Captive insurance audited by IRS | LinkedIn

Captive insurance audited by IRS | LinkedIn: Captive insurance audited by IRS
Published on Published onAugust 30, 2015

Lance Wallach
Following Following Lance Wallach
Managing Director at VEBA LLC.
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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