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Captive insurance audited by IRS Published on Published onAugust 30, 2015 Lance Wallach Lance Wallach Following Following Lance Wallach Managing Director at VEBA LLC. 225 articles Like 1 Comment 7
14 IRS Scrutinizing Arrangements of 831(b) Captives
Artex Risk Solutions, the Bermuda-based captive management subsidiary of insurance broker Arthur J. Gallagher & Co., has been the part of a probe by the IRS into captive insurers formed under 831(b) of the Internal Revenue Code. Under Section 831(b), insurance companies earning no more than $1.2 million in annual written premiums can opt not to pay taxes on those premiums and be taxed only on their investment income.
These types of captives are increasingly popular and attractive from a tax perspective, which has prompted IRS investigation. In fact, IRS probes into 831(b) captives was a hot topic at the most recent annual Vermont Captive Insurance Association Conference that took place in Burlington. In an article that appeared last month in Business Insurance, Robert H. Myers Jr., partner at Morris, Manning & Martin L.L.P. in Washington, stated: “The IRS is now looking into microcaptives, focusing on the pools some microcaptive arrangements use in an effort to demonstrate the risk distribution needed to qualify for insurance treatment by the IRS. “If the IRS determines the pools aren’t valid, it will then treat the pool participants as tax shelters rather than insurance vehicles.”
U.S. Government vs. Artex In the Artex case, according to the IRS petition, it’s allegedly examining whether Artex’s transactions involvingcaptive insurance plans under 831(b) “constitute abusive transactions.” Artex confirmed that an ongoing investigation is taking place, and believes at least a dozen other captive managers are involved in the IRS investigation. David McManus, president of Artex Risk Solutions, as quoted in Captive International, said:
“We have already communicated with our small captive customers and referral partners on this and it’s really no surprise that Artex, as one of the largest captive managers in the world, is involved. The IRS clearly recognizes captives as a legitimate tool for businesses, when used correctly and Artex believes that its small capti
Captive insurance audited by IRS
ReplyDeletePublished on Published onAugust 30, 2015
Lance Wallach
Lance Wallach
Following Following Lance Wallach
Managing Director at VEBA LLC.
225 articles
Like 1
Comment
7
14
IRS Scrutinizing Arrangements of 831(b) Captives
Artex Risk Solutions, the Bermuda-based captive management subsidiary of insurance broker Arthur J. Gallagher & Co., has been the part of a probe by the IRS into captive insurers formed under 831(b) of the Internal Revenue Code. Under Section 831(b), insurance companies earning no more than $1.2 million in annual written premiums can opt not to pay taxes on those premiums and be taxed only on their investment income.
These types of captives are increasingly popular and attractive from a tax perspective, which has prompted IRS investigation. In fact, IRS probes into 831(b) captives was a hot topic at the most recent annual Vermont Captive Insurance Association Conference that took place in Burlington. In an article that appeared last month in Business Insurance, Robert H. Myers Jr., partner at Morris, Manning & Martin L.L.P. in Washington, stated: “The IRS is now looking into microcaptives, focusing on the pools some microcaptive arrangements use in an effort to demonstrate the risk distribution needed to qualify for insurance treatment by the IRS. “If the IRS determines the pools aren’t valid, it will then treat the pool participants as tax shelters rather than insurance vehicles.”
U.S. Government vs. Artex
In the Artex case, according to the IRS petition, it’s allegedly examining whether Artex’s transactions involvingcaptive insurance plans under 831(b) “constitute abusive transactions.” Artex confirmed that an ongoing investigation is taking place, and believes at least a dozen other captive managers are involved in the IRS investigation. David McManus, president of Artex Risk Solutions, as quoted in Captive International, said:
“We have already communicated with our small captive customers and referral partners on this and it’s really no surprise that Artex, as one of the largest captive managers in the world, is involved. The IRS clearly recognizes captives as a legitimate tool for businesses, when used correctly and Artex believes that its small capti