The contingency funds are not taxed. When we have a contingency fund, it is set. Therefore, this is money set aside to offset current or anticipated losses. We are talking here about incurred but not yet reported losses.
However, when we cannot prove that losses are being incurred, among other things, this money is considered a profit. Taxes have to be paid on profits. When we have money left over after paying taxes, we put it into our surplus fund. The surplus is the money we can keep once taxes have been paid.