Insurance professionals, tax leaders, and government representatives recently discussed emerging trends affecting insurance companies at the Federal Bar Association’s (FBA) 2026 Insurance Tax Seminar. Topics ranged from tax legislation and reserve developments to artificial intelligence (AI), IRS enforcement, and investment planning. This article provides our insights on several issues that may be relevant to your insurance organization.
OB3 Updates & What Comes Next
Discussions regarding the One Big Beautiful Bill Act (OB3) were prevalent throughout many sessions. Leaders from Washington, D.C., and moderators were most excited about making many expiring items from the Tax Cuts and Jobs Act (TCJA) permanent through the OB3. While there was enthusiasm about many of the included items, there were also areas where additional guidance may be needed, as well as opportunities for future legislation.
On the business side, the major OB3 updates were restoring bonus depreciation to 100%, allowing U.S. research and development (R&D) expenses to be deducted immediately, and returning the interest expense disallowance calculation from earnings before interest and taxes (EBIT) to earnings before interest, taxes, depreciation, and amortization (EBITDA). In addition, a new provision for charitable contributions includes a disallowance of 1% of taxable income. While a few credits were made permanent—such as employer-paid family leave, New Markets, and Opportunity Zone credits—many clean energy credits are set to phase out and expire in the coming years. In addition, one of the more significant impacts was the expansion of transferable tax credits.
Unlike the TCJA, the OB3 had no updates that applied only to the insurance industry, and many questions around further legislative updates exist, such as potential changes in life-nonlife consolidation rules. Indications at the seminar were that the OB3 was just the beginning and there were plans to continue with more tax policy updates.
Insurance Reserving & Form 3115 Implications
A few short years ago, changes to tax reserves were implemented through the TCJA. While there are no such changes in the OB3, some upcoming (or accelerated adoption of) National Association of Insurance Commissioners (NAIC) updates may still have an impact on your tax reserves and tax filings, specifically Valuation Manual (VM)-22 and the Greater of Economic Scenarios (GOES). As some of the NAIC changes may not affect everyone, a good discussion was had regarding when a change in reserve (Statutory Accounting Principles (STAT) or Tax) would affect your tax return filing.
Speakers discussed Revenue Ruling 2020-19 and how it provides great guidance and scenarios on what constitutes a change that would require IRS consent versus situations that merely reflect operational fluctuations or administrative corrections. Understanding these distinctions remains important because certain reserve changes may require the filing of Form 3115 and could affect the timing of income recognition. Several presenters emphasized the importance of evaluating reserve changes carefully due to their potential tax reporting implications.
Investment Taxation & Planning Opportunities
Mixed into the seminar were various investment and tax planning opportunities. While some were reminders of existing planning opportunities, a few new ones came from the OB3. As there were no insurance-specific changes in the OB3, companies that file 1120-PC returns are still able to carry back losses to offset income from the past two years, and this can be done either through Form 1139, if completed within one year of the loss, or by amending the return.
Another hot seminar topic was purchasing tax credits. With the updates in the OB3, many credits are now able to be transferred between taxpayers and companies that have generated credits but are unable to use them and sell them at a discount. For organizations exploring tax credit investments, it is important to understand the accounting differences between U.S. GAAP and STAT, the potential for additional financial statement disclosures, and a variety of business considerations, including risk, expected return on investment, projected tax liability, cash availability, alternative uses of capital, and the ability to utilize the credits through carryforward or carryback mechanisms.
Also discussed was insurtech funding and its relationship to R&D activities. Insurtech is anything that involves an insurance company’s investment in technology to introduce innovations that are conducive to new economic paradigms, processes, and products. As many companies invest in these technologies, it is important to note that some costs may qualify for an R&D credit and that under the OB3, these costs could be fully expensed during the year if completed in the United States.
Tax Controversy & the IRS Environment
The IRS has seen significant challenges this past year with a reduced workforce, multiple IRS commissioner changes, and a government shutdown all within the last year. Due to these challenges, multiple sessions indicated that many corporations in the industry are still waiting to have old paper filed returns and notices processed. On the bright side, 1120-L and 1120-PC returns are now available to e-file for the 2025 tax year.
Along with changes to IRS staffing, there were a few court cases discussed, one of them being Loper Bright Enterprises v. Raimondo. In June 2024, the U.S. Supreme Court overruled 40 years of case law and stated that if there was ambiguity to a law, courts are to determine the meaning instead of agencies. Speakers noted that Loper Bright could reshape the regulatory landscape by shifting greater responsibility to courts to interpret statutory provisions, potentially creating additional uncertainty as future guidance is issued and tested through litigation.
Artificial Intelligence, Ethics, & the Future Tax Function
AI use is becoming increasingly prevalent in and out of the workforce and both clients and governing bodies are taking notice. From Circular 230 to the American Bar Association, evolving professional standards increasingly require practitioners to understand the benefits and risks of emerging technologies. As a result, a lack of familiarity with these tools is becoming ever more difficult to justify. This leads to several common questions: Is it safe? Can it provide reliable answers? How should practitioners evaluate the information it produces?
AI can be a great tool if used correctly, but it can also become a headache if not, which is why training and safety measures should be used. Starting off, it is important to know if the AI tool you’re using is public or private. Public systems can feel like a quick way for a new team member to write an email or get some answers, but they are often not secure. Private or enterprise systems are ones that a business has worked with to make sure that information that is entered is protected and is not shared outside the organization.
AI can be very helpful when sorting through large sets of data that you feed into it, but when it goes searching for an answer, how can you know it is right or even real? There have been well-publicized court cases in which AI-generated responses included nonexistent authorities and citations, highlighting the importance of validating AI-generated content. AI tends to appear bold and fact-based when giving answers that from a quick glance appear correct, but when more digging is done, it can be incorrect. This is why it was mentioned that when using AI, you should maintain professional skepticism even though a response may sound bold and correct. In fact, if a colleague provides you with an AI-generated answer, ask them how they confirmed it was true and which source AI used.
Overall, seminar speakers viewed AI as a tool that can improve efficiency and enhance workflows when used responsibly. As adoption continues to increase, organizations should focus on governance, training, validation procedures, and professional judgment to enhance its benefits while managing its risks.
How Forvis Mazars Can Help
Forvis Mazars works with insurance companies to deliver assurance, tax, and consulting services within the U.S. and globally. If you have questions on any of the topics above or want to discuss their effects on your institution, please reach out to a professional at Forvis Mazars.