Did you know that Congress increased the premium limits?
There is a special provision of the insurance tax laws – Section 831(b) – that allows a small insurance company to exclude its premiums from taxable income. In exchange for that, they pay tax on all their investment earnings. Prior to 2017, an insurance company with less than $1.2 million in premiums was considered a micro-captive insurance company. Starting in 2017, Congress increased that limit to $2.2 million. The micro-captive insurance company can be set up and operated as an insurance company, and provide insurance for businesses, while pooling their premiums to cover risks. The IRS is focused on insurance companies that aren’t set up like real insurance companies. In fact, examinations and promoter audits of the captive managers started a few years ago because the IRS is unhappy with the permanent tax savings that people are potentially able to achieve by entering into an insurance company that doesn’t operate like a regular insurance company. Watch this video for details on recent case outcomes and what went wrong.
Matthew D. Lee
Fox Rothschild LLP
- Partner in the Philadelphia office of Fox Rothschild LLP
- Former U.S. Department of Justice trial attorney
- Practice emphasizes all aspects of white collar criminal defense and federal tax controversies
- Advises clients on FATCA and FBAR reporting requirements and IRS voluntary disclosure programs
- Counsels foreign banks on FATCA compliance issues
- Author of The Foreign Account Tax Compliance Act Answer Book 2017 (Practising Law Institute)
- Frequent speaker and writer on issues relating to the IRS voluntary disclosure programs, DOJ/IRS enforcement efforts regarding undeclared foreign bank accounts, and FBAR and FATCA rules and regulations
- Member of the Pennsylvania, New York, New Jersey and District of Columbia Bars
- J.D. degree, Emory University School of Law; B.A. degree, Furman University
- Can be contacted at 215-299-2765 or [email protected]
- Partner with Fox Rothschild LLP
- Former certified public accountant who focuses her practice on tax controversy, tax compliance and tax planning for clients with difficult and sophisticated tax issues
- Extensive experience handling cases involving IRS focused compliance regimes including for clients who invested in listed transactions, conservation easements, captive insurance arrangements, and clients who own marijuana businesses
- Experience as a CPA makes her uniquely qualified to address the issues of the marijuana industry, which are a unique blend of accounting and legal considerations
- Counsels accountants faced with professional liability issues
- J.D. degree, with honors, George Washington University Law School; M.S. and B.B.A. degrees in accounting, Texas A&M University
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