Taxation
Maryland Bill Would Pause Captive Insurance Premium Tax Collection
Maryland lawmakers are considering legislation to temporarily suspend premium receipts taxes on certain captive insurance arrangements. The bill includes retroactive relief, requires a study on captive taxation and regulation, and sets a sunset on the provisions, reflecting a broader review of how captive insurance is treated at the state level. Learn More
When Are Premiums Paid to a Captive Insurance Company Deductible for Federal Income Tax Purposes?
Premiums paid to a captive insurance company are deductible for federal income tax purposes only if the arrangement qualifies as true insurance. This requires risk transfer, risk distribution, and alignment with common insurance principles, as recognized by the Internal Revenue Service and courts. The structure and underlying risk profile ultimately determine deductibility. Learn More
Captive Insurance and the CFM Decision: Operational Discipline Matters
In a recent issue of "Captive Insurance Company Reports," Kristen Lawler of Crowe LLP examines the Tax Court's CFM decision and its implications for captive insurance qualification. The analysis highlights the importance of operational discipline, governance, and the "commonly accepted notions" standard in federal tax determinations. Read More
Why Do Insurance Companies Discount Unpaid Loss Reserves?
Under federal tax law, insurance companies are allowed to take a current deduction for unpaid losses, which is an expense that is paid over time. Without the deduction for unpaid losses, the tax code would be exceedingly burdensome for insurance companies. Read More
Tax Court Addresses Economic Substance and Disclosure Penalties in Micro-Captive Case
The Tax Court's reviewed opinion in "Patel v. Commissioner" applies the codified economic substance doctrine to micro-captive arrangements and sustains both the 20 percent noneconomic substance penalty and the 40 percent enhanced penalty for inadequate disclosure. The court outlined missing facts in the taxpayers' returns and declined to consider arguments raised too late. Read More
Bermuda Proposes Tax Credits to Offset 15 Percent Corporate Levy for Insurers and Reinsurers
Bermuda's Ministry of Finance has proposed tax credits to accompany its 15 percent corporate tax, per Reinsurance Business. The credits include substance-based incentives for re/insurers tied to jobs and local spending. The initiative aims to support Bermuda’s insurance economy, which continues to expand across captives, life reinsurers, and legacy transactions. Read More
Drake Plastics Sues IRS over Captive Insurance Premium Dispute
Drake Plastics has filed a federal lawsuit against the Internal Revenue Service (IRS) over its disallowance of captive insurance premium deductions under Section 831(b). The company argues its insurance program is lawful and essential for managing risks traditional insurers won’t cover, while warning current IRS enforcement threatens small-business risk management strategies. Read More