Taxation

  Tax Reform-SF

Eversheds Sutherland Observations on the Unified Tax Framework

Eversheds Sutherland provides its observations on the Republican unified tax framework. The framework is intended to serve as a "template" for the tax-writing committees, the House Ways and Means Committee, and the Senate Finance Committee to draft tax reform legislation.
October 04, 2017 Read More
  Businessman Checking Check Box

A Checklist for 831(b) Captives in Light of the Avrahami Tax Case

This 5-part checklist lays out a set of fundamental policies and practices 831(b) captives should follow. While the Avrahami 831(b) captive tax case may have been unique, owners need to be following essential protocols. In doing so, they are much less likely to find themselves the subject of an IRS audit.
September 27, 2017 Read More
  Golden scales of justice in front of an American flag with yellow fringe

Tom Jones Finds Taxpayer-Positive Interpretation of "Avrahami" Decision

While the US Tax Court's "Avrahami" decision qualifies as a taxpayer loss, Tom Jones of McDermott Will & Emery finds positive elements to the decision. He says along the larger continuum of tax concerns relating to captives, the decision provides further clarity and should benefit larger captives.
August 31, 2017 Read More
  Gavel and Tax Blocks-SF

Lessons Learned from the "Avrahami" Case

Much has been shared, and many lessons can be learned from "Avrahami v. Comm'r" and "Feedback Ins. Co., Ltd. v. Comm'r," 149 T.C. 7 (2017). Jeremy and Richard Colombik provide their take on the lessons learned from the case.
August 30, 2017 Read More
  tax wooden blocks with gavel SF

Court Concludes Tax Elections Invalid in Avrahami and Feedback Decision

On August 21, 2017, the US Tax Court decided two companion cases, Avrahami v. Commissioner and Feedback Insurance Company, Ltd., v. Commissioner, 149 T.C. No. 7, which involved issues around the formation and operation of a captive in Saint Kitts and elections under Internal Revenue Code sections 953(d) and 831(b).
August 22, 2017 Read More
  Martin Eveleigh

What Are the Financial Benefits of a Deductible Reimbursement Policy?

An operating company may achieve immediate financial benefits by using a captive insurer to issue a deductible reimbursement policy for its high deductible retentions. The tax implications for reimbursement policies for high deductibles are explained in this video by Martin Eveleigh of Atlas Insurance Management.
August 09, 2017 Read More
  Gavel and Dollars-SF

IRA Tax Ruling Favors Captive Insurance

Management Services International (MSI) recently analyzed the "Summa Holdings, Inc. v. Comm'r" case decided and filed in February. In its analysis, MSI asks us to consider if this individual retirement account (IRA) tax ruling has favorable implications for the captive insurance industry and moves to the conclusion that the answer is affirmative.
June 26, 2017 Read More
  Tax Calculator and Pen SF

What Is a Reciprocal Insurance Company, and How Is It Taxed?

A reciprocal insurance company is an arrangement through which mutual promises of the participants are exchanged with respect to their insurance risks. While not a separately incorporated company, it is characterized as an insurance company for federal tax purposes.
March 01, 2017 Read More
  Tax Laws-SF

Direct Procurement Taxes: A Primer for Captives

Direct procurement taxes, also known as self-procurement taxes, are imposed by many states when an insured purchases insurance from an insurer not licensed in the state. These taxes can drive up the cost associated with buying insurance from a captive. This article is a primer on direct procurement taxes and how they operate.
February 22, 2017 Read More
  IRS Dirty Dozen-SF

Captives Once Again Make the IRS "Dirty Dozen" List

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.
February 20, 2017 Read More
  Tax Building Blocks-SF

The Basics of the 831(b) Election for Captives

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.
January 25, 2017 Read More
  Accounts Filing Forms-SF

What Is FATCA, and How Do Captives Handle It?

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.
January 18, 2017 Read More
  Tax Calculator and Pen SF

Taxation of Single-Parent Captives: A Basic Guide

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.
January 12, 2017 Read More
  Accountant-SF

When Are Premiums Paid to a Captive Insurance Company Deductible for Federal Income Tax Purposes?

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.
January 04, 2017 Read More
  White House

The Possible Impact of Tax Reform on RRGs and Captive Insurers

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.
December 22, 2016 Read More
  Stock Market

Legitimate Captive Insurance Companies Are Not Driven by Tax Planning Strategies

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.
December 16, 2016 Read More
  Flat World Map

Bermuda Responds to "Tax Haven" Charge

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.
December 14, 2016 Read More
  Rental Application

Captive Insurance Basics: A Guide to Rental Captive Insurers

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.
December 13, 2016 Read More
  USCapitolBuilding

Captive Insurance Gears Up for Tax Reform

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.
December 09, 2016 Read More
  CICR

Captive Insurance Taxation and Regulation Hot Topics Featured in December CICR

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.
December 05, 2016 Read More