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CPAs: Talking to Your Clients About Captive Insurance and Alternative Risk Planning

New Captive Insurance ServicesAs a CPA, taking the lead as a true financial advisor means delivering alternative methods for money management, risk assessment, and tax planning. Middle market business owners in industries such as manufacturing, construction, retail, agriculture, shipping, and others must look at all aspects of their business to ensure it remains profitable and resilient when losses occur. This is why talking to your clients about forming a captive insurance company makes sense.

When your client forms his or her own small P&C insurance company (a captive), they will not only gain a strong risk management strategy, but they will also benefit from the comprehensive planning that the captive affords. Insurance premiums paid to the captive are made on a tax-deductible basis; yet the captive can elect to only be taxed on its investment income. That is, the premiums received by the captive are tax exempt. Other benefits may include secured loans, dividends, and other asset protection. Gaps in their commercial insurance policy can be filled with specially-designed coverages through the captive.

As a CPA or financial advisor, you can position yourself as a subject-matter expert and bring a powerful alternative risk management strategy to the table. Filling gaps in insurance coverage while maximizing the financial integrity of your client’s business will undoubtedly strengthen your business relationship and solidify your position as a trusted advisor. Stand out from your competitors—talk to your clients about forming their own captive insurance company.

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Tax Update on the Captive Insurance Industry
(Houston, TX) April 7, 2015 – Tax controversies surrounding captive insurance companies have led to a national dialogue. In this interview, originally published by Captive Review, tax attorney Logan R. Gremillion and CEO/General Counsel for Capstone, Stewart A. Feldman delve into these issues and provide refreshing insight. CPAs and others who are researching current IRS viewpoints as well as current legislation can download the pdf version to read the interview transcript in its entirety.

Sec. 831: Tax On Insurance Companies Other Than Life Insurance Companies
As suggested by the Internal Revenue Code, middle market businesses that insure risks through a captive insurance company are currently at a planning advantage. Here, you can read the details of IRC Section 831(b) and other Sections of the Code.

Tax Issues: U.S. Sides with Tax-Avoiding Companies
(Houston, TX) July 23, 2015 - Bloomberg explains that the Obama administration was integral in helping businesses avoid taxes by way of a foreign domicile. Although he quickly criticized corporate inversions, there was no indication that The Department of Homeland Security put any measures in place to reverse a noteworthy memorandum on the issue.

Estate Tax Remains In Effect
(Houston, TX) April 22, 2015 – With the right estate planning in place, the current federal estate tax exemption could increase. Read more about current legislation affecting estate taxes in this short article.

The IRS’ List of “Abusive Tax Schemes”
(Houston, TX) February 10, 2015 – The tax attorneys at The Feldman Law Firm, LLP, the affiliated law firm to Capstone, details the so-called “dirty dozen” list issued by the Internal Revenue Service. CPAs and others can get the full story behind the controversy and how they should approach captive insurance planning. The Feldman Law Firm LLP has successfully handled 175 captive projects since 1998 and more than 60 substantive reviews by the IRS. Get the full story.

Income Tax Hikes and Multi-State Estate Planning
(Houston, TX) February 6, 2015 – News stories from the past few years are included. Get the history (by way of stories from trusted sources) of tax hikes that have affected middle market business owners. See where we’ve been and where we’re going in the captive arena.

U.S. Tax Court Validates Another Captive Insurance Arrangement
(Houston, TX) November 10, 2014 – Today’s current captive insurance climate has been shaped, in part, by legislation. The adoption of alternative risk management strategies that include the formation of a captive is on the rise. The U.S. Tax Court has validated many captive insurance arrangements; this has provided a backdrop for new captive domiciles and more business owners forming their own insurance companies. In this article, you’ll get the details on landmark cases that have undoubtedly contributed to the popularity of captive insurance companies formed in the U.S. and around the globe.

Captive Insurance Companies Still On The Hook For State IPP Taxes?
(Houston, TX) August 20, 2014 - Two senior U.S. Senators, Patrick Leahy (D-Vermont) and Lindsey Graham (R-South Carolina), introduced legislation to clarify the Non-admitted and Reinsurance Reform Act (NRRA), enacted as part of the 2010 Dodd Frank Act. This story provides some perspective, as the proposed legislation is still being hashed out. Overall, the vague language of the NRRA resulted in a nationwide excise or gross receipts tax on captive insurance premiums.

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