Partnering with SIIA to Shape Captive Insurance Policy in DC

By Sandra Fenters

Over the last 5 years, we have seen a whirl wind of activity around captive insurance in Washington. Some very positive; some less so.

Consider the following:

  • Farm mutuals received a boost with the 2015 PATH (Protecting Americans from Tax Hikes) Act.
  • In the initial versions, small business captives (taking the 831b election) were originally omitted, but with some lobbying, they were ultimately included in the final bill. Consequently, these captives enjoyed a healthy increase in tax deductibility limits of insurance premiums; this was a big boost for small business captives, and it looked like the captive market for small businesses would boom.
  • The Treasury and IRS had seen abuses over the years with select captive plans and began to cast a suspicious eye on many existing captive policies. The IRS issued a series of onerous Notices (for example: 2016-66), ramped up audits and filed a number of lawsuits to target broadly any possible abuses.
  • Part of the challenge was that Congress did not specify much of the detail of the new rules which led to industry and government confusion.
  • So despite the gains for small business captives (taking the 831b election) in 2015, an aggressive IRS has muted much of the gains.

 

Helping to Steer the Policies

With this uncertainty, SIIA (The Self-Insured Institute of America) and its Captive Advocacy Team have been active for the last few years to help shape the legislation and policies related to small business captives utilizing the small captive tax election.

I have been active on the Captive Advocacy Team since 2015 and have made over a dozen trips to DC to support these efforts. We focus on informing the legislators about the benefits of captives and are aware of the onerous reporting requirements.

My most recent trip was this Spring when colleagues and I met with the legislative teams of Richard Burr (NC), PatToomey (PA) and David Perdue (GA). During the blitz, 13 SIIA Advocacy Team members met with 38 legislative teams.

 

SIIA Advocacy Going Forward

Ryan Work, Vice President, Government Relations of SIIA, leads this governmental advocacy program and comments that after a few years of a more reactive mindset of ‘putting out fires,’ the Team plans to be more proactive in its lobbying efforts in Washington.

My next scheduled visit is November 20, 2019.

Please let me know if you have any questions or input on this program.

IRS Announces Settlement Offers for Select Captives


Update from Sandra Fenters

The IRS issued a notice earlier this week which provides a settlement offer to certain taxpayers who are currently under audit and possess bad fact patterns within their captive program.

According to DugganBertsch, the IRS has touted several recent victories with respect to “micro-captive” transactions, but these cases have illustrated bad taxpayer fact patterns that were strongly in the IRS’s favor. By litigating these bad fact pattern cases first, the IRS hopes to discourage taxpayers with stronger fact patterns from continuing their defense of their positions. However, many of the several hundred pending cases in Tax Court have more taxpayer-favorable facts and circumstances; they are likely to create a more favorable precedent.

Capterra Risk is very active on Capitol Hill, and our staff regularly conducts Congressional meetings focused on key committees of jurisdiction, including Senate Finance and House Ways and Means, as well as leadership and Chairman offices. This ongoing engagement centers around educating Members of Congress and their staff about captive insurance in general, the importance of risk mitigation and the issues facing the captive owners and managers. As part of this effort, Capterra is working to establish a set of proactive principles to help further advance and benefit the industry, in partnership with state and federal regulators.

While the recently announced settlement only applies to a small percentage of captives under current IRS examination, we wanted to make you aware of the Notice.

If you would like to discuss this news further, please contact Capterra Risk at 412.802.2600.