Taxation

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Direct Placement Tax Decision from the Tax Court of New Jersey

The Tax Court of New Jersey recently rendered an interesting decision regarding direct placement taxes. Eversheds Sutherland discusses Johnson & Johnson v. Director, Division of Taxation and Commissioner, Department of Banking and Insurance.
June 22, 2018 Read More
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Tax Court Issues Second Small Insurance Company Case

On June 18, 2018, the US Tax Court issued its opinion in Reserve Mechanical Corp. v. Commissioner, holding for the IRS. Eversheds Sutherland says that the facts of the case appear substantially similar to LTR 201609008, issued by the IRS in 2016.
June 21, 2018 Read More
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Captive Insurance Risk Pooling 101

According to Bruce Wright of Eversheds Sutherland, risk pools in captives allow organizations to spread risk and provide for a tax benefit. Risk pools provide unrelated risk to a captive insurer so the parent corporation can take a deduction for premium paid to the captive using insurance accounting.
June 20, 2018 Read More
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Microsoft Captive Insurer Ordered To Cease and Desist

The Washington State Office of the Insurance Commissioner has ordered an Arizona captive owned by Microsoft that provides coverage to the Microsoft group of companies to cease and desist transacting insurance business in the state and soliciting and writing insurance coverage for Washington insureds.
May 16, 2018 Read More
  Bruce Wright

The Avrahami and Feedback Decision Observations

On August 21, 2017, the US Tax Court decided two companion cases, Avrahami v. Commissioner and Feedback Insurance Company v. Commissioner, involving various issues surrounding the formation and operation of a captive insurance company in Saint Kitts. Bruce Wright of Eversheds Sutherland reviews the federal analysis by the Tax Court.
April 30, 2018 Read More
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Small Captive Insurance Company Rules Updated for Technical Corrections

The Consolidated Appropriations Act of 2018 was enacted on March 23, 2018, and included amendments to IRC section 831(b). Most importantly, the Act clarifies that for purposes of the first diversification test of section 831(b), the term "policyholder" refers to the direct insured under a policy and not to a reinsured.
April 13, 2018 Read More
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For the Fourth Consecutive Year, Captives Make IRS "Dirty Dozen" List

For the fourth consecutive year, "abusive micro-captives" make an appearance on the Internal Revenue Service (IRS) annual "Dirty Dozen" list of tax scams, reflected in IR-2018-62. In the 2018 version, the IRS warns taxpayers about the abuse of micro-captives and includes commentary on the IRS victory in Avrahami v. Commissioner.
April 02, 2018 Read More
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Avrahami Panel: "A Captive Is Not a Piggy Bank"

In the wake of the Avrahami decision, micro-captives have found themselves on the Internal Revenue Service 2018 "Dirty Dozen" tax scam list for the fourth year in a row. An Avrahami panel at the Captive Insurance Companies Association conference provided beneficial insights for small captive insurers.
March 26, 2018 Read More
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Will the Tax Cuts and Jobs Act Affect Small Captive Insurance Companies?

The end of 2017 delivered uncertain tidings concerning what effect the Tax Cuts and Jobs Act would have on the captive insurance industry. While the law affects larger captive insurers, changes are less significant for smaller captives. Management Services International provides its view on the tax law and small captive insurance companies.
February 16, 2018 Read More
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Captive Insurers and the Base Erosion Anti-Abuse Tax

The Base Erosion Anti-Abuse Tax imposes a 10 percent minimum tax on corporate US taxpayers. Premium payments made by US taxpayers to their non-US captive insurers and loss payments made by US captive insurers to their non-US insureds are among the amounts characterized as base erosion payments.
January 26, 2018 Read More
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Fitch: Tax Reforms Reduce Advantage of Reinsuring US Risks to Bermuda

US tax reforms are credit negative for the Bermuda re/insurance market, Fitch Ratings said. The cut in the US corporate tax rate and a new tax on premiums ceded by US insurers to foreign reinsurers will reduce the tax advantage of reinsuring US risks to Bermuda and other international reinsurers.
January 25, 2018 Read More
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RIMS "Legislative Review": Base Erosion and Anti-Abuse Tax (BEAT)

In response to the Tax Cuts and Jobs Act signed into law by President Donald Trump, RIMS has published a "Legislative Review" on the law's Base Erosion and Anti-Abuse Tax provisions, which will levy a 10 percent tax on transactions with foreign affiliates and impact some insurance and reinsurance programs.
January 24, 2018 Read More
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831(b) Premium Adjustment for Micro-captives in 2018

The Internal Revenue Service's first annual inflation adjustment for the Section 831(b) tax election has increased the premium limit for micro-captives to $2.3 million. Effective in 2017, H.R. 34 increased the maximum premium revenue allowable from $1.2 million to $2.2 million, allowing for inflation adjustments in subsequent years.
January 05, 2018 Read More
  Bruce Wright

Effects of the 2017 Tax Law on Captive Insurers

Following the passage of the Tax Cuts and Jobs Act by the US Congress, Captive.com met with Bruce Wright of Eversheds Sutherland to document his take on the primary impacts of the tax law on the captive insurance industry. According to Mr. Wright, a number of the law's provisions may affect captives.
January 03, 2018 Read More
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Avrahami Motion for Reconsideration: "No Such Luck"

On September 21, 2017, in a motion for reconsideration, the Avrahamis asked Judge Mark V. Holmes to reconsider his August 21, 2017, decision in "Avrahami v. Comm'r and Feedback Ins. Co., Ltd. v. Comm'r," 149 T.C. 7 (2017). Responding to the motion, the judge issued an order on November 14, 2017, that denied the motion.
November 27, 2017 Read More
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"Notice 2016–66 Remains Intact" as Court Dismisses CIC and Ryan Lawsuit

On November 2, 2017, just over 1 year to the day after the Internal Revenue Service (IRS) issued Notice 2016–66, Judge Travis R. McDonough dismissed the CIC Services, LLC, and Ryan, LLC, lawsuit that sought to enjoin the IRS from enforcing the notice.
November 08, 2017 Read More
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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
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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
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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
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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