San Diego
15 March 2017
Reporter: Becky Butcher
A bright future for micro captives
Captive insurance professionals launched a staunch defence of 831(b) insurers at the Captive Insurance Companies Association (CICA) International Conference in light of the US Internal Revenue Service’s (IRS) renewed interest in them.

Dana Sheridan, general counsel and chief compliance officer of Active Captive Management, said that small- and medium-sized entities are having a hard time of it right now simply because there is a misperception in Washington DC about the captive industry.

Sheridan said: “The IRS admits in Notice 2016-66 that they don’t actually know who the bad ones are, and they list stuff that they think is bad and request to hear from everyone required.”

Released in November 2016, Notice 2016-66 formally labelled 831(b) captives as ‘transactions of interest’. The IRS required them to report to the federal agency by 30 January 2017 due to their potential for tax avoidance or evasion. That deadline was subsequently pushed back to May.

The IRS has long been worried that captive arrangements such as those that elect to be taxed under Section 831(b) are fronts for tax avoidance or evasion. The IRS named micro captives in its annual ‘Dirty Dozen’ tax scam list in February, for the third year in a row.

Jeffrey Simpson, director at law firm Gordon, Fournaris & Mammarella, suggested that the captive insurance industry needs one or two examples for guidance and to provide standards before it can readjust.

He said: “If there is anything that we as an industry need to do differently, we will do that accordingly, and if the IRS needs to adjust, they will do that. I think there is a bright future for 831(b) captives.”

More regulation news
The latest news from Captive Insurance Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
UK to implement ILS regime this autumn
27 June 2017 | London | Reporter: Becky Butcher
London’s insurance-linked securities regulation is now being finalised by the UK Government ready for implementation this autumn, according to a letter sent from HM Treasury to the London Market Group’s Nicolas Aubert
Texas governor signs off captive bill updates
19 June 2017 | Austin | Reporter: Becky Butcher
Texas governor Greg Abbott has signed the state’s new captive bill into law
New FHLB legislation could see captives return
16 June 2017 | Washington DC | Reporter: Becky Butcher
US legislators have introduced a new bill to allow captive insurance companies that were members of a Federal Home Loan Bank (FHLB) prior to 12 September 2014 to return to the fold
SIIA asks Treasury to look at Notice 2016-66
15 June 2017 | Washington DC | Reporter: Becky Butcher
The Self-Insurance Institute of America (SIIA) has asked the US Treasury to include Notice 2016-66 in the President Donald Trump-ordered review of US tax rules
Financial CHOICE Act passes House
09 June 2017 | Washington DC | Reporter: Mark Dugdale
The Financial CHOICE Act, the legislation that proposes to repeal and replace the Dodd-Frank Act, has passed the House of Representatives
US-EU covered agreement moves closer to implementation
08 June 2017 | | Reporter: Mark Dugdale
The European Council has authorised the signing of the US-EU covered agreement on insurance and reinsurance, paving the way for its passage on one side of the Atlantic, at least
Insurers and reinsurers struggle with SFCR in Ireland
07 June 2017 | Dublin | Reporter: Mark Dugdale
The first round of solvency and financial condition reports filed in Ireland under Solvency II show that Irish insurers and reinsurers struggled with the system of governance disclosure requirement, according to Deloitte