Common use of DAC Tax Reimbursement Clause in Contracts

DAC Tax Reimbursement. (a) For purposes of this Agreement, the term "DAC Adjustment" is calculated as follows: First, for each taxable year with respect to each category of Policies, "the gross amount incurred by the reinsurer with respect to [this Agreement]" (as such phrase is defined in Treasury Regulations Section 1.848-2(f)(2)(i)(A) issued pursuant to Section 848 of the Code) for such category (but not including any DAC Adjustment incurred in such year) is multiplied by the applicable percentage set forth in Section 848(c)(1) of the Code for such category. The amount, if any, from the preceding sentence for a category of Policies is then reduced (below zero, if necessary) by the amortization allowed the Company under Section 848(a)(2) of the Code with respect to any such amount (without regard to any payment of any DAC Adjustment). The result for a category, whether positive or negative, is then multiplied by the quotient of: tr/(1-(tr x (l+Y))), where tr = the maximum applicable marginal corporate federal income tax percentage (as set forth in Section 11 of the Code) for the taxable year, and Y= the applicable percentage set forth in Section 848(c)(1) of the Code for such category of Policies. The aggregate amount of such calculations for all categories of Policies for a taxable year (whether positive or negative) is the DAC Adjustment for the year.