| Tax Shelter
Disclosure Regulations. |
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These regulations were first
published 3/2/00
as temporary regulations requiring a corporate
taxpayer to make appropriate disclosure if it
engages in either: (i) a "listed transaction"
as defined; or (ii) a transaction that reduces
taxes by $10 million and that meets 2 of 6 other
criteria -- unless that transaction is in the
ordinary course of business. These regulations
were modified on 8/16/00,
on 8/7/01,
and on 6/18/02
to include non-corporate taxpayers. Revised temporary
regulations were published on 10/22/02,
effective 1/1/03, and expanded to require disclosure
if a transaction meets any one of six criteria.
Final regulations,
published and effective 2/28/03, basically follow
the revised temporary regulations published on
10/22/02. |
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| State Independently
Procured Premium Taxes |
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Dow
Chemical Company v. Carole Keeton Rylander, Comptroller
of State of Texas, 38 S.W.3d 741 (Tex. App.-Austin[3rd
Dist.] 2001, cert denied) |
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This
case again declared Texas' independently procured
premium tax unconstitutional. |
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State
Board of Insurance v. Todd Shipyards Corp., 370
U.S. 451 (1962) |
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Landmark
U.S. Supreme Court case limiting a state's ability
to tax a foreign domiciled insurer. |
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Additional Background on
Captive Planning (to come) |
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Captive
Structuring |
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IRS
Revenue Ruling 2001-31 |
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In this ruling, the IRS abandoned
the "economic family" doctrine which the Service
used to attack captive planning. |
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UPS
v. Commissioner, 254
F.3d 1014 (11 Cir. 2001) |
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In this significant
case, the taxpayer's tax motivation for forming
a captive was upheld in a $2 billion victory for
the taxpayer. |
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Humana,
Inc. v. Commissioner, 881 F.2d 247 (6th Cir.
1989) |
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In this landmark case, the
Service lost its "economic family" argument. |
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Kidde
Industries v. U.S., 40 Fed. Cl. 42 (1997) |
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Holds that Humana case applies
to brother-sister subsidiaries and not divisions. |
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IRS
Notice 2002-70. |
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In this November 2002 pronouncement,
the IRS announced that captive transactions utilizing
certain reinsurance arrangements (so-called "PORCs")
resulting in shifting of income will be "listed
transactions" for purposes of Reg. Sec. 1.6011-4. |
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IRS
Revenue Procedure 2002-75. |
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In this publication, the IRS
announced that it will now consider ruling requests
on the tax treatment of captives. |
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IRS
Revenue Ruling 2002-89. |
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In this ruling, the IRS determined
that where a captive derives 50% of its premiums
from underwriting its parent's risks (with the
other 50% of premium revenue from unrelated parties),
there was sufficient risk distribution to constitute
"insurance." |
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IRS
Revenue Ruling 2002-90. |
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In this pronouncement, the
IRS ruled that a captive which insured 12 subsidiaries
of a common parent, with no unrelated insurance
underwriting, had sufficient risk distribution
to constitute "insurance." |
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IRS
Revenue Ruling 2002-91. |
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In this ruling, the IRS determined
that if within a group captive no one member's
covered risks exceeded 15% of the group's total
risks, then that captive possessed sufficient
risk distribution to constitute "insurance." |
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IRS
Notice
2003-34. |
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In this Notice the IRS
discusses the criteria for an entity to qualify
as exempt form federal income tax as an organization
described in section 501(c)(15) of the Internal
Revenue Code. |
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IRS
Notice
2003-35. |
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In this Notice the IRS
advises that companies organized as insurance
companies, often offshore, that invest in capital
in, among other things, hedge funds which generate
investment returns that substantially exceed
the needs of the insurance business, may not
qualify as an insurance Company, resulting
in adverse tax consequences as discussed in
the Notice. |
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Article
from New York Times 4/1/03 "Insurance Loophole
Helps Rich" |
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Article
from New York Times 4/4/03 "Tiny Insurers
Face Scrutiny As Tax Shields" |
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IRS Revenue Ruling 2005-40 |
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In this pronouncement, the
IRS discusses the qualifications of certian arrangements
as
" insurance" for federal income tax
purposes and specifically addresses the risk
distribution
requirement of a purported insurance contract
under four fact scenarios listed in the ruling. |
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Client Mailings and Client
Memoranda RESTRICTED ACCESS |
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CAPSTONE ASSOCIATED SERVICES, LTD.
The Galleria 
Post Oak Tower
5051 Westheimer, Suite 1875
Houston, TX 77056-5604
713/850-0550
Fax: 713/623-0329
info@CapstoneAssociated.com
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Alternative Risk
Planning for the Middle Market
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