# Massachusetts Mutual Life Insurance v. United States

> United States Court of Federal Claims · January 30, 2012 · 103 Fed. Cl. 111

URL: https://www.frixlaw.com/law-library/cases/6662881

## Case

- **Full name:** MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY v. UNITED STATES
- **Court:** United States Court of Federal Claims
- **Decided:** January 30, 2012
- **Citations:** 103 Fed. Cl. 111; 109 A.F.T.R.2d (RIA) 837; 2012 U.S. Claims LEXIS 47; 2012 WL 402043
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Horn
- **Judges:** Horn
- **Cited by:** 4 later opinions in the Frix Law Library

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## Opinion text

OPINION
HORN, Judge.
“While in some eases, ‘timing is everything,’ here timing is the only thing....” 1
FINDINGS OF FACT
The plaintiff, Massachusetts Mutual Life Insurance Company (MassMutual), on behalf of itself, and as successor to Connecticut Mutual Life Insurance Company (ConnMutual), brought this claim to recover funds allegedly overpaid to the Internal Revenue Service (IRS) for the tax years 1995, 1996 and 1997, 2 when the IRS disallowed certain policyholder dividend deductions made pursuant to Board Resolutions in December 1995, 1996, and 1997, respectively. These Resolutions established a minimum amount of dividends that would be paid out to certain policyholders the following year (the Dividend Guarantees). As noted by the plaintiff, and *114 not objected to by the defendant, “[pjlaintiff is entitled to policyholder dividend deductions; the only issue is when.” Plaintiff continued, “[i]t is undisputed that the dividends are deductible. The parties disagree solely about timing.”
A trial was held and post-trial briefings on the legal and factual issues raised in this ease were filed by both parties. After a review of the trial transcripts, the testimony, the exhibits entered into the record, and the submissions filed by the parties, the court makes the following findings of facts. MassMutual is a mutual life insurance company with its principle place of business in Springfield, Massachusetts. For the tax years 1995, 1996, and 1997, MassMutual was an accrual basis taxpayer, and timely filed its federal income tax return for each tax year at issue. In the fall of 1995, the Boards of Directors of MassMutual and ConnMutual approved a merger of the two companies. The merger was effective February 29, 1996, with Mass-Mutual emerging as the surviving entity and succeeding to all of ConnMutual’s rights and liabilities. Prior to the merger, ConnMutual was a mutual life insurance company with its principal place of business in Hartford, Connecticut. In 1995, ConnMutual was an accrual basis taxpayer, which also had timely filed its federal income tax return for the 1995 tax year. 3
According to the Joint Stipulations of Fact, mutual life insurance companies, such as MassMutual and ConnMutual, operate for the benefit of their policyholders. Mutual life insurance companies typically issue two types of insurance policies, participating policies and non-participating policies. A participating policy is an insurance policy that is eligible to receive a share of any annual distribution of surplus, as declared by the Board of Directors of a mutual life insurance company. A non-participating policy does not receive a share of the annual distribution of surplus. Each year, mutual life insurance companies calculate their surplus, i.e., assets less reserves 4 and other liabilities. The mutual life insurance company’s Board of Directors then approves the amount of surplus, known as the divisible surplus, to be returned to holders for participating policies, or participating policyholders. A sample Mass-Mutual participating policy, included as a Joint Exhibit, stated: “Each year we determine how much money can be paid as dividends. This is called divisible surplus. We then determine how much of this divisible surplus is to be allocated to this [participating] policy.” 5 A mutual life insurance company’s divisible suiplus is distributed to participating policyholders, consistent with the dividend scale developed by the company’s management, and approved by the Board of Directors.
Mutual life insurance companies typically declare policyholder dividends at the end of each year. Dividends are then payable to participating policyholders whose policies are in force as of the anniversary date of their policy. An insurance policy is in force if the premiums for the policy are paid through its anniversary date. A policy that is not in force has lapsed. A lapse rate, usually expressed as a percentage, is the number of life insurance policies that lapsed within a given period, divided by the number of policies in force at the beginning of that period. Participating policyholders may choose to have their policyholder dividends applied to the following year’s premium or purchase additional insurance instead of receiving the dividend.
*115 Policyholder dividends are generally not taxable to the policyholder until the aggregate dividends paid to a policyholder exceed the aggregate premiums paid by the policyholder. The point at which the aggregate dividends paid to a policyholder exceed the aggregate premiums paid by the policyholder is known as the cross-over point.
1995 Tax Year
1995 MassMutual Dividend Guarantee
On October 9,1995, the Board of Directors of MassMutual approved the 1996 dividend scale recommended by MassMutual’s Dividend Policy Committee. The 1996 dividend scale resulted in the apportionment of $517.3 million to all MassMutual’s participating policies. In order to determine the amount of dividends to be guaranteed, MassMutual first calculated the dividends it expected to pay policyholders of post-1983 policies, pursuant to its 1996 dividend scale, $217.3 million, and then set the guaranteed amount at 85% of that amount, or $184.7 million. The final guaranteed amount was rounded up to $185.0 million.
MassMutual, and as described below, ConnMutual chose to apply the Dividend Guarantees only to policies issued after December 31, 1983 because of unfavorable tax consequences that would have resulted from also applying the Dividend Guarantees to the policies issued before January 1, 1984. Under Section 216(b)(1) of the Deficit Reduction Act of 1984, Pub.L. 98-369, 98 Stat. 758 (1984), life insurance companies were allowed a fresh start for then-existing policies as a benefit for the change in tax treatment in the deduction of policyholder dividends from a reserve basis to an accrual basis. 6 “The ‘fresh start’ for the change in policyholder dividend accounting was intended to mitigate the detriment caused taxpayers by the statutory change in such accounting; to the extent the detriment caused by the statutory change is mitigated in fact by a company’s own change in business practices, the ‘fresh start’ was not intended to give a company additional tax benefits.” Staff of the Joint Comm, on Taxation, 98th Cong., General Explanation of the Revenue Provisions of the Deficit Reduction Act of 1984 611 (Comm. Print 1984). Therefore, pursuant to 26 U.S.C. § 808 (f), 7 *116 acceleration of pre-1984 policyholder dividends, could result in the recapture of the fresh start benefit the life insurance company received for the pre-1984 policies. To avoid the recapture of the “fresh start” benefit, MassMutual and ConnMutual limited the Dividend Guarantees to only post-1983 policyholders. In explaining why the Dividend Guarantees only applied to post-1983 policies, Margaret Sperry, the former chief compliance officer of MassMutual, testified at trial: “If a company changed its practices with regard to dividends in order to accelerate the tax deduction of dividends on that pre-[19]84 population, the population that got the fresh start, then there would be an adjustment and the company would ... have to pay additional tax.”
Ms. Sperry testified that, prior to 1995, MassMutual “was very aware of the difference between book and tax accounting on dividends_” She further stated that Mass-Mutual “wanted to align the economies of what was going on, which was reflected in our financial reporting, align the tax accounting with that financial reporting....” In 1995, Ms. Sperry stated she consulted with the accounting firm KPMG and their tax counsel at the time, Steptoe & Johnson LLP, about a dividend guarantee. According to Ms. Sperry:
what the guarantee did was it aligned a portion of our [MassMutual] dividends with the economics of what’s going on where the board would have declared the amounts of divisible surplus reflective of the earnings of the company in 1995 and prior years, and by accruing that amount of dividends associated with the guarantee in 1995, you have alignment mapping of the tax accounting, financial reporting, where the liability was firmly established, and the economics of what was going on.
In November 1995, MassMutual representatives met with representatives from the Massachusetts Division of Insurance, including the Insurance Commissioner, Linda Ru-thardt and Assistant Commissioner, Kevin McAdoo. MassMutual explained to the Massachusetts Division of Insurance representatives that it intended to implement a dividend guarantee for MassMutual’s posb-1983 policyholders. MassMutual further explained that the reason MassMutual had informed the Massachusetts Division of Insurance was to ensure that the Massachusetts Division of Insurance did not have any objections to the dividend guarantee. The parties agree, at that meeting the Division of Insurance did not raise any objections to the dividend guarantee. Subsequent to the November 1995, meeting, on December 7, 1995, MassMutual sent a letter to the Massachusetts Division of Insurance informing the Massachusetts Division of Insurance of MassMutual’s intention to adopt the dividend guarantee. The letter stated in part that MassMutual
intends to guarantee absolutely and irrevocably that it will pay a specified amount of the total annual dividend apportionment determined as of December 31, 1995, for the period beginning January 1, 1996 and ending December 31,1996.
The purpose of this letter is to inform you of this anticipated guarantee so that you *117 will be fully informed concerning Mass Mutual’s dividend practices.
Attached to the letter was a draft copy of the 1995 Mass Mutual Dividend Guarantee.
On December 8, 1995, Assistant Commissioner MeAdoo of the Massachusetts Division of Insurance responded to MassMutual’s December 7, 1995, letter, stating in part, “[t]hank you for informing the Division of Massachusetts Mutual Life Insurance Company’s (‘MassMutual’) intention to guarantee absolutely and irrevocably the payment of a specified amount of the total annual dividend apportionment determined as of December 31, 1995, for the period beginning January 1, 1996 and ending December 31, 1996.” Mr. MeAdoo also stated, “[i]t is our understanding that you will monitor the payment of annual dividends during 1996 to assure that the guaranteed aggregate amount is paid in accordance with the ‘Terms of the Annual Dividend Guarantee.’ We intend to instruct the examiners who perform MassMutual’s Examination to verify that the guaranteed aggregate amount is paid in accordance with the ‘Terms of the Annual Dividend Guarantee.’ ” Consequently, MassMutual concluded that no Massachusetts state regulator, in his or her official capacity, objected to the legality of the 1995 MassMutual Dividend Guarantee.
At the December 13, 1995, MassMutual Board of Directors meeting, the Board of Directors stated it was guaranteeing a minimum amount of $185.0 million in policyholder dividends to be paid to post-1983 policyholders in the following year. The MassMutual Board of Directors voted:
That the Company hereby absolutely and irrevocably commits and guarantees that, of the total apportionment from its surplus funds for the period beginning January 1, 1996 and ending December 31, 1996, said apportionment having previously been established by vote of this Board of Directors at its meeting held on October 9, 1995, it will pay or cause to be applied during 1996, in all events, annual dividends for participating individual life and annuity policies issued after December 31, 1983, in an amount of not less than $185 million; and that the Executive Vice President, Corporate Financial Operations be, and he hereby is, made responsible for monitoring the payment of annual dividends during 1996 to assure that such guaranteed amount is so paid or applied.
The 1995 MassMutual Dividend Guarantee stated, in part:
4.1. During each year for which the Company has adopted an Annual Dividend Guarantee, the Company shall pay or apply annual policyholder dividends to its policyholders in accordance with its usual practices and procedures. The Company’s adoption of an Annual Dividend Guarantee for any year shall not affect any individual policyholder’s right to receive, or the Company’s obligation to pay or apply, the annual policyholder dividend otherwise due to that individual policyholder on the applicable anniversary date.
4.2. Prior to December 31st of each year for which the Company has adopted an Annual Dividend Guarantee, the Company shall determine whether it actually has paid or applied annual policyholder dividends with respect to post-1983 policies in an amount at least equal to the specified amount of Guaranteed Dividends.
4.3. If the Company determines that it actually has paid or applied annual policyholder dividends with respect to post-1983 policies in an amount at least equal to the amount of Guaranteed Dividends specified, then the Company’s Executive Vice President — Corporate Financial Operations shall certify that the Company has satisfied its obligations imposed under the Annual Dividend Guarantee.
4.4. If the amount of Guaranteed Dividends specified exceeds the amount of annual policyholder dividends that the Company actually has paid or applied during the year (plus the amount that the Company determines will be paid or applied through December 31st of the year) with respect to post-1983 policies, then the Company shall be obligated to pay or apply an additional amount of policyholder dividends, equal to such excess, with respect to post-1983 policies.
4.5 Such excess shall be apportioned among the post-1983 policies still in force *118 in proportion to the annual policyholder dividends otherwise paid or applied with respect to such policies during the year.
4.6 Such excess shall be paid or applied with respect to post^l983 policies during the year in accordance with the apportionment made pursuant to the preceding paragraph.
4.7 The Company’s Executive Vice President — Corporate Financial Operations shall certify that such payments or applications have been made and that the Annual Dividend Guarantee has been properly implemented.
For the 1995 tax year, the guaranteed amount of dividends to be paid was 85% of the dividends MassMutual expected to pay to its post-1983 policyholders with policies still in force pursuant to its 1996 dividend scale. The 85% figure was set at a level that Mass-Mutual believed was virtually certain to be paid. At trial, Isadore Jermyn, 8 the Senior Vice President and Chief Actuary of Mass-Mutual, explained, “the intent was to choose an amount where the probability or the possibility that in fact a second amount of dividends would have to be paid in order to bring the total dividends up to the guarantee would be extremely remote.” According to plaintiffs expert, Louis Lombardi, a second round of payments would have required a “total breakdown of our financial system,” or some “unforeseeable cataclysmic event.” In order for a second round of payments to be triggered, plaintiffs expert Lombardi testified that, based on his analysis, a 16% policy lapse rate would be required.
According to Mass Mutual’s Chief Actuary, Mr. Jermyn, MassMutual’s lapse rate was in the 5 to 6 percent range during the mid to late 1990s and the lapse rate was fairly stable. Mr. Jermyn added that “[i]t would be very unusual for those lapse rates to get up above 10 percent.” Mr. Jermyn testified, however, that he believed the lapse rate would have to “be of the order of 50 percent” in order for a second round of payments to occur, and not just the 15% lapse rate assumed by Mr. Lombardi. Mr. Jermyn explained that for policies that lapse, typically one third of the policies lapse prior to their policy anniversary and two thirds of the policies lapse after the policy anniversary. Mr. Jermyn also stated that the majority of policies lapse after the policy anniversary because the policyholder still receives the full dividend even if the policy lapses after the policy anniversary date. Therefore, Mr. Jer-myn reasoned, “you’re going to need a 15 percent [of policies] to lapse before the anniversary, you need at least three times that to lapse in aggregate, so at least 45 percent, and I’ve sort of said roughly 50 percent need to lapse in order to result in less than 85 percent of the normal dividend being paid.”
As of December 31, 1995, at least some of the MassMutual’s posW983 policies were paid through their anniversary date in the following year, including 78,569 post-1983 policies with anniversary dates of January, February, or March. Between January 1, 1996 and September 15, 1996, MassMutual paid $118,975,383.00 in policyholder dividends to its posW983 policyholders. During 1996, MassMutual monitored the payment of post- *119 1983 policyholder dividends, and on December 12, 1996, MassMutual determined that the $185.0 million had been satisfied with post-1983 policyholder dividends paid through November 30,1996. Under the 1996 dividend scales, MassMutual and ConnMutual paid a total of $319.8 million in dividends to posM.983 policyholders, which exceeded the combined amount of the 1995 ConnMutual Dividend Guarantee and the 1995 Mass-Mutual Dividend Guarantee by $37.8 million. No second round of payments was required for the 1995 MassMutual Dividend Guarantee.
1995 ConnMutual Dividend Guarantee
Similar to MassMutual, ConnMutual adopted a dividend guarantee in 1995. In a November 6, 1995, letter to the Connecticut Department of Insurance, J. Brinke Marcuc-cilli, ConnMutuál’s Senior Vice President and Chief Financial Officer, indicated that ConnMutual intended to adopt the dividend guarantee in a measure to provide further assurance to ConnMutual’s policyholders “regarding the financial strength and strategic benefits generated by the merger....” In that same letter, ConnMutual informed the Connecticut Insurance Department of ConnMutual’s intent to adopt a dividend guarantee and disclose the guarantee in its 1995 Annual Statement. The relevant portion of the letter stated:
As a measure to provide further assurance to our respective policyholders regarding the financial strength and strategic benefits generated by the merger, both CML [ConnMutual] and MM [MassMutual] will be supplementing its 1996 dividend scale action with an unconditional guarantee as to a portion of its current dividend provisions. In our year end balance sheets, we will segregate the applicable portion of our dividend liability, and include appropriate footnote disclosure explaining the scope and nature of the guarantee.
No state regulator, including any Connecticut state regulator, in his or her official capacity, objected to the legality of the 1995 ConnMu-tual Dividend Guarantee.
On November 27, 1995, the ConnMutual Board of Directors voted to approve the 1996 dividend scale. The 1996 dividend scale resulted in the apportionment of $302.5 million to all ConnMutual’s participating policies. On December 8,1995, the ConnMutual Board of Directors stated it was guaranteeing a minimum amount of $97.0 million in policyholder dividends to posH983 policyholders the following year. At the December 8, 1995, meeting, the ConnMutual Board of Directors voted that:
Supplementing the 1996 Dividend Scale vote was taken at the November 27, 1995, meeting of this Board, the Company hereby absolutely and irrevocably commits and guarantees that, of the total apportionment for the period beginning January 1, 1996 and ending December 31, 1996, it will pay or cause to be applied in all events, annual dividends in 1996, for participating individual life and annuity policies issued after December 31, 1983, in the amount of at least $97 million; and
That the Chief Financial Officer is hereby charged with monitoring the payment of annual dividends during 1996 to assure that the total guarantee is paid as applied in accordance with the Connecticut Mutual Life Insurance Company 1996 Annual Dividend Guarantee Policy.
(emphasis in original). To determine the amount of dividends to be guaranteed, Conn-Mutual first calculated the dividends it expected to pay to the posb-1983 policies pursuant to its 1996 dividend scale, $114,925,864.00, and then calculated the guarantee at 85% of that amount, or $97,686,984.00. The final guaranteed amount was rounded down to $97.0 million. As with the 1995 MassMutual Dividend Guarantee, ConnMutual limited the 1995 ConnMutual Dividend Guarantee to only post-1983 policyholders to avoid adverse tax consequences. The 1995 ConnMutual Dividend Guarantee was set a level that ConnMutual believed was virtually certain to be paid.
The 1995 ConnMutual Dividend Guarantee was substantially similar to the 1995 Mass-Mutual Dividend Guarantee, including, for example, the definitions of Annual Dividend Guarantee and Guaranteed Dividends; however, there were some differences between the two. The definition of Company was different for the 1995 ConnMutual Dividend *120 Guarantee and 1995 MassMutual Dividend Guarantee, as was the title of the person charged with monitoring and certifying the payments of the dividends, with the 1995 ConnMutual Dividend Guarantee referring to the Company’s Chief Financial Officer and 1995 MassMutual Dividend Guarantee referring to the Company’s Executive Vice President-Corporate Financial Operations. The only substantive difference between the 1995 ConnMutual Dividend Guarantee and the 1995 MassMutual Dividend Guarantee, however, was Section 4.7. Section 4.7 of the 1995 MassMutual Dividend Guarantee stated: “The Company’s Executive Vice President-Corporate Financial Operations shall certify that such payments or applications have been made or that the Annual Dividend Guarantee has been properly implemented.” Section 4.7 of the 1995 ConnMutual Dividend Guarantee included the following additional sentence: “The Company’s Chief Financial Officer shall certify that such payments or application described in Sections 4.4 and 4.5 have been made and the Annual Dividend Guarantee has been properly implemented. Failure to so certify shall not impair, defeat, or invalidate the action of the Board of Directors in establishing the Annual Guarantee.”
In the letter to the Connecticut Insurance Department, ConnMutual indicated that it had included a footnote in its 1995 Annual Statement regarding the 1995 ConnMutual Dividend Guarantee. Footnote 22b in the ConnMutual Annual Statement stated: “The Board of Directors has further guaranteed that in 1996, a total of no less than $97.0 million will be paid or applied in the aggregate as annual dividends on certain life insurance and annuity contracts issued before January 1,1996.”
As of December 31, 1995, at least some of ConnMutual’s post-1983 policies were paid through their anniversary dates the following year, including 22,595 post-1983 policies with anniversary dates of January, February, or March. After the merger, MassMutual monitored the payment of ConnMutual’s post-1983 policyholder dividends in 1996. Between January 1, 1996 and September 15, 1996, MassMutual paid a total of $77,425,125.00 in policyholder dividends to former ConnMutual post-1983 policyholders. On December 12, 1996, MassMutual determined that ConnMu-tual’s $97.0 million dividend guarantee had been satisfied with post-1983 policyholder dividends paid through November 30, 1996. No second round of payments was required for the 1995 ConnMutual Dividend Guarantee.
1996 Tax Year
1996 MassMutual Dividend Guarantee
On October 14, 1996, the Board of Directors of MassMutual approved the 1997 dividend scale recommended by the Dividend Policy Committee. The 1997 dividend scale resulted in the apportionment of $873.3 million to all MassMutual’s participating policies. On December 11, 1996, MassMutual’s Board of Directors stated it was guaranteeing a minimum of $310.0 in policyholder dividend to be paid to post-1983 policyholders the following year. In order to determine the amount of dividends to be guaranteed, MassMutual calculated the dividends it expected to pay to the post-1983 policies pursuant to its 1997 dividend scale, $365.0 million and then set the guaranteed amount at 85% of that amount, or $310.3 million. The final guai’anteed amount was rounded down to $310.0 million. The 1996 MassMutual Dividend Guarantee was set at a level MassMu-tual believed was virtually certain to be paid. At the December 11, 1996, MassMutual Board of Directors meeting, the Board of Directors voted:
That the Company hereby and absolutely and irrevocably commits and guarantees that, of the total apportionment from its surplus funds for the period beginning January 1, 1997 and ending December 31, 1997, said apportionment having previously been established by vote of this Board of Directors at its meeting held on October 14, 1996, it will pay or cause to be applied during 1997, in all events, annual dividends for participating individual life and annuity policies issued after December 31, 1983, in an amount not less than $310 million; and that the Executive Vice President, Corporate Financial Operations be, and he hereby is, made responsible for monitoring the payment of annual dividends during 1997 *121 to assure that such guaranteed amount is so paid or applied.
The 1996 Dividend Guarantee enacted by the MassMutual Board of Directors on December 11, 1996 was identical to the 1995 Mass-Mutual Dividend Guarantee enacted the previous year.
On December 23,1996, MassMutual sent a letter to the Massachusetts Division of Insurance indicating that MassMutual had:
guaranteed absolutely and irrevocably that it would pay a specified amount of the total annual dividend apportionment determined as of December 31, 1995, for the period beginning January 1, 1996 and ending December 31, 1996. MassMutual continued this practice for 1996. MassMutual has guaranteed absolutely and irrevocably that it will pay a specified amount of the total annual dividend apportionment determined as of December 31, 1996, for the period beginning January 1, 1997 and ending December 31,1997.
The December 23, 1996, letter noted that amount the MassMutual Board of Directors voted to guarantee was “not less than $310 million.” The letter continued, “[t]he purpose of this letter is to inform you of the continuation of this guarantee so that you will be fully informed concerning MassMutual’s dividend practices.” The letter also noted that “[t]he difference between the 1995 MassMutual guarantee amount of $185 million and the 1996 guarantee amount is due primarily to the inclusion of a guarantee on policies issued by Connecticut Mutual, thereby also continuing Connecticut Mutual’s practice of guaranteeing the payment of these dividends.” Attached to the letter was a copy of the 1996 MassMutual Dividend Guarantee.
On December 26, 1996, Assistant Commissioner MeAdoo of the Massachusetts Division on Insurance returned a copy of the Mass-Mutual’s December 23, 1996, letter which was stamped “approved.” No state regulator, including any Massachusetts state regulator, in his or her official capacity, had objected to the legality of the 1996 MassMu-tual Dividend Guarantee.
As of December 31, 1996, at least some of the MassMutual’s post-1983 policies were paid through their anniversary date in the following year, including 79,269 post-1983 policies with anniversary dates of January, February, or March. Between January 1, 1997 and September 15, 1997, MassMutual paid $136,930,036.00 in policyholder dividends to its post-1983 policyholders and $67,325,356.00 in policyholder dividends to former ConnMutual post-1983 policyholders. During 1997, MassMutual monitored the payment of post-1983 policyholder dividends, and on December 5,1997, MassMutual determined that the $310.0 million guaranteed amount had been satisfied with post-1983 policyholder dividends paid through November 30,1997. Under the 1997 dividend scale, MassMutual paid $354.7 million in dividends to post-1983 policyholders, which exceeded the 1996 MassMutual Dividend Guarantee by $44.7 million. No second round of payments was required for the 1996 MassMutual Dividend Guarantee.
1997 Tax Year
1997 MassMutual Dividend Guarantee
On October 13, 1997, the MassMutual Board of Directors approved the 1998 dividend scale recommended by the Dividend Policy Committee. The 1998 dividend scale resulted in the apportionment of $939.0 million to all MassMutual’s participating policies. On December 10, 1997, MassMutual’s Board of Directors stated it was guaranteeing a minimum of $360.0 million in policyholder dividend to be paid to pos1^1983 policyholders the following year. In order to determine the amount of dividends to be guaranteed, MassMutual first calculated the dividends it expected to pay to the post-1983 policies pursuant to its 1998 dividend scale, $425.3 million and then set the guaranteed amount at 85% of that amount, or $361.5 million. The final guaranteed amount was rounded down to $360.0 million. As with the other Dividend Guarantees, the 1997 Mass-Mutual Dividend Guarantee was set at a level MassMutual believed was virtually certain to be paid.
The MassMutual Board of Directors voted at the December 10,1997, Board of Directors meeting:
*122 That the Company hereby and absolutely and irrevocably commits and guarantees that, of the total apportionment from its surplus funds for the period beginning January 1, 1998 and ending December 31, 1998, said apportionment having previously been established by vote of this Board of Directors at its meeting held on October 13, 1997, it will pay or cause to be applied during 1998, in all events, annual dividends for participating individual life and annuity policies issued after December 31, 1983, in an amount of not less than $360 million; and that the Executive Vice President and Chief Financial Officer be, and he hereby is, made responsible for monitoring the payment of annual dividends during 1998 to assure that such guaranteed amount is so paid or applied.
The 1997 Dividend Guarantee enacted by the MassMutual Board of Directors on December 10, 1997, was substantially similar to the MassMutual Dividend Guarantees had enacted in 1995 and 1996. The only difference between the 1997 MassMutual Dividend Guarantee from the 1995 and 1996 MassMu-tual Dividend Guarantees, was the title of the Executive Vice President charged with monitoring and certifying the payments of the dividends. In Sections 3.1 and 4.7 of the 1995 and 1996 MassMutual Dividend Guarantees list the title of the Vice President as Executive Vice Presideni^Corporate Financial Operations, whereas in Sections 3.1 and 4.7 of the 1997 MassMutual Dividend Guarantee, the title is listed as the Executive Vice President and Chief Financial Officer.
On December 23, 1997, MassMutual sent a letter to the Massachusetts Division of Insurance indicating that MassMutual had again adopted a dividend guarantee which:
guaranteed absolutely and irrevocably that it would pay a specified amount of the total annual dividend apportionment determined as of December 31, 1995, for the period beginning January 1, 1996 and ending December 31, 1996. MassMutual continued this practice in 1996 and 1997. MassMutual has guaranteed absolutely and irrevocably that it will pay a specified amount of the total annual dividend apportionment determined as of December 31, 1997, for the period beginning January 1, 1998 and ending December 31,1998.
The letter noted that amount the MassMutual Board of Directors voted to guarantee was “not less than $360 million.” The letter continued, “[t]he purpose of this letter is to inform you of the continuation of this guarantee so that you will be fully informed concerning MassMutual’s dividend practices.” Attached to the letter was a copy of the 1997 MassMutual Dividend Guarantee. No state regulator, including any Massachusetts state regulator, in his or her official capacity, objected to the legality of the 1997 MassMutual Dividend Guarantee.
As of December 31, 1997, at least some of the MassMutual’s posH983 policies were paid through their anniversary date in the following year, including 79,628 post-1983 policies with anniversary dates of January, February, or March. Between January 1, 1998 and September 15, 1998, MassMutual paid $163,402,093.00 in policyholder dividends to its post-1983 policyholders and $75,226,505.00 in policyholder dividends to former ConnMutual posb-1983 policyholders. During 1998, MassMutual monitored the payment of post-1983 policyholder dividends, and on December 5,1997, MassMutual determined that the $360.0 million had been satisfied with posML983 policyholder dividends paid through November 30,1998. Under the 1998 dividend scale, MassMutual paid $415.1 million in dividends to post>1983 policyholders, which exceeded the 1997 MassMutual Dividend Guarantee by $55.1 million. No second round of payments was required for the 1997 MassMutual Dividend Guarantee.
Additionally, for the tax years at issue, none of the posW983 policies had reached the cross-over point, at which point the aggregate dividends paid on a policy exceeded the aggregate premiums paid on the policy. Mr. Jermyn testified that a typical policy issued today “would have to wait at least 30 years before their cumulative dividends would start exceeding their cumulative premiums” or reached the cross-over point. Mr. Jermyn noted that because interest rates were higher and dividend scales were higher, the cross-over point would be shorter for policies purchased in the early 1980s, but he *123 “would be very surprised if-that period was shorter than say 20 years” and none of the post-1983 policies would have been 20 years or older in the years at issue. Mr. Jermyn also noted that the majority of policyholders use their policyholder dividends to purchase insurance as paid-up additions, considered additional premiums, which would extend the time before the cross-over point was reached. Paid-up additions refer to policyholder dividends applied to the following year’s premium or used to purchase additional insurance instead of being received by the policyholder.
When asked if she and her fellow employees considered the dividend guarantee revocable, Ms. Sperry stated “we would not have thought that any action taken by the dividend policy committee and then recommend to and acted on by our full board of directors would be viewed as revocable_” Ms. Sperry stated that in addition, MassMutual “would not go to the Commissioner of our state of domicile with an action that we thought would not be a serious commitment, and that we intended it as such and viewed it as such.”
Plaintiffs amended complaint alleged that for the taxable years 1995, 1996, and 1997, MassMutual was entitled to claim deductions as a result of the 1995, 1996, and 1997 Mass-Mutual Dividend Guarantees. The parties stipulated that “[b]oth MassMutual and ConnMutual took the necessary administrative steps to elect the ‘recurring item exception’ within the meaning of Internal Revenue Code § 461(h)(3) with respect to policyholder dividends for the years at issue.” The parties agree that the IRS denied MassMutual’s claims to accrue its liability to pay the Mass-Mutual Guarantee Dividends and deduct those changes for the tax years 1995, 1996, and 1997. The parties further agree that MassMutual timely filed claims for refund of federal income tax for the taxable years 1995, 1996 and 1997 and that the IRS had not taken any action on MassMutual’s claims as of the date of the filing of the lawsuit in this court.
Plaintiffs amended complaint also alleged that for the 1995 tax year, ConnMutual was entitled to claim deductions as a result of the ConnMutual 1995 Dividend Guarantee. The parties agree that the IRS denied ConnMu-tual’s claim to accrue its liability to pay the Guarantee Dividends and deduct that change in the accrual for 1995. The parties further agree that MassMutual, as successor to ConnMutual, filed a timely claim for refund of federal income tax for the 1995 tax year, and that the IRS partially disallowed the refund claim.
In its amended complaint plaintiff claims deductions for $77,425,125.00 in policyholder dividends attributable to ConnMutual’s Dividend Guarantee for tax year 1995. Plaintiff also claims deductions for $118,975,383.00 in policyholder dividends attributable to the 1995 MassMutual Dividend Guarantee for tax year 1995, $7,854,784.00 in policyholder dividends attributable to the 1996 MassMutual Dividend Guarantee for tax year 1996, and $34,373,306.00 in policyholder dividends attributable to the 1997 MassMutual Dividend Guarantee for tax year 1997. This opinion addresses only the liability regarding the dividend guarantee issue.
DISCUSSION
The parties agree that the issue to be resolved during this phase of the litigation is:
For each of the three years before the Court, the ultimate issue is whether, for federal income tax purposes, Plaintiff is entitled to a deduction based on the declared guaranteed minimum amount in the year of declaration. The answer to this question requires a determination of the following sub-issues:
1. Whether, in the years they were adopted, the Resolutions fixed Plaintiffs liability to pay the declared guaranteed minimum amounts in the following year....
2. Whether Plaintiffs policyholder dividends are rebates, refunds, or similar payments under Treas. Reg. § 1.461-4 (g)(3) that qualify for the recurring item exception under Treas. Reg. § 1.461 — 5(b)(5)(ii).
The plaintiff argued that its liability for the guaranteed amount of the policyholder dividends satisfies the requirements of the “all events test” and “[ajceordingly, Plaintiff was entitled to deduct in tax years 1995,1996 and *124 1997 a portion of the guaranteed minimum amount of policyholder dividends declared by Plaintiffs board of directors in 1995, 1996 and 1997.” In contrast, the defendant argued that the guaranteed minimum amount of policyholder dividends could not be deducted “in the year in which the boards adopted the resolutions—because the dividend guarantees do not meet the all-events test for accrual under the Internal Revenue Code and the regulations.” (citations omitted).
In a tax refund ease, there is a presumption of the correctness of the findings of the Commissioner of Internal Revenue. See United States v. Fior D’Italia, Inc., 536 U.S. 238, 243 , 122 S.Ct. 2117 , 153 L.Ed.2d 280 (2002) (“An ‘assessment’ amounts to an IRS determination that a taxpayer owes the Federal Government a certain amount of unpaid taxes. It is well established in the tax law that an assessment is entitled to a legal presumption of correctness—a presumption that can help the Government prove its case against a taxpayer in court.”); Conway v. United States, 326 F.3d 1268, 1278 (Fed.Cir.) (“The ruling of the Commissioner of Internal Revenue enjoys a presumption of correctness and a taxpayer bears the burden of proving it to be wrong.” (quoting Transamerica Corp. v. United States, 902 F.2d 1540, 1543 (Fed.Cir.1990)), reh’g denied (Fed.Cir.2003)); see also Stobie Creek Inv. LLC v. United States, 608 F.3d 1366, 1381 (Fed.Cir.2010); Bubble Room, Inc. v. United States, 159 F.3d 553, 561 (Fed.Cir.1998) (“In a tax refund case, the ruling of the Commissioner of Internal Revenue is presumed correct”), reh’g denied, en banc suggestion declined (Fed.Cir.1999); Lima Surgical Assocs., Inc. v. United States, 944 F.2d 885, 888 (Fed.Cir.1991) (“[Determinations of the Commissioner of Internal Revenue are presumptively correct.”).
The taxpayer has the burden of rebutting the presumption of correctness, but also “the taxpayer has the burden of establishing entitlement to the specific refund amount claimed.” Bubble Room, Inc. v. United States, 159 F.3d at 561 ; see also United States v. Gen. Dynamics Corp., 481 U.S. 239, 245 , 107 S.Ct. 1732 , 95 L.Ed.2d 226 (1987) (“The taxpayer has the burden of proving its entitlement to a deduction.” (citing Helvering v. Taylor, 293 U.S. 507, 514 , 55 S.Ct. 287 , 79 L.Ed. 623 (1935)). Similarly the Supreme Court has endorsed the “ ‘ “familiar rule” that “an income tax deduction is a matter of legislative grace and that the burden of clearly showing the right to the claimed deduction is on the taxpayer.””’ Knight v. Comm’r, 552 U.S. 181, 192 , 128 S.Ct. 782 , 169 L.Ed.2d 652 (2008) (quoting INDOPCO, Inc. v. Comm’r, 503 U.S. 79, 84 , 112 S.Ct. 1039 , 117 L.Ed.2d 226 (1992) (quoting Interstate Transit Lines v. Comm’r, 319 U.S. 590, 593 , 63 S.Ct. 1279 , 87 L.Ed. 1607 (1943))); see also United States v. Janis, 428 U.S. 433, 440-41 , 96 S.Ct. 3021 , 49 L.Ed.2d 1046 (1976) (“In a refund suit the taxpayer bears the burden of proving the amount he is entitled to recover.” (citing Lewis v. Reynolds, 284 U.S. 281 , 52 S.Ct. 145 , 76 L.Ed. 293 , modified, 284 U.S. 599 , 52 S.Ct. 264 , 76 L.Ed. 514 (1932)); Helvering v. Taylor, 293 U.S. at 515 , 55 S.Ct. 287 (“Unquestionably the burden of proof is on the taxpayer to show that the Commissioner’s determination is invalid.”); Welch v. Helvering, 290 U.S. Ill, 115, 54 S.Ct. 8 , 78 L.Ed. 212 (1933) (“The Commissioner of Internal Revenue[’s] ... ruling has the support of a presumption of correctness, and the petitioner has the burden of proving it to be wrong.” (citing Wickwire v. Reinecke, 275 U.S. 101 , 48 S.Ct. 43 , 72 L.Ed. 184 (1927)); Charron v. United States, 200 F.3d 785, 792 (Fed.Cir.1999) (“Since the [plaintiffs] were seeking refunds of taxes they had paid, they have the burden of proving they are entitled to the amount sought.”); Danville Plywood Corp. v. United States, 899 F.2d 3, 7-8 (Fed.Cir.1990); Barenholtz v. United States, 784 F.2d 375, 381 (Fed.Cir.1986); Young & Rubicam, Inc. v. United States, 187 Ct.Cl. 635, 654-55 , 410 F.2d 1233, 1244-45 (1969).
To rebut the presumption of the Commissioner’s correctness, “the taxpayer must come forward with enough evidence to support a finding contrary to the Commissioner’s determination.” Bubble Room, Inc. v. United States, 159 F.3d at 561 . Stated otherwise, to overcome the presumption, the taxpayer has the burden of presenting “sub *125 stantial evidence as to the wrongfulness of the Commissioner’s determination.” KFOX, Inc. v. United States, 206 Ct.Cl. 143, 151-152 , 510 F.2d 1365, 1369 (1975); Arrington v. United States, 34 Fed.Cl. 144, 147 (1995), aff'd, 108 F.3d 1393 (Fed.Cir.1997) (table). The burden imposed on a plaintiff is both the burden of going forward and the burden of persuasion. Thus, a plaintiff first must come forward with enough evidence to support a finding contrary to the Commissioner’s determination. See Transamerica Corp. v. United States, 902 F.2d at 1543 ; Danville Plywood Corp. v. United States, 899 F.2d at 7-8 ; Arrington v. United States, 34 Fed.Cl. at 147 . Even after satisfying the burden of going forward, a plaintiff must still carry the ultimate burden of proof. See Transamerica Corp. v. United States, 902 F.2d at 1543 ; Danville Plywood Corp. v. United States, 899 F.2d at 8 .
The “All Events Test”
The Tax Code at § 461(a) (2006) states: “The amount of any deduction or credit allowed by this subtitle shall be taken for the taxable year which is the proper taxable year under the method of accounting used in computing taxable income.” 26 U.S.C. § 461 (a). The parties agree that MassMutual was an accrual basis taxpayer for tax years 1995, 1996, and 1997, and that ConnMutual was an accrual basis taxpayer for the 1995 tax year. 9 Pursuant to the accrual method of accounting, the Tax Code permits the deduction of an expense in the year in which it is “incurred,” regardless of when the expense is actually paid. See 26 U.S.C. § 162 (a) (2006) (“There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business ....”); see also Avon Prods., Inc. v. United States, 97 F.3d 1435, 1438 (Fed.Cir.1996).
Treasury Regulation § 1.461-l(a)(2)(i) (2012) states under the accrual method “a liability (as defined in [Treas. Reg.] § 1.446-l(c)(l)(ii)(B)) 10 is incurred, and generally is taken into account for Federal income tax purposes, in the taxable year in which all the events have occurred that establish the fact of the liability, the amount of the liability can be determined with reasonable accuracy, and economic performance has occurred with respect to the liability.” Treas. Reg. § 1.461-1 (a)(2)©.
In United States v. General Dynamics Corp., the United States Supreme Court indicated, “[a]s we noted in United States v. Hughes Properties, Inc., 476 U.S. 593, 600 , 106 S.Ct. 2092, 2096 , 90 L.Ed.2d 569 (1986), whether a business expense has been ‘incurred’ so as to entitle an accrual-basis taxpayer to deduct it under § 162(a) of the Internal Revenue Code, 26 U.S.C. § 162 (a), is governed by the ‘all events’ test that originated in United States v. Anderson, 269 U.S. 422, 441 , 46 S.Ct. 131, 134 , 70 L.Ed. 347 (1926).” United States v. Gen. Dynamics Corp., 481 U.S. at 242 , 107 S.Ct. 1732 ; see also United States v. Hughes Props., Inc., 476 U.S. 593, 600 , 106 S.Ct. 2092 , 90 L.Ed.2d 569 (1986). In Anderson , the Supreme Court stated “a tax does not accrue until it has been assessed and becomes due; but it is also true that in advance of the assessment of a tax, all the events may occur which fix the amount of the tax and determine the liability of the taxpayer to pay it.” United States v. Anderson, 269 U.S. 422, 441 , 46 S.Ct. 131 , 70 *126 L.Ed. 347 (1926). Subsequently, the Supreme Court described the “all events test” as “a fundamental principle of tax accounting” and “the ‘touchstone’ for determining the year in which an item of deduction accrues....” United States v. Consol. Edison Co., 366 U.S. 380, 385 , 81 S.Ct. 1326 , 6 L.Ed.2d 356 (1961); see also United States v. Hughes Props., Inc., 476 U.S. at 600 , 106 S.Ct. 2092 . In United States v. General Dynamics Corp., the Supreme Court noted in a footnote,
The “all events” test has been incorporated into the Internal Revenue Code by the Deficit Reduction Act of 1984, Pub.L. 98-369, 98 Stat. 598, 607, 26 U.S.C. § 461 (h)(4) (1982 ed., Supp. III). Section 461(h) imposed limits on the application of the test, providing that ‘in determining whether an amount has been incurred with respect to any item during any taxable year, the all events test shall not be treated as met any earlier than when economic performance with respect to such item occurs.’ § 461(h)(1). The pertinent portions of the 1984 amendments were retained in the Tax Reform Act of 1986.
United States v. Gen. Dynamics Corp., 481 U.S. at 243 n. 3, 107 S.Ct. 1732 ; see also Metro Leasing and Dev. Corp. v. Comm’r, 376 F.3d 1015, 1023 (9th Cir.2004) (“In 1984 this ‘all events test’ was engrafted into the Internal Revenue Code. In general, an accrual basis taxpayer may not deduct an expense until (1) all events have occurred that determine the fact of liability; (2) the amount of the liability can be determined with reasonable accuracy; and (3) economic performance or payment has occurred.” (citing 26 U.S.C. § 461 (h) and Treas. Reg. § 1.461 -l(a)(2))).
Similarly, in Coltec Industries, Inc. v. United States, 454 F.3d 1340 (Fed.Cir.), reh’g denied (Fed.Cir.2006), ce rt. denied, 549 U.S. 1206 , 127 S.Ct. 1261 , 167 L.Ed.2d 76 (2007), the United States Court of Appeals for the Federal Circuit indicated that a liability is incurred in the taxable year in which all events have occurred to establish the fact of the liability. See id. at 1347 (citing Treas. Reg. § 1.461 — 1 (a)(2)(i)); see also Interex, Inc. v. Comm’r, 321 F.3d 55, 58 (1st Cir.2003) (“Accrual method taxpayers may deduct expenses when they are incurred even if they have not yet been paid, as long as three factors are met: 1) all of the events that establish the fact of the liability must have occurred; 2) the amount must be able to be determined “with reasonable accuracy;’ and 3) economic performance must have occurred.”); Cher nin v. United States, 149 F.3d 805, 808-09 (8th Cir.1998) (citing Treas. Reg. § 1.461 -l(a)(2)) (“In general, an accrual basis taxpayer may not deduct an expense until (1) all events have occurred that determine the fact of liability; (2) the amount thereof can be determined with reasonable accuracy; and (3) economic performance has occurred with respect to the expense.”).
The Tax Code at § 461(h)(4), defines the requirements of the “all events test” by stating, “[f]or purposes of this subsection, the all events test is met with respect to any item if all events have occurred which determine the fact of liability and the amount of such liability can be determined with reasonable accuracy.” 26 U.S.C. § 461 (h)(4). According to the United States Court of Appeals for the Federal Circuit, “[a]s that test [the “all events test”] would have it, a liability can only be included in basis ‘for the taxable year in which all the events have occurred which determine the fact of liability and the amount thereof can be determined with reasonable accuracy.’ ” Marriott Int’l Resorts, L.P. v. United States, 586 F.3d 962, 974 (Fed.Cir.2009) (quoting La Rue v. Comm’r, 90 T.C. 465, 478 (1988) (discussing the “all events test” in the context of a partnership and 26 U.S.C. § 752 (2006))). Likewise, the United States Court of Claims noted,
[i]f all events which determine liability and fix the amount of the tax occur before the end of the prior year, a deduction is available to an accrual basis taxpayer.... The “all events” test has been applied frequently and regularly in this court and other jurisdictions to determine proper timing for tax expense deductions.
Eastman Kodak Co. v. United States, 209 Ct.Cl. 365, 371 , 534 F.2d 252, 256 (1976).
Explaining the specific effect of the Deficit Reduction Act of 1984 on tax implications of policyholder dividends to insurance companies and its relation to the “all events test,” *127 the treatise Federal Taxation of Insurance Companies states:
[T]he 1984 Act [the Deficit Reduction Act of 1984] permitted the deduction for policyholder dividends to equal the policyholder dividends paid or accrued during the tax year. Thus, the concept of a reserve for policyholder dividends contained in prior law has been eliminated and replaced by a more stringent accrual standard. The intent of the provision was likely to place the liability for dividends declared on a par with other liabilities subject to the “all events” tests.
Federal Taxation of Insurance Companies ¶ 7.03, at 708 (1999) (footnote omitted).
The Fact of Liability
The Tax Code states, with respect to the first element of the “all events test,” “the all events test is met with respect to any item if all events have occurred which determine the fact of liability....” 26 U.S.C. § 461 (h)(4); see also Treas. Reg. § 1.461 -l(a)(2)(i). According to the United States Supreme Court, “[i]t is fundamental to the ‘all events’ test that, although expenses may be deductible before they have become due and payable, liability must first be firmly established.” United States v. Gen. Dynamics Corp., 481 U.S. at 243 , 107 S.Ct. 1732 . Similarly, the United States Court of Appeals for the Federal Circuit has indicated “[t]he all events test ... states that ‘an expense is deductible for the taxable year in which all the events have occurred which determine the fact of the liability-’ ” Iowa S. Utils. Co. v. United States, 841 F.2d 1108, 1114 (Fed.Cir.1988) (quoting Treas. Reg. § 1.461 -l(a)(2)) (emphasis in original). The United States Supreme Court in United States v. Hughes Properties, Inc., noted that “the Court’s cases have emphasized that ‘a liability does not accrue as long as it remains contingent.’ ” United States v. Hughes Props., Inc., 476 U.S. at 600 , 106 S.Ct. 2092 (quoting Brown v. Helvering, 291 U.S. 193, 200 , 54 S.Ct. 356 , 78 L.Ed. 725 (1934)); see also Dixie Pine Prods. Co. v. Comm’r, 320 U.S. 516 , 64 S.Ct. 364 , 88 L.Ed. 270 (1944); Lucas v. Am. Code Co., 280 U.S. 445, 452 , 50 S.Ct. 202 , 74 L.Ed. 538 (1930); Union Pac. R.R. Co. v. United States, 208 Ct.Cl. 1, 18 , 524 F.2d 1343, 1350 (1975) (“So long as a liability remains contingent or if the liability has attached but the amount cannot be reasonably estimated, a business expense deduction is not allowed.”), cert. denied, 429 U.S. 827 , 97 S.Ct. 83 , 50 L.Ed.2d 89 (1976).
The Supreme Court in Hughes Properties continued:
Thus, to satisfy the all-events test, a liability must be “final and definite in amount,” Security Flour Mills Co. v. Commissioner, 321 U.S. 281, 287 , 64 S.Ct. 596, 599 , 88 L.Ed. 725 (1944), must be “fixed and absolute,” Brown v. Helvering, 291 U.S. [193,] 201, 54 S.Ct. [356,] 360, [ 78 L.Ed. 725 (1934) ], and must be “unconditional,” Lucas v. North Texas Lumber Co., 281 U.S. 11, 13 , 50 S.Ct. 184, 185 , 74 L.Ed. 668 (1930). And one may say that “the tax law requires that a deduction be deferred until ‘all the events’ have occurred that will make it fixed and certain.” Thor Power Tool Co. v. Commissioner, 439 U.S. 522, 543 , 99 S.Ct. 773, 786 , 58 L.Ed.2d 785 (1979).
United States v. Hughes Props., Inc., 476 U.S. at 600-01 , 106 S.Ct. 2092 . The Supreme Court also has stated, “[n]or may a taxpayer deduct an estimate of an anticipated expense, no matter how statistically certain, if it is based on events that have not occurred by the close of the taxable year.” United States v. Gen. Dynamics Corp., 481 U.S. at 243-44 , 107 S.Ct. 1732 ; see also Hallmark Cards v. Comm’r, 90 T.C. 26, 34 (1988) (“The all events test is based on the existence or nonexistence of legal rights or obligations at the close of a particular accounting period, not on the probability — or even absolute certainty — that such right or obligation will arise at some point in the future.”).
Although a liability does not accrue as long as it remains contingent, uncertainties unrelated to the fixing of the amount of the liability do not prevent the taxpayers from meeting the “all events test.” See Washington Post Co. v. United States, 186 Ct.Cl. 528, 535 , 405 F.2d 1279, 1283-84 (1969) (describing a fact situation with “[n]o problem of estimating the amount of the expense is involved here, so this case certainly is not *128 comparable to the cases involving accruals to ‘contingency accounts.”). The Washington Post court further stated, “[w]e think the message is clear: the ‘all-events’ test that comes down to us from United States v. Anderson, [ 269 U.S. 422 , 46 S.Ct. 131 ] is not inflexible; when the liability itself is clearly fixed, as in this case, other uncertainties do not necessarily destroy that initial certainty.” Washington Post Co. v. United States, 186 Ct.Cl. at 636, 405 F.2d at 1284 ; see also Eastman Kodak Co. v. United States, 209 Ct.Cl. at 372 , 534 F.2d at 257 .
The Supreme Court in United States v. Hughes Properties, Inc., allowed a casino, using the accrual method, to deduct as a business expense guaranteed payouts on progressive slot machines, even though the jackpots had not yet been won. See United States v. Hughes Props., Inc., 476 U.S. at 606 , 106 S.Ct. 2092 . The Supreme Court indicated “[t]he Government misstates the need for identification of the winning player. That is, or should be, a matter of no relevance for the casino operator. The obligation is there, and whether it turns out that the winner is one patron or another makes no conceivable difference as to basic liability.” Id. at 602 , 106 S.Ct. 2092 . In Washington Post Co. v. United States, 186 Ct.Cl. 528 , 405 F.2d 1279 , the United States Court of Claims noted that “indeterminacy at the time of accrual as to the ultimate recipient’s exact share of accrued ‘bonuses,’ or indeterminacy as to the time of payout does not destroy the deductibility of an accrued item when the amount of liability is absolutely fixed.” Washington Post Co. v. United States, 186 Ct.Cl. at 535, 405 F.2d at 1283 . Therefore, the United States Court of Claims in Washington Post held that “when a ‘group liability’ is involved, it is the certainty of the liability which is of utmost importance in the ‘all events’ test, and not necessarily either the certainty of the time over which payment will be made or the identity of the payees.” Washington Post Co. v. United States, 186 Ct.Cl. at 536, 405 F.2d at 1284 ; see also Willoughby Camera Stores v. Comm’r, 125 F.2d 607, 609 (2d Cir.1942) (“The Board of Tax Appeals held that an employee of the taxpayer could not ascertain, within the taxable year, his proportionate share of the accrual. We do not regard that as relevant to the issue of deductibility.”). In Kershaw Mfg. Co. v. Comm’r, 313 F.2d 942 (5th Cir.1963), the United States Court of Appeals for the Fifth Circuit determined that bonus payments, which were not to be made until the following year could still be accrued, despite noting that, “it is plain that the amount of bonuses could not be finally ascertained until after the books were otherwise balanced and closed, and that this could not be done until after the end of the year.” Id. at 944-945 . Therefore, the court concluded that the minimum amount the taxpayer was obligated to pay, was properly accrued, even though the final amount paid could be more. See id. at 945 .
Under the accrual system, the “all events test” allows for payment to occur in the future or even accounts for the possibility that payment may not occur at all as long as the liability is fixed. The Supreme Court in United States v. Hughes Properties, Inc., stated the “potential nonpayment of an incurred liability exists for every business that uses an accrual method, and it does not prevent accrual_‘The existence of an absolute liability is necessary; absolute certainty that it will be discharged by payment is not.’ ” United States v. Hughes Props., Inc., 476 U.S. at 605-606 , 106 S.Ct. 2092 (citations omitted); see also Gold Coast Hotel & Casino v. United States, 158 F.3d 484, 489 (9th Cir.1998) (“[F]or purposes of the ‘all events’ test, what is critical is the existence of an absolute liability, not an absolute certainty the liability will be discharged by payment.”) (emphasis in original). As previously noted by the Court of Claims, “[t]he ‘all events’ test thus allows deductions when the taxpayer has a special kind of knowledge which gives him enough facts to demonstrate the absolute necessity of paying an expense at some future date without regard to such matters as actual payment taking place, existence of legal liability, or accrual.” Eastman Kodak Co. v. United States, 209 Ct.Cl. at 373 , 534 F.2d at 257 .
Moreover, a liability need not be legally enforceable to be fixed under the “all events test.” See Eastman Kodak Co. v. United States, 209 Ct.Cl. at 373 , 534 F.2d at *129 257 (“The ‘all events’ test on the other hand looks to a liability that is so fixed that the fact of liability is certain and the amount thereof reasonably ascertainable, although not necessarily legally enforceable.”); see also Flamingo Resort, Inc. v. United States, 664 F.2d 1387, 1390 (9th Cir.) (indicating a casino’s inability to legally enforce its debts was not a sufficient reason to preclude application of “all events test,” and stating “[t]he debts which the ‘markers’ represent are, therefore, fixed; there is a reasonable expectancy of collection; and no contention has been made that the amounts cannot be determined with reasonable accuracy.”), cert, denied sub worn. Hilton Hotels Corp. v. United States, 459 U.S. 1036 , 103 S.Ct. 446 , 74 L.Ed.2d 602 (1982); Burlington N. R.R. Co. v. Comm’r, 82 T.C. 143, 151 (1984) (“[T]he amount of the liability may be determined with reasonable accuracy and all events determining the fact of the liability occur prior to year-end. Thus the purposes of the all events test are satisfied, and the taxpayer may properly accrue and deduct the expense even though legal liability may not exist until the subsequent year.”); Champion Spark Plug Co. v. Comm’r, 30 T.C. 295, 298 (1958) (“[I]t may be true that here there was no underlying legal liability compelling the petitioner to make the fixed and definite obligation. But this lack of an underlying legal liability is not fatal to petitioner’s argument.”), aff 'd, 266 F.2d 347 (6th Cir.1959).
The cases cited regarding establishing the fact of the liability mostly precede the addition of the economic performance element of the “all events test” by the Deficit Reduction Act of 1984 and codification of the “all events test” at 26 U.S.C. § 461 (h). Cases such as Gold Coast Hotel & Casino v. United States, 158 F.3d 484 , decided after the codification of the “all events test” at 26 U.S.C. § 461 (h), do not question the use of cases decided before the Deficit Reduction Act of 1984 and rely on them as precedent. The parties have not been able to identify, nor has the court located a case or regulation which calls into question the precedential value of those cases which address the measure of determining the fact of the liability, which precede the addition of the economic performance element of the now applicable “all events test.” The United States Supreme Court, in United States v. General Dynamics Corp., when analyzing the “all events test,” albeit for tax years prior to the codification of 26 U.S.C. § 461 (h), noted the addition of the economic performance element in 26 U.S.C. § 461 (h), without questioning the Court’s prior analysis of the “all events test” or indicating how it might be applied in the future. See United States v. General Dynamics Corp., 481 U.S. at 243 n. 3, 107 S.Ct. 1732 . Similarly, in Maxus Energy Corporation v. United States, 31 F.3d 1135 (Fed.Cir.1994), the United States Court of Appeals for the Federal Circuit considered the plaintiffs deductions in tax years 1984 and 1985. Prior to considering the economic performance element of 26 U.S.C. § 461 (h), the court noted “[u]nder the ‘all events’ test, the taxpayer cannot deduct an expense until all the events have occurred that fix the amount and fact of the underlying liability,” and cited the earlier United States Supreme Court cases of United States v. Consolidated Edison Company, 366 U.S. 380, 385 , 81 S.Ct. 1326 , 6 L.Ed.2d 356 (1961) and United States v. Anderson, 269 U.S. at 441 , 46 S.Ct. 131 , both decided prior to the codification of the “all events test” and the addition of the economic performance element. See Maxus Energy Corp. v. United States, 31 F.3d at 1142 .
Likewise, in 2006, the United States Court of Appeals for the Sixth Circuit examined whether the taxpayer had established liability with sufficient certainty to satisfy the first element of the “all events test,” and considered the Supreme Court precedent of United States v. Hughes Properties, Inc. and United States v. General Dynamics Corp. without questioning the precedential value of either ease, even though the economic performance was not yet a part of the “all events test.” See Chrysler Corp. v. Comm’r, 436 F.3d 644 , 650-51 (6th Cir.2006); see also Gold Coast Hotel & Casino v. United States, 158 F.3d at 488 (same); Metro Leasing and Dev. Corp. v. Comm’r, 376 F.3d at 1022 -23 (citing United States v. Hughes Properties, Inc. and United States v. Anderson) (same); Valero Energy Corp. v. Comm’r, 78 F.3d 909, 915 (5th Cir.1996) (same).
*130 Finally, the legislative history to the Deficit Reduction Act of 1984 indicates that the addition of the economic performance to the “all events test” was to complement the existing two prongs of the “all events test,” and did not call into question the precedential value of eases determining either the fact of liability or if the liability could be determined with reasonable accuracy. See H.R. Rep. 98-432, pt. 2, at 1252-56 (1984), 1984 U.S.C.C.A.N. 697, 915-19; Staff of the Joint Comm, on Taxation, 98th Cong., General Explanation of the Revenue Provisions of the Deficit Reduction Act of 1984 258-62 (Comm. Print 1984). As the House Report No. 98-432(11) indicated, “[t]he Committee believes that the rules relating to the time for accrual of a deduction by a taxpayer using the accrual method of accounting should be changed to take into account the time value of money.” H.R. Rep. 98-432, pt. 2, at 1254, 1984 U.S.C.C.A.N. 697 at 917.
There are cases which have held that Board resolutions can fix liability for the purposes of the “all events test.” See Champion Spark Plug Co. v. Comm’r, 30 T.C. 295 ; see also Willoughby Camera Stores, Inc. v. Comm’r, 125 F.2d 607 ; Produce Reporter Co. v. Comm’r, 18 T.C. 69 (1952), aff'd, 207 F.2d 586 (7th Cir.1953). In Champion Spark Plug, a company’s Board resolutions were found to create a fixed and definite obligation and fixed the Champion’s liability for the “all events test.” See Champion Spark Plug Co. v. Comm’r, 30 T.C. at 300 . A Board of Directors’ resolution in Champion Spark Plug resolved to make sixty semi-monthly payments to a disabled employee. Id. at 297 . Although the payments would not begin until the year following the Board resolution, the payments would not be fully paid for a number of years, and the company was further under no underlying legal obligation to make the payments, the court determined the expenditure was a fixed and definite obligation that could be deducted as a liability in the year of the Board’s resolution. Id. at 298 . The court indicated “[i]t is sufficient here that the petitioner desired to obligate itself to make the payments that have a connection with its employer-employee relationship. It translated its desire into an unconditional obligation to make the payments. The expenditure, which we feel was ordinary and necessary in the conduct of its business, was properly accruable in the year 1953 when the obligation to pay was made fixed and definite by the resolution.” Id.
In Willoughby Camera Stores, Inc. v. Commissioner, the plaintiff, an accrual basis taxpayer, sought to deduct employee bonuses that had been declared in a Board of Directors’ resolution and were to be paid the following year. See Willoughby Camera Stores, Inc. v. Comm’r, 125 F.2d at 608 . The United States Court of Appeals for the Second Circuit determined that the Board of Directors, in passing a Board resolution, “definitely fix[ed] a minimum for the amount to be paid” the following year to the employees and fixed the liability to comply with the “all events test.” See id. at 609 . The court noted that the amount to be paid was known to the employees, and, therefore, the action on the part of the Board of Directors was viewed by the company and the employees as more than “a statement that so much would be paid if the company did not change its mind.” Id. (footnote omitted). The court also indicated that the promise to pay at least the amount set up in the reserve to the aggregate group could have been enforced by the employees as a class. Id. Therefore, the Second Circuit concluded: “all the events necessary to a determination of the amount to become due were present in the taxable years.” Id. Notably, the Second Circuit stated “[t]he fact that before the amounts were paid in the succeeding years, new resolutions were passed by the board of directors is irrelevant; later resolutions were necessary to set the date of distribution, and those passed here, though somewhat repetitive, do not militate against the conclusion that the amounts set up by the earlier resolutions were regarded as final.” Id.
Similarly, in Produce Reporter Co. v. Commissioner, 18 T.C. 69 , the Tax Court permitted amounts authorized as employee bonuses, pursuant to Board resolutions, to be deducted in the year of the resolution, although the payments were not made until the following year. Id. at 76-77 . The Tax Court noted the company had a custom of announcing end of the year bonuses, authorized by the com- *131 pan/s Board of Directors. The company would advise the employee of the exact amount the employee would receive the following year. Id. at 77 . The company accrued the liability in the year the Board authorized the bonuses, and not the year the payments were made. Id. The Tax Court stated, “[petitioner contends that a fixed, definite obligation to pay the bonuses was incurred in the respective years of accrual. We agree.” Id.
The United States Court of Claims in Clevite Corp. v. United States, 181 Ct.Cl. 652 , 386 F.2d 841 (1967), distinguished the case before it from Champion Spark Plug Co. v. Commissioner, 30 T.C. 295 , and found that liability was not fixed for the “all events test” when a taxpayer deducted payment of vacation pay to its employees prior to when the vacation period begin. See Clevite Corp. v. United States, 181 Ct.Cl. at 657 , 386 F.2d at 843 . The Court of Claims indicated, “the Board of Directors passed no resolution, and the shareholders expressed no opinion on the subject, so that this ease is demonstrably distinguishable from Champion Spark Plug Co.” Clevite Corp. v. United States, 181 Ct.Cl. at 660 , 386 F.2d at 844 (citation omitted). The United States Court of Appeals for the Federal Circuit in Avon Products, Inc. v. United States, 97 F.3d 1435 also distinguished a number of eases cited above which stated that taxpayers could “deduct in the year of accrual forms of employee compensation that were not paid until late in the following year.” Id. at 1441 . The Federal Circuit, however, was interpreting 26 U.S.C. § 404 , which applies to “[d] eductions for contributions of an employer to an employees’ trust or annuity plan and compensation under a deferred-payment plan.” Regarding Willoughby Camera Stores, Inc. v. Commissioner, 125 F.2d 607 , the Federal Circuit stated that the Willoughby case “predate[d] section 404 and its predecessor.” Regarding Produce Reporter Co. v. Commissioner, 18 T.C. 69 , the Federal Circuit indicated, “the question of the timing of the payments does not appear to have been raised as an issue.” Avon Prods., Inc. v. United States, 97 F.3d at 1441 . Notably, the Avon Products court did not question if Board resolutions could fix an accrual basis taxpayer’s liability because the accrual of the company’s employee profit-sharing payments were not based on the company’s Board resolutions fixing the company’s liability, but instead involved a foreign tax credit issue for a foreign subsidiary which was “required by Mexican law to pay its employees a percentage of its profits each year within five months of the close of its taxable year.” See id. at 1437 .
For the accrual method of accounting, and pursuant to Treasury Regulation § 1.446-1, “[t]he term ‘liability includes any item allowable as a deduction, cost, or expense for Federal income tax purposes,” Treas. Reg. § 1.446 — 1(c)(ii)(B), and under the Tax Code, policyholder dividends are liabilities which are properly deductible by life insurance companies. See 26 U.S.C. § 805 (a)(3); UNUM Corp. v. United States, 130 F.3d 501, 509 (1st Cir.1997) (“There is no dispute that § 805(a)(3) allows life insurance companies to deduct ‘policyholder dividends’ from income.”), cer t. denied, 525 U.S. 810 , 119 S.Ct. 42 , 142 L.Ed.2d 32 (1998); see also 26 U.S.C. § 808 (c) (“The deduction for policyholder dividends for any taxable year shall be an amount equal to the policyholder dividends paid or accrued during the taxable year.”); CUNA Mut. Life Ins. Co. v. United States, 39 Fed.Cl. 660, 661 (1997), aff'd, 169 F.3d 737 (Fed.Cir.1999).
The plaintiff argued that when the Board passed its Dividend Guarantee Resolutions, it fixed plaintiffs liability for the purposes of the “all events test,” in that year “to pay the guaranteed minimum amounts of policyholder dividends in each of the years at issue,” 11 even though plaintiffs custom was *132 to pay out policyholder dividends to its policyholders the following year. Plaintiff also argued that the Dividend Guarantee Resolutions identified a “defined a group of policyholders that, in the aggregate, were entitled to receive the specified minimum in the following year regardless of which individuals composed the group,” and that “[s]uch an identifiable group existed at the end of each of the tax years at issue, as more than 100,-000 policyholders had already paid their premiums through their next anniversary date in the following year.”
By contrast, the defendant argued “[i]n they [sic] year they were adopted, the dividend-guarantee resolutions did not fix Conn-Mutual’s and MassMutual’s liability to pay the declared guaranteed minimum amounts in the following year.” Defendant argued that plaintiff cannot demonstrate that at the end of each tax year, plaintiff was obligated to pay the entire guaranteed amount “under the facts as they stood at the end of that year.” According to defendant, despite plaintiffs assumption that it was already obligated to pay the guaranteed amount of dividends, conditions existed which demonstrate that “the companies [MassMutual and ConnMutual] had no liability to pay the entire guaranteed amount until a later event occurred — and that event was not simply the passage of time and the preservation of the status quo at year-end.” Therefore, defendant argued, there was not an identifiable group of policyholders eligible to receive the Dividend Guarantee in the year the Dividend Guarantee Resolutions were adopted.
Although Board resolutions can establish the fact of liability, the court must determine if the Dividend Guarantee Resolutions, established the fact of liability. As discussed above, “ ‘a liability does not accrue as long as it remains contingent.’” United States v. Hughes Props., Inc., 476 U.S. at 600 , 106 S.Ct. 2092 (quoting Brown v. Helvering, 291 U.S. at 200 , 54 S.Ct. 356 ). The plaintiffs Dividend Guarantees 12 stated in relevant part:
4.1. During each year for which the Company has adopted an Annual Dividend Guarantee, the Company shall pay or apply annual policyholder dividends to its policyholders in accordance with its usual practices and procedures. The Company’s adoption of an Annual Dividend Guarantee for any year shall not affect any individual policyholder’s right to receive, or the Company’s obligation to pay or apply, the annual policyholder dividend otherwise due to *133 that individual policyholder on the applicable anniversary date.
4.2. Prior to December 31st of each year for which the Company has adopted an Annual Dividend Guarantee, the Company shall determine whether it actually has paid or applied annual policyholder dividends with respect to post-1983 policies in an amount at least equal to the specified amount of Guaranteed Dividends.
4.3. If the Company determines that it actually has paid or applied annual policyholder dividends with respect to post-1983 policies in an amount at least equal to the amount of Guaranteed Dividends specified, then the Company’s Executive Vice President-Corporate Financial Operations shall certify that the Company has satisfied its obligations imposed under the Annual Dividend Guarantee.
4.4. If the amount of Guaranteed Dividends specified exceeds the amount of annual policyholder dividends that the Company actually has paid or applied during the year (plus the amount that the Company determines will be paid or applied through December 31st of the year) with respect to post^l983 policies, then the Company shall be obligated to pay or apply an additional amount of policyholder dividends, equal to such excess, with respect to post-1983 policies.
4.5. Such excess shall be apportioned among the post-1983 policies still in force in proportion to the annual policyholder dividends otherwise paid or applied with respect to such policies during the year.
4.6. Such excess shall be paid or applied with respect to post-1983 policies during the year in accordance with the apportionment made pursuant to the preceding paragraph.
4.7. The Company’s Executive Vice President-Corporate Financial Operations shall certify that such payments or applications have been made and that the Annual Dividend Guarantee has been properly implemented.
The terms Annual Dividend Guarantee and Guaranteed Dividends were defined in the Dividend Guarantees. The definition of the Annual Dividend Guarantee was, “the Company’s irrevocable guarantee that it will pay or apply an amount not less than a specified amount of annual policyholder dividends with respect to post-1983 policies in the following year.” The definition of Guaranteed Dividends was, “annual policyholder dividends with respect to post-1983 policies in an amount that, pursuant to its Annual Dividend Guarantee, the Company has irrevocably committed itself to pay or apply in the following year.” The Dividend Guarantees guaranteed a minimum amount of policyholder dividends to be paid the following year to post-1983 policyholders whose policies were still in effect after the annual policyholder dividends were paid, if the annual policyholder dividend was not equal or greater to the guaranteed minimum amount.
Although the Dividend Guarantees did not identify the amount each individual policyholder would receive under the Dividend Guarantees, or even which specific policyholders would receive the minimum amount of guaranteed dividends, neither is fatal to the fixing of liability. See Washington Post Co. v. United States, 186 Ct.Cl. at 536, 405 F.2d at 1284 (“[W]hen a ‘group liability’ is involved, it is the certainty of the liability which is of utmost importance in the ‘all events’ test, and not necessarily either the certainty of the time over which payment will be made or the identity of the payees.”); see also Willoughby Camera Stores v. Comm’r, 125 F.2d at 609 .
The parties disagree about two aspects of the plaintiffs Dividend Guarantee Resolutions regarding determining if liability was fixed: (1) whether the Dividend Guarantee Resolutions created a condition precedent, and (2) whether the Dividend Guarantee Resolutions were revocable or likely to be enforced by plaintiffs regulators. 13 First ad *134 dressing whether the Dividend Guarantee Resolutions created a condition precedent, which would prevent plaintiffs liability from accruing, Black’s Law Dictionary defines a condition precedent as “[a]n act or event, other than a lapse of time, that must exist or occur before a duty to perform something promised arises. If the condition does not occur and is not excused, the promised performance need not be rendered,” and defines a condition subsequent as “[a] condition that, if it occurs, will bring something else to an end; an event the existence of which, by agreement of the parties, discharges a duty of performance that has arisen.” Black’s Law Dictionary 334 (9th ed. 2009). In the context of a copyright infringement suit, the United States Supreme Court, quoting an earlier version of Black’s Law Dictionary stated, “ '[a] condition precedent is one which must happen or be performed before the estate to which it is annexed can vest’ or which must be performed ‘before some right dependent thereon accrues.’ A ‘condition subsequent is one annexed to an estate already vested, ... and by the failure or nonperformance of which it is defeated.’ ” Washingtonian Pub. Co. v. Pearson, 306 U.S. 30, 47 , 59 S.Ct. 397 , 83 L.Ed. 470 (quoting Black’s Law Dictionary (3d ed. 1933)), reh’g denied (1939) (omissions in original, footnotes omitted).
The court in Burnham, Corp. v. Commissioner, 90 T.C. 953 (1988), aff'd, 878 F.2d 86 (2d Cir.1989), explained the relationship of a condition precedent and a condition subsequent for the accrual of a liability for the “all events test:”
If existence of a liability depends on satisfaction of a condition precedent, the liability is not unconditionally fixed as required by the first requirement of the all events test. Liability does not in fact arise until the condition is satisfied. A taxpayer is, therefore, prevented from obtaining the benefit of a deduction for an expense that he has NO liability to pay until some event, other than the passage of time, occurs. A liability subject to a condition subsequent, however, is definitely fixed, subject only to a condition which may cut off liability in the future. An accrual basis taxpayer having such a liability may deduct an expense for which it is presently liable.
Id. at 956 (emphasis in original); see also Charles Schwab Corp. v. Comm’r, 107 T.C. 282, 293 (1996), aff'd, 161 F.3d 1231 (9th Cir.1998), cert. denied, 528 U.S. 822 [ 120 S.Ct. 67 , 145 L.Ed.2d 58 ] (1999) (distinguishing between conditions precedent and conditions subsequent for the “all events test” in the context of income).
As it applies to plaintiffs case, if the Dividend Guarantees imposed a condition precedent on the payment of the guaranteed amount of minimum dividends, then the plaintiffs liability cannot be considered fixed and the requirements of the “all events test” are not met. Noting that the plaintiffs Dividend Guarantee Resolutions stated that the policyholders were not eligible to receive the minimum amount of guaranteed dividends until after the annual policyholder were paid, the defendant argued that the Dividend Guarantee Resolutions “demonstrate the that companies [MassMutual and ConnMutual] may not accrue a liability to pay the guaranteed amounts in the years they adopted the dividend guarantees because the liability was contingent on an event that could not happen until the next year.” The defendant asserted that the payment of the annual policyholder dividends was the contingent event which prevents the liability from being fixed in the year the Dividend Guarantee Resolutions were adopted. The defendant further argued that “the present case is not one in which identifiable persons had fulfilled a ‘condition precedent’ during the first year and were already eligible by the end of that year to receive a distribution during the next year.” The defendant also maintained that the post>1983 policyholders were eligible only for the guaranteed amount after they received their regular dividend, which they could only receive the following year, and *135 because the policyholders could have lost their eligibility if their policies were still not in force, a condition precedent persisted.
By contrast, plaintiff argued that a defined group of pos1>1983 policyholders existed who had already paid their policies through their next anniversary and were already entitled to receive the annual dividend. The plaintiff contended there were no conditions precedent to these policyholders receiving their annual dividend, only the passage of time and the status quo. Therefore, the plaintiff argued, the fact of liability can be established for the Dividend Guarantees for all the tax years at issue. Plaintiff further argued that “[plaintiff’s liability to pay the guaranteed minimum amount of policyholder dividends became fixed and, therefore, aecruable in the year the Dividend Guarantee Resolutions were adopted.... Plaintiff had at year end a single dividend liability with a guaranteed minimum and a reasonably estimated maximum.” Moreover, plaintiff stated it “purposely chose to set the dividend guarantees at a level that was virtually certain to be paid in the ordinary course under Plaintiffs dividend scale.”
At trial, Susan Marchacos, the “reporting and strategy manager” for MassMutual’s United States Insurance Group, presented evidence of MassMutual’s and ConnMutual’s posH983 policies as paid through their following anniversary, with anniversary dates of January, February and March for each of the tax years at issue. For example, as of December 31,1995, there were 78,569 post-1983 MassMutual policies with anniversary dates of January, February, or March, with the premiums paid through the next anniversary and 22,595 similar post-1983 ConnMutual policies as of December 31, 1995. 14 This testimony, seemingly, refutes the defendant’s argument that there were not a group of identifiable policyholders already eligible for the guarantee minimum amount of dividends in the year the Dividend Guarantee Resolutions were adopted.
The defendant, however, argued that the typical MassMutual policy was entitled to a dividend only if the policyholders had paid premiums for the two previous policy years, and asserted that the summaries of the policies identified by Ms. Marchacos only showed premiums paid for one year. In response the plaintiff argued that defendant’s argument is inconsistent with the defendant’s own statement in its post-trial brief that the plaintiffs lapse rate is typically between five and six percent. For all the policies identified by Ms. Marchacos, and included in the Joint Exhibits, as policies for which only one year of premiums had been paid, the plaintiff stated that “every single post-1983 policyholder with policies commencing during the first quarter of each year from 1984 to 1993 would have had to lapse or die prior to December 31, 1995. Such an assumption is completely unrealistic and unwarranted given the facts on the record.” Indeed, as Mr. Jermyn testified, MassMutual’s lapse rate was in the 5 to 6 percent range during the mid to late 1990s and the lapse rate was relatively stable. It would be highly unusually for the lapse rate to increase to one hundred percent for .the post-1983 policies with January, February, or March anniversary dates. This is further supported by the number of MassMutual and ConnMutual post-1983 policies paid through their following anniversary, with anniversary dates of January, February and March as of December 31, 1996 and 1997. As of December 31, 1996, there were 79,269 MassMutual post-1983 policies paid through their following anniversary, with anniversary dates of January, February and March, an increase from the 78,569 such policies as of December 31,1995. Similarly, as of December 31,1997, there were 79,628 MassMutual posW983 policies paid through their following anniversary. Likewise, for ConnMutual, as of December 31, 1996, there were 22,758 MassMutual post-1983 policies paid through their following anniversary, with anniversary dates of January, February and March and 23,111 similar policies as of December 31, 1997 — for both companies an increase from the 22,595 *136 policies as of December 31, 1995. Defendant’s position regarding the MassMutual and ConnMutual posb-1983 policies paid through their following anniversary appears to be unfounded in the record.
There also is a distinct group of MassMu-tual and ConnMutual post-1983 policies which were no longer required to pay any further premiums on their policies. Ms. Marchacos presented evidence at trial of MassMutual and ConnMutual pos1>-1983 policies which were paid-up policies for each of the tax years at issue. Ms. Marchacos explained that paid-up policies were “policies where premiums were no longer due” and policies which have paid all the premiums they were ever going to have to pay. Although a smaller group of policies, the plaintiff demonstrated there was an identifiable group of policyholders with paid-up policies. For example, as of December 31, 1995, there were 1,848 post-1983 MassMutual policies with anniversary dates of January, February or March, which were paid-up policies, and 287 similar post-1983 ConnMutual paid-up policies as of December 31, 1995. For the group of policyholders with paid-up policies, no event but the passage of time would occur before those policyholders would receive their annual dividend and, thus, be eligible for the minimum guaranteed dividends. Indeed, if any event prevented the paid-up policyholders from receiving their policyholder dividends or rendered the paid-up policyholders ineligible for receiving the minimum guaranteed dividends, it would not be a condition precedent, rather a condition subsequent, which would not prevent liability for being fixed. See Burnham Corp. v. Comm’r, 90 T.C. at 956. Notably, in all of the years at issue plaintiffs payment of annual policyholder dividends exceeded the guaranteed minimum of dividends and an additional round of payments to the post-1983 policyholders with policies still in force was not required.
In addition to arguing that there was not an identifiable group of policyholders eligible to receive the Dividend Guarantee in the year the Dividend Guarantee Resolutions were adopted, the defendant devoted substantial effort to the words of the Dividend Guarantee. The defendant emphasized that “[n]o policyholder is entitled to share in the entire guaranteed amount before receiving the regular annual policyholder dividend ‘during the year,’ and the dividend guarantees and enacting resolutions, read as a whole, demonstrate that the phrase ‘during the year’ can refer only to the year after the year in which the guarantees were adopted.” The defendant argued that “[i]n each of the years before the Court, the Board instructed the company to assure that the guaranteed amount was properly paid or applied by monitoring payment of the annual dividends during the following year. Thus, according to the defendant, the documents themselves demonstrate that the guaranteed amounts can comprise only dividends paid in the year after the guarantees were adopted.” (internal citations omitted; emphasis in original).
As discussed above, however, simply because the plaintiff will not pay out the liability until the following year does not prevent the liability from accruing under the “all events test.” See United States v. Hughes Props., Inc., 476 U.S. at 605-606 , 106 S.Ct. 2092 ; see also Eastman Kodak Co. v. United States, 209 Ct.Cl. at 373 , 534 F.2d at 257 (“The ‘all events’ test thus allows deductions when the taxpayer has a special kind of knowledge which gives him enough facts to demonstrate the absolute necessity of paying an expense at some future date without regard to such matters as actual payment taking place, existence of legal liability, or accrual.”). Although a condition precedent can prevent a liability from being fixed, if the only event(s) still to occur are the passage of time and/or the payment, the liability is considered fixed. See generally Burnham Corp. v. Comm’r, 90 T.C. 953 . For the identifiable group of post-1983 policyholders with paid-up policies, no events other than the passage of time and payment of the policyholder dividend were required.
The defendant also argued that simply because the plaintiff was certain to be obligated to pay the guaranteed amount the following year, does not mean the liability was fixed in the year before the Dividend Guarantee Resolutions were passed, citing to Hallmark Cards, Inc. v. Commissioner, 90 T.C. 26 . In Hallmark Cards, the taxpayer did not accrue *137 income in one year for merchandise because title and risk of loss did not pass to the purchaser until the following year, even though the merchandise had shipped in the first year. See id. at 30 . It was the taxpayer’s practice to ship Valentine’s Day merchandise the year before Valentine’s Day, but not to pass the risk of loss and title to the purchaser until the following year. See id. at 29 . The taxpayer had this arrangement for Valentine’s Day merchandise to address customer concerns about receiving Valentine’s Day merchandise while they still had Christmas merchandise and the financial impact of inclusion of the Valentine’s Day merchandise in them year-end inventories. See id. at 28 . Although title was certain to pass to the purchaser the following year, the Tax Court concluded that the income could be not be accrued in the first year by the taxpayer, because the fact of liability under the “all events test” was not met. Id. at 32 . The Tax Court determined “petitioner does not possess any fixed and definite rights to payment at year end. The fact that at the stroke of midnight petitioner knows with absolute certainty that in the next instant these rights will arise cannot compensate for the fact that as of the close of the old year they do not exist. The all events test is based on the existence or nonexistence of legal rights or obligations at the close of a particular accounting period, not on the probability — or even absolute certainty — that such right or obligation will arise at some point in the future.” Id. at 34 .
The defendant tried to analogize the Hallmark Cards case as applicable to the plaintiffs Dividend Guarantees. The Hallmark Cards ease, however, is factually distinct, as the Hallmark Cards case addressed the ac-erual of income to the taxpayer, whereas the instant case relates to the accrual of a liability to the plaintiff. Although the analysis is similar for fixing liability under the “all events test,” see Rev. Rul. 98-39,1998- 2 C.B. 198 , the accrual of income is distinct from the accrual of a liability. 15
Unlike the plaintiff, the taxpayer in Hallmark Cards adopted the practice of shipping the merchandise without passing the risk of loss and title in response to concerns from its purchasers so that Hallmark did “not possess any fixed and definite rights to payment at year end,” Hallmark Cards, Inc. v. Comm’r, 90 T.C. at 34. MassMutual adopted the Dividend Guarantees, not due to policyholder concerns about guaranteeing payment of dividends, but to align their tax accounting with their financial reporting for the post-1983 policies. Moreover, MassMutual established a binding commitment before year’s end to pay out a guaranteed minimum of dividends to policyholders, albeit with payment to occur in the following year. Moreover, in the case of Hallmark Cards, it was the IRS which was trying to demonstrate that the “all events test” was met, and the taxpayer was resisting the application of the test, the inverse of the positions of the parties in this case. The Hallmark Cards case also is not binding precedent on this court. See Amergen Energy Co., LLC ex rel. Exelon Generation Co., LLC v. United States, 94 Fed.Cl. 413, 422 (2010); see also Alpha I, L.P. v. United States, 93 Fed.Cl. 280 , 309 n. 15 (2010) (“Although decisions of the Tax Court are not precedential for and are not binding upon the Court of Federal Claims, decisions of the Tax Court are substantial authority under Treasury Regulation § 1.6662-4(d) (3) (iii). ”). 16
*138 An identified group of plaintiffs policyholders were certain to receive the regular dividend and, therefore, qualify for the guaranteed dividend, subject only to the passage of time even though plaintiff might not be liable to a segment of post-1983 policyholders since some post-1983 policyholders might not receive the regular dividends if their policies lapsed. Furthermore, the group of policyholders with paid-up policies were not at risk for their policies lapsing as they never had to pay another premium on their policies. Therefore, unlike the taxpayer in Hallmark Cards, plaintiffs Dividend Guarantees did not impose conditions precedent on the payment of the guaranteed amount of policyholder dividends. Plaintiff had an unconditional obligation to post-1983 policyholders with paid-up policies to pay the guaranteed amounts of policyholder dividends in the year the Dividend Guarantee Resolutions were adopted.
In addition to arguing that the Dividend Guarantee Resolutions created a condition precedent, the defendant also argued that the resolutions did not impose any obligation on the plaintiff because the Dividend Guarantee Resolutions were both revocable and unlikely to be enforced by a regulator. Counsel for the defendant framed the argument as “[t]his issue comes down to the question of this: Would anyone or anything have forbidden MassMutual to withdraw the dividend resolution if it wanted to?” The defendant contends “a board of directors can always rescind or ignore its own resolutions; and a board with the power to add the word ‘irrevocable’ to a resolution also has the power to remove or ignore the word ‘irrevocable.’ ” Defendant’s counsel quoted from an unpublished opinion from the Court of Chancery of Delaware for the proposition “ ‘[i]f the board has the power to adopt resolutions (or policies), then the power to rescind resolutions (policies) must reside with the board as well.’ ” Unisuper, Ltd. v. News Corp., No. 1699-N, 2005 WL 3529317 , *5 (Del.Ch. Dec. 20, 2005).
Defendant argued that had the beneficiaries been aware of the resolutions, the resolutions might not have been revocable, because the beneficiaries could have relied upon the resolutions and kept their policies in force because of the guaranteed dividend. Defendant also intimated that cases which permitted accrual of expenses by Board resolution uniformly informed the beneficiaries. In the case of Willoughby Camera Stores, Inc. v. Commissioner, discussed above, however, in which accrual was permitted, it is not apparent that the beneficiary was aware of the Board resolution or that such knowledge was required for the liability to be fixed. See Willoughby Camera Stores, Inc. v. Comm’r, 125 F.2d 607 . Similarly, in Champion Spark Plug Co. v. Commissioner, 30 T.C. 295 , the Tax Court did not mention if the disabled employee or his widow were provided notice of the Board’s resolution prior to payment of the benefits.
Even if notice of a Board’s resolutions might be an important element for consideration, which does not appear so from the case law, defendant acknowledged that ConnMu-tual included a footnote disclosing the dividend guarantee of payment of policyholder dividends in its 1995 Annual Statement. Defendant argued, however, that ConnMutual did not disclose the terms or that the guarantee applied only to post-1983 policyholders. *139 Defendant stated “[e]xcept for this meager information in a footnote of a financial statement, ConnMutual did not disclose the dividend guarantee to its policyholders or its field force; and according to a former Connecticut insurance commissioner, even a teamed insurance investigator could easily overlook footnotes in a financial statement,” and MassMutual did not make any such disclosure.
Moreover, in response to the defendant’s argument that the Board Resolutions could be revoked, the plaintiff argued that “the government does not (and cannot) point to a single tax accounting case, statute or regulation requiring ‘irrevocability’ as an element necessary to accrue a liability. No such requirement exists under the federal tax law.” Counsel for the defendant admitted at closing argument “that of all my arguments this is the weakest. The impression I’m left with, perhaps no good, is that a revocable board resolution that is respected is respected voluntarily pretty much because they’re voluntarily not revoking it. That may be a weak argument.” The court agrees.
In addition, the defendant also argued that the plaintiffs regulators never approved the Dividend Guarantees and would not have monitored MassMutual’s compliance with them. Defendant conceded, however, that Mi*. McAdoo, Assistant Commissioner of the Massachusetts Division of Insurance, stamped “approved” on the letter sent to him by MassMutual regarding the Dividend Guarantee in 1996 and returned the stamped letter to MassMutual. The defendant argued this was an error because the Massachusetts Division of Insurance did not have the authority to approve policies such as the Dividend Guarantees. Noting, given that the Dividend Guarantees were set in an amount virtually certain to be paid, plaintiff argued that it is not surprising the Massachusetts Division of Insurance “did not devote regulatory resources to something that was virtually self-enforcing.” Moreover, as stipulated by the parties, no state insurance regulator objected to the legality of the guarantees. In fact, both ConnMutual and MassMutual corresponded with their respective regulators for each year the companies adopted a Dividend Guarantee, to inform the regulators in advance of the Dividend Guarantee and none of the regulators questioned their ability to monitor the Dividend Guarantees and payment of the policyholder dividends. Notably, Massachusetts Division of Insurance Assistant Commissioner McAdoo, in response to MassMutual’s letter informing the Division of Insurance of its intention to adopt a Dividend Guarantee, stated “[w]e intend to instruct the examiners who perform Mass-Mutual’s Examination to verify that the guaranteed aggregate amount is paid in accordance with the ‘Terms of the Annual Dividend Guarantee.’ ”
Furthermore, the defendant alleged that an “insurance commissioner would have been unlikely to enforce the dividend guarantees,” however, defendant’s sole witness for this assertion was Robert Wilcox, a former Utah insurance commissioner, who was qualified as an expert generally on insurance regulation and insurance industry practice, with no particular Massachusetts or Connecticut expertise. By contrast, one of plaintiffs expert witness was a former Connecticut Insurance Commissioner, Robert Googins. Mr. Wilcox himself noted that Mr. Googins was more knowledgeable than he was about Connecticut insurance regulation, 17 and acknowledged that Mr. Googins was “right that the Connecticut commissioner has ample authority over dividends.” Moreover, as plaintiff noted, “not a single deponent testified that the DOI [Massachusetts Division of Insurance] or [Connecticut] Insurance Department lacked the authority to enforce the dividend guarantees in the unlikely event enforcement should ever become necessary,” nor was other evidence to that effect introduced into the record.
Defendant also raised the possibility that if a second round of payments was required under the Dividend Guarantees, then post-1983 policyholders would receive an extra amount of dividends, greater than received by the pre-1984 policyholders in the same dividend class. This, defendant argued, *140 would result in the post-1983 policyholders receiving a disproportionate share of the divisible surplus in relation to their contributions and would violate the contribution principle, which “addresses the fair equitable ... payment of dividends to policyholders.” Defendant also cited to Massachusetts and Connecticut statutes, Mass. Ann. Laws ch. 175 § 120 (1995) and Conn. Gen.Stat. § 38a-446 (1994), prohibiting discrimination in the amount of dividends paid to insurants in the same class, i.e., a violating the contribution principle. Addressing this concern, Mr. Jer-myn testified that as MassMutual’s Senior Vice President and Chief Actuary, he “would have expected that we most certainly would have made any second round of payments had they been necessary,” explaining that “every decision that has ever been made relative to the payment of dividends of Mass-Mutual have [sic] been to ensure that we’re fair and consistent with our policyholders to ensure that we’re consistent with our practices, so it would be inconceivable to me that if the payments that have been made to our policyholders were less than the guarantee such that there was a difference that had to be made up, that we would not have made that difference up.” Similarly, Ms. Sperry stated that “MassMutual stands by its commitments, and if it made a guarantee, if its board took an action, they would take actions that they view as serious and binding, and if they made that commitment ... I feel that they would have made whole on that guarantee.” In response, defendant argued that even if the insurance commissioners had known about the potential for violations of the contribution principle by the terms of the Dividend Guarantees, the commissioners could not have known about “MassMutual’s nonexistent plans to remedy potential violations.”
Although the defendant raised the possibility that plaintiffs regulators might have been unlikely to enforce the dividend guarantees and that a second round of payments might have violated the contribution principle, or even state law, the defendant does not demonstrate how this would prevent plaintiff from establishing the fact of liability. As plaintiff pointed out, and defendant acknowledged, a liability need not be legally enforceable to be fixed under the “all events test.” See Eastman Kodak Co. v. United States, 209 Ct.Cl. at 373 , 534 F.2d at 257 ; see also Burlington N. R.R. Co. v. Comm’r, 82 T.C. at 151; Champion Spark Plug Co. v. Comm’r, 30 T.C. at 298 . Even if the parade of horri-bles that defendant envisions were to have come true, a second round of payments, which defendant itself noted would not be triggered absent some unforeseeable cataclysmic event, such as a total breakdown of the financial system or a nuclear war, and plaintiff failed to make a similar payment to similarly situation pre-1984 policyholders in violation of the contribution principle and state law, none of the above demonstrates that the Dividend Guarantees did not fix the fact of liability.
Plaintiffs Dividend Guarantees created an unconditional obligation to pay an aggregate group of policyholders the following year. The Dividend Guarantees were not subject to a condition precedent and neither defendant’s concerns regarding enforceability or revocability of the Dividend Guarantee Resolutions prevents plaintiffs liability from being fixed in the year in which plaintiff enacted the Dividend Guarantees. Plaintiff has demonstrated that the Dividend Guarantees establish the fact of liability, meeting the first requirement of the “all events test.”
After the close of testimony in the above captioned case, on November 9, 2011, the IRS released Revenue Ruling 2011-29, which held that: “An employer can establish the ‘fact of the liability’ under § 461 for bonuses payable to a group of employees even though the employer does not know the identity of any particular bonus recipient and the amount payable to that recipient until after the end of the taxable year.” Rev. Ruling 2011-29, 2011 WL 5379455 (Nov. 9, 2011). The example used in the Revenue Ruling was an employer who used an accrual method of accounting and paid bonuses to group of employees after the end of a tax year pursuant to a defied bonus program, previously described to the employees, for performance during the tax year. See id. Although the employer would not know the identity of any particular bonus recipient and the amount payable to that recipient until after the end *141 of the taxable year, the aggregate minimum of bonuses to be paid was fixed, as the employer would reallocate the bonuses to other employees if an employee was no longer employed on the date the bonuses were paid, and, therefore, was not qualified to receive a bonus. See id.
As noted by a Judge on the United States Court of Federal Claims, “Revenue rulings typically contain the Service’s interpretation of how the law applies to a commonly encountered set of hypothetical facts. Although not as broad in application as regulations, revenue rulings are considered authoritative.” Reliant Energy Inc. v. United States, 45 Fed.Cl. 302 , 306 n. 6 (1999). 18 Because Revenue Ruling 2011-29 was enacted on November 9, 2011, years after the first tax year at issue in this case, there is some debate if the ruling would be retroactively effective. As discussed at length in a footnote in Principal Life Insurance Co. v. United States, the court stated that:
Odd as it might seem, some courts have held that, under section 7805 of the Code, revenue procedures relate back to the effective date of the statute they implement, unless they prescribe otherwise. See Cohen v. Comm’r of Internal Revenue, 910 F.2d 422, 427 (7th Cir.1990); Shore v. Comm’r of Internal Revenue, 631 F.2d 624 , 628 n. 8 (9th Cir.1980) (“Revenue Rulings and Procedures are normally given retroactive application.”); United States v. Lavi, 2006 WL 1305288 , at *3 (E.D.N.Y. March 30, 2006), aff'd, 168 Fed.Appx. 454 (2d Cir.2006) (“Section 7805 of Title 26 of the United States Code applies to both Revenue Rulings and Revenue Procedures and requires both to be applied retroactively unless the Treasury Secretary states otherwise.”); cf. Matson Navigation Co. v. Comm’r of Internal Revenue, 68 T.C. 847, 852-55 (1977) (rejecting this view).
Principal Life Ins. Co. v. United States, 95 Fed.Cl. 786 , 799 n. 30 (2010). The court continued, noting that:
That said, there are several reasons to question whether the IRS, without any prior warning, may establish procedures that apply retroactively. First, it is well-established that “a statutory grant of legislative rulemaking authority will not, as a general matter, be understood to encompass the power to promulgate retroactive rules unless that power is conveyed by Congress in express terms.” Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 , 109 S.Ct. 468 , 102 L.Ed.2d 493 (1988); see also Durr v. Nicholson, 400 F.3d 1375, 1380 (Fed.Cir.2005). Nothing in section 6603 provides such an “express” power. And it is debatable whether section 7805 of the Code does so, as the Secretary’s authority thereunder to issue retroactive regulations deals primarily, if not exclusively, with interpretative rules. Legislative regulations, by comparison, are generally viewed as springing from the specific enactment language and not from the general authorization for the Secretary to “prescribe all needful rules and regulations” found in section 7805(a). See E.I. du Pont de Nemours & Co. v. Comm’r of Internal Revenue, 41 F.3d 130 , 135 n. 20 (3d Cir.1994). Second, it is unclear whether the Secretary may use a revenue procedure to effectuate a grant of legislative rulemaking authority, even a grant that, unlike some, does not explicitly require the issuance of “regulations.” Cf. 26 U.S.C. § 2663 (“The Secretary shall prescribe such regulations ...”). Affording such a revenue procedure the weight of a legislative regulation seems particularly problematic if, as happened here, the IRS issues the procedures without complying with the notiee-and-comment requirements of the Administrative Procedure Act, 5 U.S.C. § 553 (b) — the ones that normally apply to legislative rules. See Schwalbach v. Comm’r of Inter *142 nal Revenue, 111 T.C. 215, 220 (1998) (Secretary must comply with APA, 5 U.S.C. § 553 (b) when he prescribes legislative regulations); see also Fransen v. United States, 191 F.3d 599, 600 (5th Cir.1999).
Principal Life Ins. Co. v. United States, 95 Fed.Cl. at 799 n. 30. Regardless of whether the Revenue Ruling can be applied retroactively to the facts of this case, the holding of Revenue Ruling 2011-29, that the fact of liability can be established even though an employer making bonus payments does not know the identity of any particular recipient and bonus is not paid until the following year, is consistent with the court’s conclusion that plaintiffs Dividend Guarantees established the fact of liability even though the Dividend Guarantees did not identify which policyholders would receive the minimum amount of guaranteed dividends or what amount each individual policyholder would receive under the Dividend Guarantees. Similar to the example cited in the Revenue Ruling, in which the fact of liability was established, plaintiff in the above captioned case established a guaranteed minimum amount of dividends to pay policyholders, which was sufficient to establish the fact of liability.
Liability Determined with Reasonable Accuracy
The second element of the “all events test” is that “the amount of such liability can be determined with reasonable accuracy.” 26 U.S.C. § 461 (h)(4); Treas. Reg. § 1.461 -l(a)(2)(i) see also United States v. Gen. Dynamics Corp., 481 U.S. at 242 , 107 S.Ct. 1732 (quoting Treas. Reg. § 1.461 -l(a)(2) (1986) (“The test is now embodied in Treas. Reg. § 1.461 -l(a)(2), 26 C.F.R. § 1.461 -l(a)(2) (1986), which provides that ‘[u]nder an accrual method of accounting, an expense is deductible for the taxable year in which all the events have occurred which determine the fact of the liability and the amount thereof can be determined with reasonable accuracy.’ ”)); Hughes Props., Inc. v. United States, 760 F.2d 1292, 1293 (Fed.Cir.1985) (citing Treas. Reg. § 1.446-1 (c)(1)(h) (1984) (“Under the accrual method of accounting, an expense is deductible for a tax year in which all of the events have occurred that determine the fact of liability and the amount thereof can be determined with reasonable accuracy.”), aff'd, 476 U.S. 593 , 106 S.Ct. 2092 , 90 L.Ed.2d 569 (1986)). Notably, “the all events test does not require that the amount of liability be known with certainty. The second prong of the test makes clear that the amount only need be known with reasonable accuracy.” Burnham Corp. v. Comm’r, 878 F.2d at 88 .
The defendant did not allege at trial, or argue in filings submitted to the court, that the Dividend Guarantees did not satisfy the second element of the “all events test.” Defendant also conceded that “[e]aeh of the dividend guarantee resolutions did establish a minimum amount of policyholder dividends to be paid to post-1983 policyholders in the following year.” In Burnham Corp. v. Commissioner, the court concluded that the “[b]y failing to argue that the test’s second prong had not been satisfied, the [defendant] has in effect conceded that the amount of liability could be determined with reasonable accuracy.” Id. Like the United States in the cause currently before the court, in United States v. General Dynamics Corp., 481 U.S. 239 , 107 S.Ct. 1732 , in determining whether all the events necessary to fix liability had occurred, the Supreme Court noted in a footnote, that the “United States did not seek review of whether the amount of liability in this case could be determined with reasonable accuracy.” Id. at 242 n. 2, 107 S.Ct. 1732 .
Each of the Dividend Guarantees at issue had an identical definition for the Annual Dividend Guarantee: “the Company’s irrevocable guarantee that it will pay or apply an amount not less than a specified amount of annual policyholder dividends with respect to posH983 policies in the following year.” As a specific example, at the December 13, 1995, MassMutual Board of Directors meeting, the Board of Directors stated it was guaranteeing a minimum amount of $185.0 million in policyholder dividends to be paid to post-1983 policyholders in the following year. The MassMutual Board of Directors voted:
That the Company hereby absolutely and irrevocably commits and guarantees that, of the total apportionment from its surplus *143 funds for the period beginning January 1, 1996 and ending December 31, 1996, said apportionment having previously been established by vote of this Board of Directors at its meeting held on October 9, 1995, it will pay or cause to be applied during 1996, in all events, annual dividends for participating individual life and annuity policies issued after December 31, 1983, in an amount of not less than $185 million; and that the Executive Vice President, Corporate Financial Operations be, and he hereby is, made responsible for monitoring the payment of annual dividends during 1996 to assure that such guaranteed amount is so paid or applied.
Therefore, in 1995, the minimum amount of policyholder dividends guaranteed by the 1995 MassMutual Dividend Guarantee was $185.0 million and the minimum amount of policyholder dividends guaranteed by the 1995 ConnMutual Dividend Guarantee was $97.0 million. In 1996, the minimum amount of policyholder dividends guaranteed by the 1996 MassMutual Dividend Guarantee was $310.0 million and in 1997, the minimum amount of policyholder dividends guaranteed by the 1997 MassMutual Dividend Guarantee was $360.0 million. Each of the Dividend Guarantees identified a specific minimum amount of guaranteed policyholder dividends for which MassMutual and ConnMutual were liable and, although not stated in dollar amounts in the Board Resolutions, the amount of plaintiffs liability for the Dividend Guarantees was determinable with “reasonable accuracy” for each tax year at issue. Plaintiff has established, and defendant has not effectively contested, that for the second element of the “all events test,” the amount of liability was determined with reasonable accuracy.
Economic Performance
The Federal Circuit has indicated that “I.R.C. § 461(h) embodies an ‘economic performance’ test, according to which an accrual method taxpayer may not deduct an expense prior to the time when ‘economic performance’ occurs in relation to the expense.” Maxus Energy Corp. v. United States, 31 F.3d 1135, 1142 (Fed.Cir.1994); see also United States v. Gen. Dynamics Corp., 481 U.S. at 243 n. 3, 107 S.Ct. 1732 . The Tax Code at 26 U.S.C. § 461 (h)(1) states, “[i]n determining whether an amount has been incurred with respect to any item during any taxable year, the all events test shall not be treated as met any earlier than when economic performance with respect to such item occurs.” 26 U.S.C. § 461 (h)(1); see also Metro Leasing and Develop. Corp. v. Comm’r, 376 F.3d at 1023 ; Gold Coast Hotel & Casino v. United States, 158 F.3d at 487 n. 5 (“Section 461(h)(1) further provides that the ‘all events’ test is not satisfied any earlier than when ‘economic performance’ has occurred.”). Therefore, although the fact of liability may be established and the amount of the liability can be established with reasonable accuracy, unless economic performance has occurred, the “all events test” has not been met. See 2 Mertens Law of Federal Income Taxation, § 12A:119, at 12A-191 (“For accrued expenses, the all-events test is modified by the rule of Section 461(h), that the all-events test is not deemed to have been met any earlier than the occurrence of the economic performance of the item or obligation underlying the taxpayer’s liability.”) (footnote omitted). 19 Section 461(h)(3) of the Tax Code, however, provides an exception for certain recurring items. Section 461(h)(3) states:
(A) In general. — Notwithstanding paragraph (1) an item shall be treated as incurred during any taxable year if—
(i) the all events test with respect to such item is met during such taxable *144 year (determined without regard to paragraph (1)),
(ii) economic performance with respect to such item occurs within the shorter of—
(I) a reasonable period after the close of such taxable year, or
(II) 8 1/2 months after the close of such taxable year,
(iii) such item is recurring in nature and the taxpayer consistently treats items of such kind as incurred in the taxable year in which the requirements of clause (i) are met, and
(iv) either-
(I) such item is not a material item, or
(II) the accrual of such item in the taxable year in which the requirements of clause (i) are met results in a more proper match against income than accruing such item in the taxable year in which economic performance occurs.
26 U.S.C. § 461 (h)(3); see also 2 Mertens Law of Federal Income Taxation, § 12A:123, at 12A-201. Treasury Regulation § 1.461-5(a), promulgated pursuant to 26 U.S.C. § 461 (h), see Treas. Dec. 8408, 57 Fed.Reg. 12411 (Apr. 10, 1992), states, in part, that “[ejxcept as otherwise provided in paragraph (c) of this section, a taxpayer using an accrual method of accounting may adopt the recurring item exception described in paragraph (b) of this section as method of accounting for one or more types of recurring items incurred by the taxpayer.” Treasury Regulation § 1.461-5(b) states,
Under the recurring item exception, a liability is treated as incurred for a taxable year if—
(i) As of the end of that taxable year, all events have occurred that establish the fact of the liability and the amount of the liability can be determined with reasonable accuracy;
(ii) Economic performance with respect to the liability occurs on or before the earlier of—
(A) The date the taxpayer files a timely (including extensions) return for that taxable year; or
(B) The 15th day of the 9th calendar month after the close of that taxable year;
(iii) The liability is recurring in nature; and
(iv) Either—
(A) The amount of the liability is not material; or
(B) The accrual of the liability for that taxable year results in a better matching of the liability with the income to which it relates tha

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/6662881. Public record. Not legal advice.