June 25, 2015 (Houston, TX) - Time is short to design, form, and implement captive/alternative risk planning with tailored coverages for 2015. These regulated insurers usually take 2-4 months to properly implement. Closely-held middle market businesses that form captives operate in a wide variety of industries, including manufacturing, fabricators, transportation, distribution, construction, healthcare, and retail.
These businesses usually have risks that are either uninsurable commercially, too expensive in the conventional markets, or unreliably offered. First and foremost, a captive is an insurance company, underwriting property and casualty risks. A captive allows the pre-funding of future losses on a tax-advantageous basis. Additionally, a captive insurer provides other planning benefits, such as secured lending, are all in support of the underlying insurance function. Now is an ideal time to explore the benefits of forming a captive. For more information, please contact Lance McNeel, CPCU, ARM, and Vice President of Business Development at WEB_TEL .
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The Tax Inversion Rate Keeps Rolling
July 14, 2015 (Houston, TX) - The Wall Street Journal reports that despite Washington’s efforts last year to protect the U.S. corporate tax base, revenue keeps eroding. Since applicable Treasury rules went into effect last fall, 55 U.S. companies have been sold to or targeted by foreign buyers, many of those acquirers formed by inversions themselves, according to FactSet, a prominent financial analysis and data provider. Several companies have closed deals through tax-beneficial migrations known as inversions.
"Tax inversion" or "corporate inversion" refers to the relocation of a corporation's legal domicile to a country with lower corporate tax requirements while usually retaining its material operations in the higher-tax country of origin (e.g., the U.S.). Through these techniques, large, multi-national companies are able to manage their tax bill, taking advantage of tax rates, a fraction of the 35% charged in the U.S.
Capstone administers the design, implementation, and management of captive insurance arrangements, providing exceptional risk coverage for middle-market organizations. Middle market businesses may obtain tailored risk coverages and fill in gaps in their existing commercial policies with a captive insurance arrangement. Insurance premiums paid to the captive insurer are made on a tax-deductible basis. Please call Lance McNeel, CPCU, ARM -- Vice President of Business Development at WEB_TEL to learn more.
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What the Clarification Act Means for Captives
July 10, 2015 (Houston, TX) - The issue of double taxation as it relates to captive insurance companies has been the crux of The Non-admitted and Reinsurance Reform Act (NRRA) since its enactment in July 2010. The Act, part of the Dodd-Frank Act, contained vague language vis-à-vis captive insurance arrangements that led to uncertainty as to whether captive insurers would be taxed in the home state where their insured businesses were headquartered as well as the state in which their captives were domiciled. The Act failed to explicitly exclude captives from the definition of “nonadmitted insurer.”
The Captive Insurers Clarification Act, introduced by Vermont Senator Patrick Leahy and South Carolina Senator Lindsey Graham is an attempt to clarify this loose language, define a true captive insurance company and provide clear language on the independent procurement of taxes on the insurance purchased from the captive. If passed, the bill would clearly state whether taxes would need to be paid to the home state as well as to the state where the captive is domiciled, leading to double taxation.
Currently, the bill is in its infancy, having just been introduced on June 11, 2015. The bill was assigned to a congressional committee, which will consider it before it goes before the U.S. House of Representatives or the U.S. Senate. Current captive owners should continue to adhere to the regulatory guidelines provided by their domicile. Captive managers, if qualified, should also be able to provide guidance on their state tax obligations.
If you have any additional questions regarding the NRRA or the Captive Insurers Clarification Act, please contact the Firm directly at 713.850.0700.
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Forming a Captive Early Has Powerful Benefits
June 12, 2015 (Houston, TX) - Alternative risk and tax planning done early in the year leaves more time to design and implement tailored insurance coverages, which can only begin once the policies are issued. In turn, policies are only issuable following the application to form an insurer which itself follows the insurer's capitalization and licensing. Thus, fourth quarter transactions are more difficult.
Clients interested in supplementing their commercial insurance coverages with a captive have the unique advantage of writing broad policies paid on a tax-deductible basis to their captive insurance company which in turn finances future losses. Factors such as claims history and anticipated losses, uninsured but insurable risks, investments including secured loans from the captive to the operating company for business-related purposes, and even prospective dividends at favorable tax rates are considered when assessing an alternative risk program.
Capstone is the premier captive insurance planning company in the United States, working with middle market businesses across various industries, including construction, transportation, energy, and manufacturing.