Why Is Tax-Deductibility of Captive Premiums Important

February 17, 2016

Tax-deductibility of premiums is a key issue for captive insurance companies, and in this video, P. Bruce Wright of Sutherland Asbill & Brennan LLP discusses why. In most situations, if the premium collected by a captive insurance company is not considered to be part of an insurance contract (as far as the Internal Revenue Service is concerned), the result is an inability for the captive insurance company to write off its reserve—which is taken out of that premium—as a deduction. This generally means that the benefit from that deduction is spread out in time, which is less desirable. For 831(b) captive insurance companies, the benefit of being able to write off reserves as a deduction is lost.


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February 17, 2016