Taxation

  Court Ruling Gavel

Johnson & Johnson Successful on Appeal of New Jersey Tax Court Decision

Johnson & Johnson was successful on appeal of a New Jersey Tax Court decision regarding independently procured tax. The court found Johnson & Johnson liable only for independent procurement tax on New Jersey risk related to premium paid to its captive insurance company.
October 04, 2019 Read More
  IRS

IRS Will Mail Settlement Offers to Micro-captive Owners

The Internal Revenue Service (IRS) said Monday that it is mailing settlement offers to about 200 owners of so-called 831(b) micro-captives who participated in what the IRS calls "abusive" insurance transactions.
September 17, 2019 Read More
  Gavel on Money

Alaska Air Opposes Washington State Fines for Its Captive Coverages

Alaska Air Group Inc. is opposing Washington State Insurance Department's move to impose significant financial fines for not paying premium taxes on coverage its captive insurer provides to Alaska Air subsidiaries operating in Washington.
September 12, 2019 Read More
  Gavel and Dollars-SF

Syzygy Insurance Co. v. Commissioner: What You Should Know

Syzygy Insurance Company, a microcaptive created by Highland Tank & Manufacturing Co. and its associates did not qualify as an 831(b) microcaptive entity between the years of 2009 and 2011. Find out what you should know about this Tax Court case.
July 23, 2019 Read More
  Mark Sims

Bulletproofing Your Captive Insurance Company

Mark Sims, vice president of business development at Captive Alternatives, LLC, says that best practices for bulletproofing a captive insurance company so that it meets the definition of an insurance company involve consideration of five criteria: risk sharing (shifting), risk distribution, premium pricing, policies, and claims.
July 17, 2019 Read More
  Regulations 480x377

Treasury's Proposed Regulations on the PFIC Rules Insurance Exception

Treasury has issued proposed regulations on the insurance exception to the passive foreign investment company rules. This article focuses on only one of the aspects of the regulations, albeit a very important one for captive insurance companies—the active conduct requirements.
July 16, 2019 Read More
  Bruce Wright

What a Captive Insurer Should Know about the Federal Excise Tax

The federal excise tax (FET) is imposed at the federal level on insurance premiums or reinsurance premiums that are paid by a US person to a foreign non-US person with regard to US risks. Bruce Wright, partner at Eversheds Sutherland (US) LLP, discusses what captive owners should know about FET.
June 24, 2019 Read More
  Key Concepts-SF

Key Issues for Micro-Captives during an IRS Audit

The current state of the law regarding captives in the US Tax Court is important for micro-captive owners as they consider what approach to take going forward. A thorough review of the captive program can help establish an informed basis for decision-making both before and during an Internal Revenue Service (IRS) audit.
May 22, 2019 Read More
  Compliance Red Computer Key-SF

Some Captive Owners May Be Affected by the LB&I Campaign on Form 5471

On April 16, 2019, the Internal Revenue Service (IRS) Large Business and International Division (LB&I) announced three additional compliance campaigns, one of which relates to Form 5471 and may have application to shareholders of some captive insurance companies.
May 01, 2019 Read More
  Bruce Wright

What a Captive Insurer Should Know about the 953(d) Tax Election

Bruce Wright, partner at Eversheds Sutherland (US) LLP, discusses section 953(d) of the Internal Revenue Code (IRC). Under section 953(d) of the IRC, non-US-domiciled captive insurers may elect to be taxed as if they were domestic companies for all purposes of the IRC.
April 22, 2019 Read More
  Audit IRS or Financial-SF

For the 5th Consecutive Year, Captives Make IRS "Dirty Dozen" List

For the fifth consecutive year, abusive micro-captive insurance companies found their way to the Internal Revenue Service (IRS) annual "Dirty Dozen" listing. Where last year's listing told taxpayers to be wary, the IRS uses a more aggressive tone in the 2019 listing.
April 01, 2019 Read More
  Washington State 480x377

Washington State Collects $3.6 Million from Costco's Captive Insurer

Arizona-domiciled NW Re Limited, a captive insurance company owned by Costco Wholesale Corp., will pay $3.6 million in premium taxes, penalties, interest, and a fine in a settlement it reached with Washington State Insurance Commissioner Mike Kreidler.
March 14, 2019 Read More
  Bruce Wright

Captive Insurance Compliance and Direct Procurement Taxes

Bruce Wright, partner at Eversheds Sutherland (US) LLP, discusses direct procurement taxes in the context of captive insurance. Most states have a statute that is either a direct placement statute or an industrial insured statute. An ongoing issue for captive insurers is the compliance concern with direct placement taxes.
March 13, 2019 Read More
  Bruce Wright

Captive Insurance and State and Local Income Tax Issues

According to Bruce Wright of Eversheds Sutherland, state and local income taxes are an evolving issue that concerns captive insurers. He says some states are challenging whether a captive insurer's income should be included with combined income when determining the overall income tax of the parent.
February 11, 2019 Read More
  Court Ruling Gavel

Reserve Mechanical Contemplation and Further Discussion

Alan Fine of Brown Smith Wallace contemplates the conclusions reached and supporting rationale used by the US Tax Court in the second small captive case, "Reserve Mechanical Corp. v. Commissioner of Internal Revenue," and believes there are a few areas that continue to warrant discussion.
January 31, 2019 Read More
  Tax Building Blocks-SF

Proposed Regulations Clarify the BEAT and FATCA

The Department of the Treasury and the Internal Revenue Service issued two sets of proposed regulations that clarify the application of the base-erosion anti-abuse tax (BEAT) and the treatment of insurance premiums under the Foreign Account Tax Compliance Act (FATCA). Eversheds Sutherland explains the proposed regulations and offers key takeaways.
January 16, 2019 Read More
  Washington State 480x377

Captive Insurers Allowed 18 Months To Self-Report to Washington State

Washington State Insurance Commissioner, Mike Kreidler, has offered captive insurance companies that have "unlawfully" insured any risk in Washington State in the past 15 years the chance to pay a substantially reduced fine and premium tax penalty for self-reporting this activity.
December 11, 2018 Read More
  Businesswoman with Questions-SF

What Is a Micro-Captive?

A micro-captive is a small captive insurance company that may be taxed under Internal Revenue Code § 831(b) and may pay tax on investment income only. What is a micro-captive? Read further to find out!
November 19, 2018 Read More
  Man holding red X

Reserve Mechanical, Part II: Motion for Reconsideration Denied

P. Bruce Wright and Saren Goldner extract the salient features of the US Tax Court's denial (without comment) of the taxpayer's motion for reconsideration in the "Reserve Mechanical" case. In order to seek any further relief, the taxpayer will need to appeal the case.
September 21, 2018 Read More
  Planning

Small Captive Insurance Program Exit Planning

After two consecutive losses for taxpayers involved in small captive insurance programs, some may consider exiting their small captive insurance program. Exiting a captive, however, may be time consuming and expensive. Many captive owners will need to take into account numerous issues and make some difficult decisions.
September 04, 2018 Read More