Tax-Exempt Captives: IRC 501(c)(15)

The IRC 501(c)(15) is a provision of the Internal Revenue Code that affords certain tax benefits to small insurance companies. Essentially, property & casualty insurance companies receiving less than $600,000 in gross receipts, whose insurance premiums make up more than 50 percent of those gross receipts, are exempt from federal income tax.

Here’s where it gets technical:

The difficulty in qualifying as a section 501(c)(15) captive is that they’re treated as having received the gross receipts of other corporations that are members of the same “controlled group.”

Small tax exempt insurance companies have become less common after 501(c)(15) was changed in 2004 along with a change in the tax exempt determination ruling policy at the IRS. Prior to 2004, any insurance company whose net written premiums didn’t exceed $350,000 was tax exempt under 501(c)(15). However, even under the revised requirements, there are many captive insurance companies that may still qualify.

In addition to leading the industry in captive planning for mid-market organizations, Capstone has historically taken the lead in the design, formation, and management of captive insurance companies that qualify for 501(c)(15) provision, as well as the 831(a) and 831(b) provisions.

For the last 26 years, Capstone has leveraged an award-winning, multi-disciplinary approach.

About Capstone

Capstone Associated Services, Ltd. is the most integrated outsourced provider of captive insurance services for the middle market. Capstone administers property & casualty insurance companies that provide alternative risk financing services throughout the U.S. Now in its 26th year, Capstone provides turnkey services to manufacturers, distributors, service providers, and professional organizations. Capstone's own staff of insurance professionals includes Chartered Property & Casualty Underwriters, accountants and administrators. Capstone bolsters this expertise with long-standing working relationships with outside CPAs, risk managers, property & casualty professionals, and actuaries. Together, this team offers middle market companies the most comprehensive risk planning solution available. Today, captives are the premier risk management and risk-financing tool for qualified middle market companies.

To learn more about how alternative risk planning and captive insurance can protect your business from uninsured risks, please contact us at 713.800.0550.

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