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Form 1120PM3: 1120-PC (Schedule M-3)
IRS Form 1120-PC Schedule M-3 is the Net Income (Loss) Reconciliation for U.S. Property and Casualty Insurance Companies with total assets of $10 million or more. It reconciles financial statement net income to taxable income. Domestic corporations or groups required to file Form 1120-PC with assets of $10M or more must file this schedule.
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IRS Form 1120PM3 - 1120-PC (Schedule M-3)
IRS Form 1120-PC Schedule M-3 is the Net Income (Loss) Reconciliation for U.S. Property and Casualty Insurance Companies with total assets of $10 million or more. It reconciles financial statement net income to taxable income. Domestic corporations or groups required to file Form 1120-PC with assets of $10M or more must file this schedule.
Risk Radar
Scan points- 1Reporting net income of non-includible entities on Part I line 11.
- 2Failing to file Schedule M-3 when total assets are $10 million or more.
- 3Reporting net income of entities not includible in the consolidated tax return on Part I line 11.
- 4Using the wrong financial statement basis (e.g., GAAP instead of statutory) for annual statement companies.
- 5Checking 'Yes' on Part I line 1a when no certified audited financial statements exist.
Plain English
This schedule reconciles the net income or loss shown on a property and casualty insurance company's financial statements to the income reported on its tax return. It helps the IRS check that the company's book income matches its taxable income. Companies with $10 million or more in total assets at year-end must file it.
Submission Date
- Filing date: 2026-01-08 11:11:03
- Preparation window: collect IDs, supporting records, and signatures in advance.
- Final review: verify names, dates, and required fields before submission.
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Glossary Terms
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What this form is for
- Use this form when the corporation is required to file Form 1120-PC and reports total consolidated assets on Schedule L of $10 million or more at the end of the tax year.
- Do not use it when total assets on Schedule L are less than $10 million; in that case, file Schedule M-1 (Form 1120-PC) instead.
- Check Schedule M-1 (Form 1120-PC) instead when total assets are below $10 million.
Form selector
Use this form or another form?
Corporation required to file Schedule M-3 (Form 1120-PC)
Must file Form 1120-PC with all attachments, including Schedule M-3, at the Ogden service center.
✓ Confirm you are using the current edition (12-21) and include all required schedules.
Separate return filer with total assets on Schedule L of $10 million or more
Assets at or above $10 million trigger mandatory filing of Schedule M-3.
✓ Verify total year-end assets on Schedule L equal at least $10 million.
Consolidated group with total assets on Schedule L under $10 million
Group is not required to file Schedule M-3 because assets do not meet the $10 million threshold.
✓ Check consolidated Schedule L total assets; if under $10 million, omit Schedule M-3.
Removing income of nonincludible foreign entity on Part I line 5
Must attach supporting statement with name, EIN, and net income removed for each entity.
✓ Prepare a statement listing each nonincludible foreign entity's details and net income.
Deadline or filing window
The due date for Schedule M-3 is the same as the due date for Form 1120-PC. The instructions do not provide a specific date or extension details. Check the Form 1120-PC instructions for the filing deadline.
Checklist
What you need before filling it out
Part I, line 11
Financial statement net income (loss) on statutory basis · Statutory annual statement
Part I, lines 5a/5b
Supporting statement with name, EIN, net income for each nonincludible foreign entity · Attached schedule
Part I, lines 6a/6b
Supporting statement with name, EIN, net income, total assets, total liabilities for each nonincludible U.S. entity · Attached schedule
Part I, line 8
Consolidation eliminations and minority interest adjustments · Consolidation workpapers
Schedule L
Total year-end assets · Form 1120-PC Schedule L
Part II, lines 9-11
Disregarded entity income or loss reported as owner's item · Owner's books and records
Form 851
List of includible corporations in consolidated return · Consolidated return documentation
Before you submit
- 1Check that the form revision is December 2021.
- 2Verify total assets on Schedule L equal or exceed $10 million.
- 3Check the applicable box at top: (1) Non-consolidated, (2) Consolidated return (Form 1120-PC only), (3) Mixed 1120/L/PC group, or (4) Dormant subsidiaries schedule attached.
- 4If filing consolidated, attach Form 851 and ensure all includible corporations are listed.
- 5Complete Part I: line 1a – indicate if SEC Form 10-K was filed; if yes, skip lines 1b-1c.
- 6Report financial statement net income on statutory basis on line 11.
- 7Attach detailed statements for Part II and Part III for each separate entity (including parent and eliminations entity).
- 8Confirm mailing address: Department of the Treasury, IRS, Ogden, UT 84201-0012.
- 9Keep a copy of the entire return including Schedule M-3.
- 10Sign and date Form 1120-PC (Schedule M-3 is attached, so signature on main form suffices).
How to file this form
- 1Determine if total assets on Schedule L are $10 million or more.
- 2Select the appropriate box at the top of Schedule M-3 (non-consolidated, consolidated, mixed, or dormant subsidiaries).
- 3Complete Part I using the appropriate financial statements (SEC Form 10-K if filed, otherwise statutory annual statement).
- 4Prepare detailed supporting statements for Part II and Part III for each includible corporation.
- 5Attach Schedule M-3 to Form 1120-PC.
- 6Mail the complete return to the Ogden, UT service center.
- 7Retain proof of mailing (certified mail receipt or electronic filing confirmation).
Known limitations
- 1Not required if total assets on Schedule L are less than $10 million; use Schedule M-1 instead.
- 2Not applicable to insurance companies that are not required to file Form 1120-PC.
- 3Not for use by life insurance companies (Form 1120-L filers); this form is specifically for property and casualty insurance companies.
- 4Consolidated groups with total assets below $10 million after eliminations are not required to file Schedule M-3 (see example on Instructions p.2).
- 5Cannot be used if the corporation prepares non-tax-basis financial statements but also prepares tax-basis statements for other purposes; tax-basis statements are allowed only if no non-tax-basis statements exist.
Field map
Compact field-by-field guide
Entity Info
2 items
Full legal name of the corporation and its Employer Identification Number.
Current mailing address and date of incorporation.
Income
3 items
Total revenue from business operations before deducting costs.
Direct costs attributable to producing goods sold by the corporation.
Gross receipts minus cost of goods sold and returns/allowances.
Deductions
1 items
Sum of all business expenses including compensation, rent, interest, taxes, and depreciation.
Tax
2 items
Total income minus total deductions.
Tax calculated on taxable income using the applicable corporate tax rate, minus any credits.
Signatures
1 items
An authorized corporate officer must sign and date the return.
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Fillable formOpen in Editor->The form revision is December 2021, but the instructions were revised in December 2025. The instructions note a new law (P.L. 119-21) adding section 174A for domestic research and experimental expenditures, effective for tax years beginning after December 31, 2024. For the latest updates, consult IRS.gov/Form1120PC.
What changed or needs a fresh check
- Edition date — confirm the form revision is December 2021 and instructions are December 2025.
- Fee — not stated in the official source — verify on the agency site.
- Mailing address — confirm to send to Department of the Treasury, IRS, Ogden, UT 84201-0012.
- Signature — not stated for this schedule; follow Form 1120-PC signature requirements.
- Attachment — confirm Schedule M-3 is attached to Form 1120-PC.
- Check applicable box — confirm one of boxes (1)-(4) is checked at top of page 1.
Quick Facts
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After you file
- 1Retain a copy of the filed Schedule M-3 and all supporting statements.
- 2Keep records for at least 3 years from the date of filing (general statute of limitations).
- 3Expect a confirmation if filing electronically; if mailing, consider using certified mail.
- 4If an error is discovered after filing, file an amended Form 1120-PC with a corrected Schedule M-3.
- 5Monitor IRS correspondence for any questions about the reconciliation.
- 6Check the IRS website for any updates to the form or instructions.
Sources
- SRCInstructions p.1Schedule M-3 is for U.S. property and casualty insurance companies with total assets of $10 million or more.
- SRCInstructions p.1Must file instead of Schedule M-1 when assets equal or exceed $10 million.
- SRCInstructions p.1Where to file: Department of the Treasury, IRS, Ogden, UT 84201-0012.
- SRCInstructions p.1What's New: Domestic research and experimental expenditures under section 174A.
- SRCInstructions p.2Example: B files separate return with $12M assets, required to file M-3; CD group with $8M not required.
- SRCForm p.1Check applicable boxes: (1) Non-consolidated, (2) Consolidated return (Form 1120-PC only), (3) Mixed 1120/L/PC group, (4) Dormant subsidiaries schedule attached.
- SRCForm p.1Part I line 1a: Did the corporation file SEC Form 10-K? If yes, skip lines 1b-1c.
- SRCInstructions p.8Tax-basis financial statements allowed only if no non-tax-basis statements prepared.
- SRCInstructions p.7Detailed statements for Part II and III must be attached for each separate entity.
- SRCInstructions p.9Part I includes nonincludible U.S. entities.
Common confusion points
Should I use statutory or GAAP net income for Part I line 11?
The instructions require statutory basis for property and casualty insurance companies, but GAAP is common for other purposes.
→ Confirm that the annual statement used is prepared on a statutory basis.
Do I need to file Schedule M-3 if my assets are under $10 million?
The $10 million threshold applies to total year-end assets on Schedule L, and rules differ for separate vs. consolidated returns.
→ Check Schedule L total assets; if under $10 million, you are not required to file Schedule M-3.
How do I report income of a disregarded entity on Schedule M-3?
Disregarded entities are not separate for tax; their income must be reported as an item of the owner.
→ Report the income or loss on the owner's lines (not on Part II lines 9-11 as a separate pass-through).
What supporting statements are required for nonincludible foreign entities?
The instructions require a statement with name, EIN, and net income removed on line 5 for each entity.
→ Prepare a statement listing each nonincludible foreign entity's name, EIN, and net income from line 4a.
Can I use tax-basis financial statements for Schedule M-3?
Tax-basis statements are allowed only if no non-tax-basis statements were prepared for any purpose and books reflect only tax-basis amounts.
→ Ensure no GAAP or other non-tax-basis financial statements exist; if they do, you must use non-tax-basis.
Do I need to include nonincludible entities' net income in Part I line 11?
Line 11 should only include net income of includible corporations; nonincludible entities are removed on lines 5 and 6.
→ Verify that entities not listed on Form 851 (except disregarded entities) are not included in line 11.
How do I handle consolidation eliminations for nonincludible entities?
Adjustments for intercompany dividends, minority interest, and eliminations are made on Part I line 8.
→ Ensure all intercompany transactions between nonincludible and includible entities are eliminated on line 8.
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Questions about IRS Form 1120PM3
What is IRS Form 1120PM3 used for?
This schedule reconciles the net income or loss shown on a property and casualty insurance company's financial statements to the income reported on its tax return. It helps the IRS check that the company's book income matches its taxable income. Companies with $10 million or more in total assets at year-end must file it.
Who must file IRS Form 1120PM3?
Any domestic corporation or group of corporations required to file Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return, that reports total assets at the end of the tax year of $10 million or more must file Schedule M-3.
What information does IRS Form 1120PM3 require?
Schedule M-3 collects information about the corporation's financial statements and reconciles financial statement net income (loss) to taxable income. Part I asks about financial statements and reconciles worldwide net income to U.S. taxable income; Parts II and III reconcile net income to the subtotal on Form 1120-PC Schedule A or B.
Where do I file IRS Form 1120PM3?
File Schedule M-3 with Form 1120-PC at the Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201-0012.
How do I complete IRS Form 1120PM3?
Complete Part I by answering questions about financial statements and reconciling worldwide net income to U.S. taxable income. Then complete Parts II and III to reconcile net income to the subtotal on Form 1120-PC Schedule A or B. Attach the schedule to Form 1120-PC and sign the return.
Should I use statutory or GAAP net income for Part I line 11?
The instructions require statutory basis for property and casualty insurance companies, but GAAP is common for other purposes. Confirm that the annual statement used is prepared on a statutory basis.
Do I need to file Schedule M-3 if my assets are under $10 million?
The $10 million threshold applies to total year-end assets on Schedule L, and rules differ for separate vs. consolidated returns. Check Schedule L total assets; if under $10 million, you are not required to file Schedule M-3.
How do I report income of a disregarded entity on Schedule M-3?
Disregarded entities are not separate for tax; their income must be reported as an item of the owner. Report the income or loss on the owner's lines (not on Part II lines 9-11 as a separate pass-through).
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