Montana


Officials at Montana’s insurance department are confident that this year will be a continuation of the Treasure State’s push to solidify its position as a go-to captive domicile.

Having licensed its first captive in 2002, the state is now on course to license its 200th within the next 12 months, following a 2014 that saw it add 34 new formations to its roster.

Although Montana did lose seven captives last year, its net gain of 27 entities demonstrates that it’s undergoing a period of growth at a time when domicile competition is increasing in the US. In 2013, Montana secured 47 new captives, bringing its then total to 150. The state lost 11 entities that year, so 2014 was a little slower, admits Steve Matthews, director of captives in the Office of the Commissioner of Securities and Insurance.

“I think we are going to be the same as what happens in the rest of the country. I’m expecting us to do what we’ve done the last few years. We’ve got the expertise and the infrastructure here that make us an attractive domicile for plenty of companies out there.”

Putting forward’s Montana’s pitch for new business, Matthews explains: “We cater broadly, we’re open to any type of captive. We are looking for captives that make business sense and meet our regulatory requirements.”

“We have a couple of captive management firms here in the state that do great work and we really want to see them grow and continue to prosper. We also have several law firms in the state that do a lot of captive work for captive clients. Our in-state infrastructure is growing and getting more excited about the business, but we also allow some out-of-state captive managers, too.”

Regulatory tweaks

Among the legislative changes made last year was Montana’s adoption of a series LLC (limited liability company) capability for protected cells. In essence, the LLC capability is another level of protection for a cell within a protected cell captive, allowing cells to erect partitions between each other’s liabilities. Montana’s decision to allow series LLC captives makes it only the second to do so in the US, with Delaware being the first domicile to adopt the capability.

Matthews says: “2014 was our first full year with the series LLC capability. The aim of its introduction was to keep up with the other states and be on the cutting edge and allow captives to take advantage of that. All that has to happen is a captive, the captive manager and their attorney decide that the series LLC is the vehicle they want to use and they have to fill out the appropriate form. So far they seem to be working fine.”

Montana’s legislature is currently considering multiple captive insurance bills. One in particular aims to make business fairer in the Treasure State.

It will allow for a pro-rata distribution of taxes within the year of a captive’s closure, so as to make leaving the domicile less punitive. Matthews explains: “We have a minimum premium tax and we have prorated that on the year of formation of the captive. What we didn’t have was a way of adjusting the minimum premium tax when a captive closes. At the moment, even if a captive dissolves at the beginning of the year, it pays the same tax as a captive that closes right at the end of the year.”

Under Montana’s current captive laws, the minimum premium tax was also set higher, with it having to be prorated on a quarterly basis beginning at $5,000 in Q1, $3,750 in Q2, $2,500 in Q3 and $1,250 in Q4.

The new bill would amend Montana’s legislation to add a whole new section on minimum premium taxes for the year in which the captive dissolves, with thresholds set at $1,250 in Q1, $2,500 in Q2, $3,750 in Q3 and $5,000 in Q4.

Matthews says: “With this new bill, we will be able to use a pro-rata distribution for the minimum premium tax when the captive dissolves. If they dissolve in the month of January, they pay considerably less tax, which is always the fairer way to do it.”
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