November 24, 2025
Following the resolution of the longest government shutdown in U.S. history, the IRS is working quickly to regain lost ground ahead of the 2025 tax filing season—while simultaneously rolling out long-awaited modernization initiatives and implementing major tax changes from the One Big Beautiful Bill Act (OBBBA). For insurance companies, these developments create both operational challenges and meaningful opportunities. From electronic refunds and expanded e-filing to new incentives for technology investment and evolving rules for employer-related tax benefits, insurers will need to stay vigilant as the IRS implements tax law from the OBBBA.
On Wednesday November 12, President Trump signed H.R. 5371, ending the longest government shutdown in U.S. history. Since the IRS lost operational time to prepare for the upcoming filing season, taxpayers can certainly expect delays in the processing of their returns. Nevertheless, a couple of anticipated updates are in progress.
To protect taxpayers and speed up refunds, the IRS is phasing out the use of paper checks as a form of refunds. Corporate taxpayers are already required to electronically remit payments to the IRS, and now they can expect to receive refunds electronically. Insurance companies should make sure the IRS has their correct banking information to avoid delays in processing refunds. Corporate tax returns do not currently have a location to provide bank information; the IRS will provide updates that will hopefully include guidance regarding maintaining current bank information with the IRS.
The IRS has also committed to making electronic filing available for all tax forms, which is long overdue for Forms 1120-L and 1120-PC. The Internal Revenue Manual indicates that the Modernized e-File system has been modified to include Form 1120-L and Form 1120-PC. It remains to be seen how smooth the electronic filing process will be for insurance company tax returns.
The IRS will also be busy implementing changes to the tax code from the One Big Beautiful Bill Act (OBBBA). Several OBBBA tax provisions—such as permanent 100% bonus depreciation and full deductibility of domestic R&D expenses—directly benefit insurers investing in technology. If a carrier is developing software internally, such as tools to streamline claims administration, partnering with a firm to conduct an R&D study can help identify how those costs should be treated and whether the company is eligible for the R&D credit.
Insurers could consider:
The tax landscape creates a unique window for carriers to advance modernization goals at a lower after-tax cost.
Insurance companies also need to be aware of the tax provisions from the OBBBA that impact employers. Effective beginning after December 31, 2025, meals provided to employees on business premises for the employer’s convenience will no longer be deductible for tax purposes. This includes de minimis office meals and snacks. The deduction for the following types of business meals remains unchanged:
A hot topic from the bill is the “no tax on overtime” provision. Employees who receive qualified overtime compensation can deduct the pay that exceeds their regular rate of pay. The IRS will not update Form W-2 until tax year 2026, thus employers will have the challenge of tracking and reporting an employee’s overtime pay in another format for the 2025 tax year.
In addition to these IRS updates, the FASB also issued an update in December 2023 regarding income tax accounting that will affect reporting for insurers. To increase transparency and provide investors and shareholders with improved decision-making information, Accounting Standards Update (ASU) 2023-09 now requires a corporation to disaggregate income taxes paid by federal, state, and foreign tax on its financial statements. The ASU also stipulates that a public business entity must disclose specific and detailed categories in the rate reconciliation section of the income tax footnote. The Statutory Accounting Principles Working Group adopted the first of these requirements but chose not to adopt any requirements specific to public business entities. Public business entities must begin using the new reporting requirements for years that start after December 15, 2024, while all others must adopt the new standards for years beginning after December 15, 2025.
In conclusion, the IRS is implementing a series of modernization initiatives, including the transition to electronic refund payments and long-awaited e-filing availability for Forms 1120-L and 1120-PC. Meanwhile, the OBBBA introduces tax incentives that strongly favor insurers investing in technology, digital transformation, and insurtech partnerships. Insurance companies must also prepare for notable employer-related tax changes—such as the elimination of deductions for employer-provided meals beginning in 2026 and the introduction of the “no tax on overtime” provision, which will require new tracking and reporting processes. Additionally, insurers should be prepared to report their income tax under the new standards to enhance the usefulness of their financial statements. Together, these developments signal a period of both opportunity and operational adjustment for insurance organizations navigating the evolving tax landscape.
For additional guidance, please contact us. Larson and Company has developed a suite of services specifically to serve the needs of insurance companies.