Proposed Legislation Could Impact Captive Insurers

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Last month, new legislation was introduced in the Senate and House of Representatives “to amend the Internal Revenue Code of 1986 to prevent the avoidance of tax by insurance companies through reinsurance with non-taxed affiliates.”

Senator Mark R. Warner, D-VA and Representative Richard E. Neal, D-MA claim there is currently a “loophole” that allows insurers to claim deductions for reinsurance premiums when paid to international affiliates. The proposed legislation is similar to President Obama’s 2017 budget provision which denies a routine tax deduction for businesses when certain reinsurance premiums are paid by domestic insurers to international affiliates. This is Obama’s seventh attempt at introducing the recommendation. Although such legislation could result in increased costs for U.S. companies with domestic and internationally domiciled captives, the chances of it passing appear remote.
The Warner-Neal legislation, although equally unlikely to pass, could have serious implications for captives if it does become law. For more information on how this proposed legislation could impact you, contact us today.