More on Taxation of Cell Captives


Captive Tax Issues | Gary Bowers | Partner | Johnson Lambert LLP


Gary Bowers of Johnson Lambert briefly explains what a cell captive insurance company is and discusses cell captive taxation. Cell captive insurance companies have historically been required to file a single consolidated tax return for all the members of the cell. However, in recent years, proposed regulations have centered around treating each individual cell as its own insurance company that files its own tax returns. Each cell company might take various elections to effect its final tax treatment. For instance, cell members that qualify as micro-captives under section 831(b) of the Tax Code may elect to obtain treatment following this section of the code (also see the video "Taxation of 831(b) Micro-Captives and IRS Concerns"). Because it is difficult to keep foreign insurance income offshore and not be taxed somewhere, another election that is often taken is the 953(d). This section of the insurance code allows a company to elect to be treated as a US taxpayer. Additionally, the 953(d) election takes away the need for offshore companies to pay federal excise tax (1–4 percent of premiums).