Legal Articles & Cases

Captive Insurance Legal Articles and CasesCertain landmark cases have contributed to the process by which the captive insurance industry operates today. The Harper v. Commissioner case in 1992, The Malone & Hyde, Inc. v. Commissioner case in 1995, and most recently, and the Rent-a-Center v. Commissioner case in January of 2014 shed light on the need for alternative risk management options like captives—and their legitimacy. The growth of 831 (b) captives and support entities such as reinsurance companies and captive managers is undeniable. Mid-market companies are seeking more comprehensive methods for insuring their risks and becoming more cost-efficient.

In this section, you will have the opportunity to read the details of each case as well as insightful legal articles. Even as new laws are passed, you will be able to see the progression of how captive insurance came into its own as a viable alternative risk management solution. The court decisions for each case act as a reminder that the ancillary benefits offered by captives combined with the supplemental risk coverage they provide is a powerful combination and option for many business owners and advisors.

We invite you to review these legal articles and cases as part of your due diligence on the captive industry.

State Independently Procured Premium Taxes

Captive Structuring

  • TREAS. REG. Section 1.337(d)-4 abd Exempt Organizations - The IRS issued final regulations generally affecting a taxable corporation that transfers all or substantially all of its assets to a tax-exempt entity or converts from a taxable corporation to a tax-exempt entity in a transaction other than a liquidation
  • Cumulative Bulletin Notice 2001-51, I.R.B. 2001-34, August 2, 2001 - On February 28, 2000, the Internal Revenue Service issued Notice 2000-15 , 2000-12 I.R.B. 826, identifying certain transactions as "listed transactions" for purposes of §1.6011-4T(b)(2) of the temporary Income Tax Regulations and §301.6111-2T(b)(2) of the temporary Procedure and Administration Regulations. This notice restates the list of transactions identified in Notice 2000-15 as "listed transactions" effective February 28, 2000, and updates the list by adding transactions identified in notices released subsequent to February 28, 2000
  • PLR 200242023 - Relief for late filed 953 (d) election granted under 301.9100-3(a)
  • Tax Shelter Prop - TD 9017 - Tax Shelter Props. Regs.- The IRS has published temporary regulations (T.D. 9017) that revise the categories of transactions that must be disclosed on returns under temporary reg. section 1.6011-4T
  • IRS Revenue Ruling 2002-89 - 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."
  • IRS Revenue Ruling 2002-90  - 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."
  • IRS Revenue Ruling 2002-91 - 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."
  • Notice 2003-34 - Notice 2003-34 – Insurance definition – offshore entities in hedge funds
  • Notice 2003-35 - Notice 2003-35- The purpose of this notice is to remind taxpayers that an entity must be an insurance company for federal income tax purposes in order to qualify as exempt from federal income tax as an organization described in 501 ( c ) (15)
  • Relief under 301.9100-3 - Relief under 301.9100-3 of the Procedure and Administrative Regulations granting an extension of time to file under election under section 831(b)(2))(A)(ii).”
  • IRS Issued Proposed Regulations - IRS issued proposed regulations that provide guidance regarding the treatment of transactions involving obligations between members of a consolidated group and the treatment of transactions involving the provision of insurance between members of a consolidated group
  • TAM 200827006 - TAM 200827006 - Ruling discusses whether a manufacturer’s original product warranty risks covered by the Reimbursement Policies purchased by Taxpayer constitute insurable risks for federal tax purposes
  • Notice 2016-66 - Certain Section 831 (b)'s captive arrangements are "Transactions of Interest" to be reported to the Internal Revenue Service