For the third consecutive year, what it calls "abusive micro-captives" make an appearance on the IRS's annual "Dirty Dozen" list of tax scams in 2017. This article points out some important distinctions in the messaging around the IRS's 2017 announcement as compared to last year.
Section 831(b) of the Internal Revenue Code may be elected by qualifying captives to exempt the captive insurer's underwriting profits from federal income tax. This article discusses the prerequisites that must be met as well as the transactions of interest reporting requirements.
This article discusses the Foreign Account Tax Compliance Act (FATCA) and how FATCA's requirements affect captives. FATCA's provisions operate to encourage compliance with US information reporting requirements by imposing a withholding tax on those that fail to comply.
One common captive structure is an insurance company owned by a single US corporation (a "single-parent captive"), which insures the risks of its parent and/or brother/sister companies. In some cases, single-parent captives cover risks of third parties as well as related party risk. The US federal income tax treatment of a single-parent captive and its owner depends in part on whose risk the captive insures and on whether the captive is a US company or a non-US company. This article summarizes the basic tax rules applicable to single-parent captives and their owners in various situations.
Generally, premiums paid for insurance are deductible for federal income tax purposes in the year paid if the policy is an annual policy and are amortized over the policy period for a multiyear policy. In addressing the question of when premiums paid to a captive insurance company are deductible for federal income tax purposes, the key determination is whether the coverage provided by the captive will be respected as insurance for federal income tax purposes. A number of factors need to be taken into account when making that determination.
Captive.com editor Dan Labrie recently attended Arent Fox law firm’s seminar on “What to Expect from Our New President and Congress.” After hearing the presentation on the President-elect’s promise of comprehensive tax reform, Mr. Labrie made the following observations.
Here is a message that needs to be delivered to all those involved in advising, regulating, or legislating tax policy: captive insurance companies are genuine risk management organizations that add value to their owners.
Tax reform is on the agenda not only in the United States but elsewhere in the world, as well. A report of Oxfam, a global antipoverty agency, has joined those calling for corporate tax reform, and the Bermuda Business Development Agency responded quickly.
Rental captives are but one form of a captive insurance company. A captive insurer is an insurance company that is wholly owned and controlled by its insureds; its primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits.
Mark Twain (but also attributed to Gideon Tucker) is quoted as having said, "No man's life, liberty or property are safe while the Legislature is in session." This will be especially true when Congress convenes in the new year and considers tax reform. Tax reform was a hot topic during the recent election, and the Republican majority in the House of Representatives is already gearing up to advance some significant changes in Federal tax law.
The December 2016 issue of "Captive Insurance Company Reports (CICR)" looks at a current hot topic in the captive insurance community—the new ownership requirements for captives that have elected to be taxed under section 831(b) of the Internal Revenue Code—as well as other captive insurance current concerns.
The Vermont Captive Insurance Association (VCIA) is offering a webinar titled "Captive Taxation: A Shifting World," scheduled for 2:00–3:00 p.m. EST, Thursday, December 15, 2016.
The New York office of Arent Fox LLP and the firm’s Government Relations Group will host a panel discussion on “What To Expect from Our New President and Congress” on December 8, 2016.
There is a lot to do in the next 90 days for captives and their material advisers who have made elections under 26 US Code § 831(b) of the Internal Revenue Code. The reporting requirements will be applicable to “[v]irtually all of the captives that have selected the 831(b) tax option,” according to John Colvin, an attorney at Colvin + Hallett and a panelist on the American Bar Association’s (ABA) Captive Insurance Committee’s webinar that was held November 9, 2016.
One of the sections in recent Internal Revenue Service (IRS) Notice 2016-66 that may be of concern to all captives, as well as commercial insurers, is the implication that an 831(b) captive with a loss and loss adjustment expense (LAE) ratio of less than 70 percent may not be an “insurance arrangement.”
More than 1,400 captive directors, chief financial officers, risk managers, service providers, and captive managers from around the world are expected to attend the upcoming 24th annual Cayman Captive Forum.
IRS declares 831(b) captives as transactions of interest requiring specified information disclosure in Notice 2016-66.
The Delaware insurance commissioner has approved two "limited and streamlined" application procedures to make it easier for captive insurers to comply with the Protecting Americans from Tax Hikes (PATH) Act.
The October 2016 issue of "Captive Insurance Company Reports" features a broad range of articles that are of interest to captive owners, managers, and staff.
On September 28, 2016, Senator Mark R. Warner, D-VA, and Representative Richard E. Neal, D-MA, introduced companion legislation in both the Senate (S. 3424) and House of Representatives (H.R. 6270) "to amend the Internal Revenue Code of 1986 to prevent the avoidance of tax by insurance companies through reinsurance with non-taxed affiliates."