Update: Senate Finance Committee Proposal on 831(b) Captives

US Finance Committee - Captol Hill
April 21, 2015 (Houston, TX)
- In our email dated February 13, 2015, we informed you of a Senate Finance Committee proposal to increase the annual limitation on premiums of small property and casualty companies that elect alternative taxation under section 831(b) of the Internal Revenue Code (“IRC”). On April 14, 2015, Rep. Erik Paulsen (R-MN) and Rep. Ron Kind (D-WI) introduced a bill (HR 1788) to take action. The bill would increase the limit on net written premiums (or, if greater, direct written premiums) from $1,200,000 to $2,200,000 and index the amount for inflation.

Also on April 14, 2015, Sen. Orrin Hatch (R-UT) introduced a bill (S 905) that would increase the limit on net written premiums to $2,200,000 and indexes the amount for inflation, but would provide an alternative method for inflation indexing to that of the House bill. Besides an unrelated provision, Senator Hatch’s bill would call for the Secretary of the Treasury to submit a report to the Senate's Committee on Finance on the abuse of captive insurance companies for estate planning purposes.

The House bill (H.R. 1788) was referred to the House Committee on Ways and Means, and the Senate bill (S 905) was placed on the Senate’s general legislative calendar. Please note that several measures to increase the limit on net written premiums found in IRC section 831(b) have been introduced in the past, yet the $1,200,000 limit remains at the same level set when introduced in 1986.
Editor's Note: The current cap on the 0% Federal income tax rate on premiums is CURRENT_PREMIUM_CAP million.


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