applicability Dates: For dates of applicability, see Section 1.337(d)-7(g)(2)(iii).

FOR FURTHER INFORMATION CONTACT:

Austin M. Diamond-Jones, (202) 317-5363 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to 26 CFR part 1. On June 8, 2016, the Department of the Treasury (Treasury Department) and the IRS published temporary regulations (TD 9770) under section 337(d) (temporary regulations) in the Federal Register (81 FR 36793) concerning certain transfers of property to regulated investment companies (RICs) and real estate investment trusts (REITs). A notice of proposed rulemaking cross-referencing the temporary regulations (REG-126452-15) (proposed regulations) was published in the Federal Register (81 FR 36816) on the same day. A correction to the temporary regulations was published in the Federal Register (81 FR 41800) on June 28, 2016. The Treasury Department and the IRS received one written comment in response to the proposed regulations. The comment requested a public hearing, and a hearing was held on November 9, 2016. After consideration of the written comment and the comments made at the public hearing, the proposed regulations are adopted in part and as amended by this Treasury decision, and the corresponding temporary regulations are removed in part. The revisions adopted by this Treasury decision are discussed below.

Summary of Comments and Explanation of Revisions

The comment requested that the temporary regulations and the proposed regulations with respect to the recognition period be immediately withdrawn and the recognition period with respect to REITs be defined with reference to the recognition period of section 1374(d)(7), which is currently a five-year period as a result of section 127(a) of the Protecting Americans Against Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016, Public Law 114-113, 129 Stat. 2422. The comment asserted that the change to the length of the recognition period in the temporary regulations and the proposed regulations was inconsistent with Congress's intent in the PATH Act and with prior administrative guidance. On October 18, 2016, the Chairmen and Ranking Members of the Ways and Means Committee of the U.S. House of Representatives and the Finance Committee of the U.S. Senate addressed a letter to the Secretary of the Treasury stating that the recognition period in the temporary regulations and the proposed regulations was inconsistent with congressional intent and the longstanding practice of treating REITs and RICs as having the same built-in gain recognition period as S corporations, currently five years. The Chairmen and Ranking Members also asked that the temporary regulations and the proposed regulations be modified to provide that REITs, RICs and S corporations are all subject to the same five-year built-in gain recognition period in order to be consistent with congressional intent and longstanding practice.

The Treasury Department and the IRS decline to withdraw the temporary regulations and the proposed regulations relating to the recognition period but agree with the comment relating to the length of the recognition period. Accordingly, these final regulations provide that the term recognition period means the recognition period described in section 1374(d)(7), beginning, in the case of a conversion transaction that is a qualification of a C corporation as a RIC or a REIT, on the first day of the RIC's or the REIT's first taxable year, and, in the case of other conversion transactions, on the day the RIC or the REIT acquires the property. The final regulations will apply prospectively from February 17, 2017, but taxpayers may choose to apply the definition of recognition period in the final regulations, instead of the 10-year recognition period in the temporary regulations, for conversion transactions occurring on or after August 8, 2016, and on or before February 17, 2017.

The Treasury Department and the IRS continue to study the other issues addressed in the temporary regulations and the proposed regulations, including other issues raised by the comment, and welcome further comment on those issues.

Special Analyses

Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented by Executive Order 13653. Therefore, a regulatory assessment is not required. Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that this regulation will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that this regulation will primarily affect large corporations with a substantial number of shareholders. Accordingly, a regulatory flexibility analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding this regulation was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business, and no comments were received.

Drafting Information

The principal author of these regulations is Austin M. Diamond-Jones, Office of Associate Chief Counsel (Corporate). However, other personnel from the Treasury Department and the IRS participated in their development.

* * * * * Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read as follows:

Authority: 26 U.S.C. 7805 * * *

* * * * *

Par. 2. Section 1.337(d)-7 is amended by revising paragraphs (b)(2)(iii) and (g)(2)(iii) to read as follows:

Section 1.337(d)-7 Tax on property owned by a C corporation that becomes property of a RIC or REIT.

* * * * *

(b) * * *

(2) * * *

(iii) Recognition period. For purposes of applying the rules of section 1374 and the regulations thereunder, as modified by paragraph (b) of this section, the term recognition period means the recognition period described in section 1374(d)(7), beginning--

(A) In the case of a conversion transaction that is a qualification of a C corporation as a RIC or a REIT, on the first day of the RIC's or the REIT's first taxable year; and

(B) In the case of other conversion transactions, on the day the RIC or the REIT acquires the property.

* * * * *

(g) * * *

(2) * * *

(iii) Recognition period. Paragraphs (b)(1)(ii) and (d)(2)(iii) of this section apply to conversion transactions that occur on or after August 8, 2016. Paragraph (b)(2)(iii) of this section applies to conversion transactions that occur after February 17, 2017. For conversion transactions that occurred on or after August 8, 2016 and on or before February 17, 2017, see Section 1.337(d)-7T(b)(2)(iii) in effect on August 8, 2016. However, taxpayers may apply paragraph (b)(2)(iii) of this section to conversion transactions that occurred on or after August 8, 2016 and on or before February 17, 2017. For conversion transactions that occurred on or after January 2, 2002 and before August 8, 2016, see Section 1.337(d)-7 as contained in 26 CFR part 1 in effect on April 1, 2016.

Par. 3. Section 1.337(d)-7T is amended by revising paragraphs (b)(1) through (3) and (g)(2)(iii) to read as follows: Section 1.337(d)-7T Tax on property owned by a C corporation that becomes property of a RIC or REIT.

* * * * *

(b)(1) through (3) [Reserved]. For further guidance, see section 1.337(d)-7(b)(1) through (3).

* * * * *

(g) * * *

(2) * * *

(iii) [Reserved]. For further guidance, see section 1.337(d)-7(g)(2)(iii).

* * * * *

John Dalrymple, Deputy Commissioner for Services and Enforcement.

Approved: December 30, 2016.

Mark J. Mazur, Assistant Secretary of the Treasury (Tax Policy). Note

(Filed by the Office of the Federal Register on January 17, 2017, 8:45 a.m., and published in the issue of the Federal Register for January 18, 2017, 82 F.R. 5387)

EditorVail-5767533 EditorVail

HONG KONG--(BUSINESS WIRE)--
AM Best has upgraded the Financial Strength Rating to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating to “a” (Excellent) from “a-” (Excellent) of Dah Sing Insurance Company Limited (DSI) (Hong Kong). Concurrently, AM Best has revised the outlook of these Credit Ratings (ratings) to stable from positive.

These ratings reflect DSI’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect the parental support DSI receives from Dah Sing Financial Holdings Limited (DSFH) in terms of capital, brand recognition, business development, product distribution, investment expertise, risk management and operations.

The upgrading of DSI’s ratings reflects sustained improvement in its business profile, supported by its strengthened market position and significant profitable growth over the last five years, with a more balanced and diversified underwriting portfolio. The company’s gross premiums written (GPW) recorded a cumulative growth of 75% from 2021 to 2025, driven by strategic expansion in motor, accident and health, and employees’ compensation lines. In addition, DSI has been rebalancing its underwriting portfolio by expanding the property damage business and focusing on small to medium-sized enterprise clientele, which protects the company from large catastrophic losses and enhances the stability of its underwriting performance. Amid Hong Kong’s competitive soft market, the company is prudently expanding its offshore inward reinsurance portfolio, further enhancing geographic diversification with controlled catastrophe risk exposure. Under its business plan, DSI is expected to maintain healthy growth through new initiatives in the medium term, positioning it competitively in the Hong Kong non-life insurance market. The company’s GPW is produced through diversified distribution channels, with the majority of business sourced from corporate intermediaries, followed by bancassurance supported by the affiliated Dah Sing Bank.

DSI’s risk-adjusted capitalisation remained at the strongest level at year-end 2025, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s reported capital and surplus (C&S) recorded double-digit growth in 2025, as well as during the first half of 2026, owing to full profit retention and growth of the valuation of equity investments, which were measured at fair value through other comprehensive income (OCI). DSI maintains a moderately high proportion, yet well-diversified equity investment portfolio. AM Best expects DSI to implement robust investment selection and diversification strategies, as well as appropriate investment controls, to mitigate the high investment risk exposure.

DSI remained profitable in 2025, and during the first half of 2026, with an adjusted return on C&S, including gains or losses both through profit or loss and OCI, of 18.5% in 2025, mainly supported by favourable investment results in tandem with the buoyant capital market conditions during the year. Under HKFRS 17, DSI’s net-net combined ratio remained favourable at 90.3% in 2025, underpinned by disciplined underwriting and continuous expense control.

Negative rating actions could occur if there is a material deterioration in DSI’s balance sheet strength fundamentals due to large investment losses or a significant increase in risk exposure. Negative rating actions are also possible if DSFH’s credit profile deteriorates materially or if the holding company reduces the level of support it provides to DSI. Although unlikely in the intermediate term, positive rating actions could occur if DSI demonstrates a sustained improvement in its operating performance.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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