IRS Instruction 1120-PC – IRS Forms, Instructions, Pubs 2026

IRS Instruction 1120-PC – IRS Forms, Instructions, Pubs 2026 – In the complex world of corporate taxation, property and casualty insurance companies face unique requirements when filing their income tax returns. IRS Form 1120-PC serves as the essential document for reporting income, deductions, and tax liabilities for these entities. This comprehensive guide breaks down the IRS Instruction 1120-PC for the 2025 tax year, helping insurance professionals, tax preparers, and company executives navigate the filing process efficiently. Whether you’re filing for the first time or seeking updates on recent changes, this article covers everything you need to know about the U.S. Property and Casualty Insurance Company Income Tax Return.

What Is Form 1120-PC?

Form 1120-PC is the U.S. Property and Casualty Insurance Company Income Tax Return used by non-life insurance companies to report their financial activities. Specifically, it allows these companies to detail income, gains, losses, deductions, credits, and calculate their overall income tax liability. Unlike life insurance companies, which file Form 1120-L, property and casualty insurers (often referred to as P&C companies) must use this form if they are subject to taxation under section 831 of the Internal Revenue Code.

This form is critical for ensuring compliance with Subchapter L of the IRC, which outlines special tax rules for insurance companies. It includes schedules for premiums earned, losses incurred, and investment income, reflecting the industry’s unique accounting practices like loss reserve discounting and unearned premium reserves.

Who Must File Form 1120-PC?

Every domestic nonlife insurance company and qualifying foreign corporations must file Form 1120-PC if they would be taxed as a nonlife insurance company under section 831. This includes organizations providing commercial-type insurance under section 501(m)(1) and certain Blue Cross or Blue Shield organizations under section 833.

Exceptions include:

  • Life insurance companies (use Form 1120-L).
  • Nonlife insurance companies exempt under section 501(c)(15) (file Form 990 instead).
  • Companies that have disposed of their insurance business but continue corporate existence (may file Form 1120).

Foreign-owned domestic disregarded entities are treated as separate corporations for reporting if wholly owned by a foreign person, particularly those electing under sections 953(c)(3)(C) or 953(d). If your company meets the gross receipts test under section 448(c) ($31 million or less average annual gross receipts over the prior three years), you may qualify for small business exemptions, but filing is still required if taxable.

What’s New in the 2025 IRS Instruction 1120-PC?

The IRS regularly updates instructions to reflect legislative changes. For the 2025 tax year (returns filed in 2026), key updates include:

  • Increased Penalty for Late Filing: The minimum penalty for returns more than 60 days late is now the smaller of the tax due or $525.
  • Domestic Research and Experimental Expenditures: New section 174A allows deductions for domestic R&E expenses starting after December 31, 2024, or amortization over 60 months. Transition options are available for prior years under Rev. Proc. 2025-28.
  • Gain from Sale of Qualified Farmland: New section 1062 permits electing to pay tax on gains from sales to qualified farmers in four equal installments for transactions after July 4, 2025. Report on lines 16g and 15b; use Form 1062 when available.
  • Relief from Estimated Tax Penalties: Waivers for underpayments related to section 1062 elections (Notice 2026-3) and corporate alternative minimum tax (CAMT) (Notice 2025-27).
  • Interest on Rural or Agricultural Loans: Partial exclusion under new section 139L for interest received by qualified lenders after July 4, 2025 (Notice 2025-71).
  • Tax-Exempt Interest Reporting: Updated Schedule A, line 3b to include interest under sections 103, 139L, and 139H.
  • NOL Deduction Limits: For non-life insurance companies, the 80% taxable income limit does not apply to NOLs.
  • Discounting Rules: Updates to interest rates and loss payment patterns under section 846; check IRS.gov/Form1120PC for 2025 specifics.

Always check IRS.gov/Form1120PC for future developments post-publication.

How to File Form 1120-PC: Deadlines, Methods, and Locations?

Filing Deadlines

File by the 15th day of the 4th month after the tax year ends (e.g., April 15, 2026, for calendar-year filers). Fiscal year filers ending June 30 file by the 15th day of the 3rd month. Request a 6-month extension using Form 7004 by the original due date.

Electronic Filing

Electronic filing is encouraged and sometimes required. Use the Modernized e-File (MeF) system for faster processing. Direct deposit for refunds is now available on lines 21c and 21e. Payments can be made via IRS.gov/Payments.

Where to File

  • U.S.-based: Department of the Treasury, Internal Revenue Service, Ogden, UT 84201-0012.
  • Foreign or U.S. territories: Internal Revenue Service, P.O. Box 409101, Ogden, UT 84409.

Use private delivery services (PDS) for timely filing; see IRS.gov/PDS for details.

Step-by-Step Guide to Completing Form 1120-PC

Follow these steps based on the IRS instructions:

  1. Enter Basic Information: Provide the company’s name, address, EIN, and tax year. Check boxes for final return, name change, etc., in Item E.
  2. Report Taxable Income: Calculate on line 37, ensuring it accounts for inversion gains or excess inclusions.
  3. Income Tax Calculation: Multiply taxable income by 21% on line 3a; add other taxes like section 1291 (line 3b), base erosion (line 3d), and CAMT (line 6).
  4. Credits and Deductions: Apply foreign tax credits (line 8a), general business credits (line 8c), and NOL deductions (line 36b, with 2-year carryback option).
  5. Payments and Refunds: Enter estimated payments, overpayments from prior years, and request refunds or credits to next year.
  6. Sign and Attach: The return must be signed by an authorized officer. Attach the NAIC annual statement and any required forms like Form 1118 or Form 8991.

For detailed line instructions, consult the full document, as limitations apply to deductions like entertainment (50% for meals), fines, and lobbying expenses.

Key Schedules in Form 1120-PC

  • Schedule A (Taxable Income): Reports gross income, deductions like officer compensation and charitable contributions.
  • Schedule B (Investment Income for Electing Small Companies): For section 831(b) electors; limits investment expenses.
  • Schedule C (Dividends and Deductions): Details dividends-received deductions (50-100% based on ownership) and inclusions like GILTI.
  • Schedule E (Premiums Earned): Calculates net premiums, adjusting for unearned and discounted reserves under section 846.
  • Schedule F (Losses Incurred): Deducts losses paid and changes in reserves, reduced by 25% for tax-exempt income.
  • Schedule H (Section 833 Organizations): Special deductions if medical loss ratio (MLR) is 85% or higher.
  • Schedule I (Other Information): Answers questions on affiliations, foreign ownership, and elections.
  • Schedule L (Balance Sheets): Per books, including assets and liabilities.
  • Schedule M-1 (Reconciliation): Aligns book income with tax return.
  • Schedule M-3: Required if total assets are $10 million or more for reconciling financial statements.

Penalties, Recordkeeping, and Compliance Tips

Failure to file or pay on time incurs interest and penalties, including estimated tax underpayments (Form 2220). Retain records like NAIC statements, NOL computations, and reconciliations for at least three years. For consolidated returns, special rules apply to dividends. If assets are $10 million+, file Schedule UTP for uncertain tax positions.

Download the IRS Instruction 1120-PC PDF

To access the full instructions, download the PDF directly from the official IRS website: https://www.irs.gov/pub/irs-pdf/i1120pc.pdf. This document provides the most detailed guidance for completing your return.

Conclusion

Filing Form 1120-PC accurately is vital for property and casualty insurance companies to avoid penalties and ensure tax compliance. By understanding the updates for 2025 and following the step-by-step instructions, you can streamline the process. Consult a tax professional for personalized advice, and always refer to the latest IRS resources for any post-publication changes. Stay compliant and focus on what matters—protecting your policyholders.