Facebook logo
Facebook logo
Facebook logo
Facebook logo

Latest Headlines

Captive Insurance Times home | Captives feature on IRS ‘Dirty Dozen’ list again ← You are here

[close]
Latest News
Drinker Biddle hires insurance pro in California
24 May 2017 | San Francisco
Dan Brown is based in the firm’s San Francisco office. He was previously a partner at Dentons where he was a member of the insurance regulatory practice Read more

Christina Kindstedt joins Advantage Insurance
23 March 2017 | Burlington
Advantage Insurance has appointed Christina Kindstedt as senior vice president Read more

For more news visit our news section

Upcoming events
PARIMA MANILA 2017
Date: 28 March 2017
Location: SHANGRI LA at THE FORT Taguig, Metro Manila
Find out more

Captives & Corporate Insurance Strategies Summit
Date: 05 - 06 June 2017
Location: Canada
Find out more

For more events visit our event section
Industry recruitment
There are currently no jobs available
For more jobs visit our recruitment section
Captive Insurance Times
View the latest issues online now

Sister publications
Securities Lending Times
http://captiveinsurancetimes.com

Asset Servicing Times
www.assetservicingtimes.com

Real Estate Investment Times
www.realestateinvestmenttimes.com

Media pack [download]
Ad specs [download]
Latest features
Can a captive $ave us from ourselves?
Feature: With a solid enterprise risk management strategy, a captive can increase in value and reputation, says Michael Zuckerman of Temple University Read more

Cook Islands
Country profile: In an era of increasing uncertainty, Tamatoa Jonassen suggests that the Cook Islands can be a bridge to financial security in a captive Read more

Ciaran Healy :: Willis Towers Watson
Interview: Although it’s typically viewed as a defensive move, BEPS could mean positive things for captives, says Ciaran Healy of Willis Towers Watson Read more

For more features visit our features section
Latest news
More news
Captives feature on IRS ‘Dirty Dozen’ list again
16 February 2017 | Washington DC | Reporter: Becky Butcher
The Internal Revenue Service (IRS) has named micro captives on its ‘Dirty Dozen’ list of tax scams for the third consecutive year.

The ‘Dirty Dozen’ list calls out tax scams that the IRS will be targeting in the coming year. Under section 831(b) of the tax code, captive insurers that qualify as small insurance companies can elect to exclude limited amounts of annual net premiums from income, so that the captive pays tax only on its investment income.

The IRS warned that in abusive micro-captive structures, promoters, accountants or wealth planners could persuade owners of closely held entities to participate in schemes that lack many of the attributes of genuine insurance.

Captive insurance policies may attempt to cover the same risks that are covered by the entities’ existing commercial coverage, but the captive policies’ ‘premiums’ may in fact be double or triple the premiums of the policy owners’ commercial policies, according to the IRS.

The IRS suggested that captives may invest in illiquid or speculative assets. They could also loan or otherwise transfer capital to, or for the benefit of, the insured, the captive’s owners or other related persons or entities.

Captives may also be formed to advance inter-generational wealth-transfer objectives to avoid estate and gift taxes. Promoters, reinsurers and captive insurance managers may share common ownership interests that result in conflicts of interest, the IRS noted.

John Koskinen, IRS commissioner, said: “Taxpayers should avoid unscrupulous promoters who encourage the use of phony tax shelters designed to avoid paying what is owed. These scams can end up costing taxpayers more in penalties, back taxes and interest than they saved in the first place.”

On 1 November last year, the IRS released Notice 2016-66, which formally labelled micro captives as ‘transactions of interest’. The IRS advised that micro-captive insurance transactions have the potential for tax avoidance or evasion.

Transactions of interest are a type of reportable transaction first established by the IRS in 2006 and since then, only six transactions have been labelled as such, including micro-captive transactions.

The notice requires reporting by any taxpayer involved in micro captive transactions over a number of past years, in which the open statutes of limitations applies.

Tim Tarter, a captive audit defence expert, suggested that the notice “fails to provide any definitive guidance” as to which micro-captive entities will survive Tax Court scrutiny, adding that “it is unlikely to deter most informed micro-captive participants from moving forward with their planned captive transactions”.

On 29 December last year, the IRS granted a 90-day deadline extension to the 1 May for 831(b) captives that need to comply with the notice.

In addition to Notice 2016-66, Congress has also acted to curb micro-captive abuses. The Protecting Americans from Tax Hikes Act, effective 1 January, established diversification and reporting requirements for new and existing captives.



Drinker Biddle hires insurance pro in California
Dan Brown is based in the firm’s San Francisco office. He was previously a partner at Dentons wher Read more

Christina Kindstedt joins Advantage Insurance
Advantage Insurance has appointed Christina Kindstedt as senior vice president Read more

Delaware to allow captives to go dormant
Arkansas and Montana introduced legislation proposing a dormant status for captives last month Read more

EXCLUSIVE: Guernsey considers Solvency II equivalence
Guernsey is “actively considering” whether it is appropriate to pursue equivalence with the EU Read more

R&Q acquires another captive in runoff
ICDC had a total net asset value of $7.95 million at the end of 2016. It redomiciled in Vermont in 2 Read more

Captive Insurance Times site map
Home
Home

Sitemap

Issue archive
Back issues online
Recruitment
Recruitment
Events andtraining
Upcoming events

Upcoming training

Company info
About us

Contact us


Copyright (C) 2013 Black Knight Media Ltd. All rights reserved. No reproduction without prior authorization