News Update: Captive Insurance and Risk Management

Delaware Insurance Association - Captive Fall Forum

Delaware Captive Insurance AssociationOctober 28, 2014 - Capstone's Megan Brooks and John Boskat attended the symposium in Wilmington, DE on captive insurance issues. Capstone has done formations in Delaware since 2010.

Among the attendees was Steve Kinion, Delaware Director of Insurance. Delaware now ranks as the third largest captive domicile in terms of premiums, with Capstone among the most active sponsors of Delaware captives.

Capstone and The Feldman Law Firm LLP continue to monitor federal legislation and tax issues affecting captives. The only noteworthy matter discussed is the proposed H.R. 4647, increasing the 831(b) premium limitation to $2.025 million versus $1.2 million; this has been referred to the House Committee of Ways & Means but has minimal chance of being passed. This may improve with the Republican gains of November 2014.


Amazon to E.U.: “If You Don’t Like the Law, Change It.”

Multinational companies such as Amazon have a variety of lawful tax planning tools available. Meanwhile, other planning tools, e.g., lower long-term capital gains rates, IC-DISCS, and alternative risk planning, are available to domestic or privately-held businesses.

Other planning is available to individuals. The NY Times article, "Amazon's Tax Deal in Luxembourg Is the Latest Target of E.U. Inquires," addresses Amazon's corporate structure that has helped reduce its 2013 tax rate in the United States, which has a nominal rate of 35 percent to 31.8 percent, according to regulatory filings. Get the full story here.

In association with its affiliated law firm, The Feldman Law Firm LLP, Capstone offers sophisticated turnkey captive planning to midmarket businesses. We offer property & casualty insurance arrangements with annual premiums ranging from $100,000 - $20 million.


NYTimes: Made in the U.S.A., but Banked Overseas

The New York Times reported on Friday, September 26, 2014 in a major business story, Made in the U.S.A, but Banked Overseas, that companies operating only in this country have tax breaks available and often pay considerably less than the statutory corporate tax rate of 35 percent.

As reported, it is a different story for United States companies that operate internationally. “U.S. multinational firms have established themselves as world leaders in global tax avoidance strategies,” said Edward D. Kleinbard, a former chief of staff of Congress’s Joint Committee on Taxation who now teaches tax law at the Gould School of Law at the University of Southern California.

Per Kleinbard: "Companies avoid United States taxes largely by claiming that much of their income is earned in countries where taxes are low or even nonexistent. Apple books profits from patents developed in the United States in an Irish subsidiary that is not taxed there or anywhere else. Caterpillar earns money by producing tractor parts in the United States and selling them to Canadian farmers. It books the profits in a Swiss subsidiary."

While called "tax breaks", there are strong public policy reasons behind these statutory provisions. Among the so-called "tax breaks" available to the U.S. businesses are the Internal Revenue Code's sections that encourage owners of closely-held businesses to establish related property & casualty insurance companies. These P&C companies then insure the risks of their affiliated businesses. Thousands of U.S. companies have taken advantage of these statutory provisions, instituted by Congress, which date back to the 1910s. Capstone has formed over 150 P&C insurance companies since 1998.

We are one of the largest -- and the most integrated -- sponsors of captive insurance companies in the U.S.


Midsize Companies Continue to Utilize Lawful Alternative Corporate Structures

Mid size companies utilizing captive insurance November 11, 2014 (Houston, TX) - Despite national headlines regarding multinational companies' planning strategies, mid-market and multinational companies continue to utilize advanced planning options.

The NY Times article, "Hundreds of Companies Seen Cutting Tax Bills by Sending Money Through Luxembourg," addresses one of the strategies employed by mutlinationals. Get the full story here.

In association with The Feldman Law Firm LLP, Capstone offers sophisticated turnkey captive planning to mid-market businesses. We offer property & casualty insurance arrangements with annual premiums ranging from $100,000-$20 million.


The NFL's $10.5 Billion Profits are Tax Exempt

Please see the enclosed CNN "news" article on the NFL, with its $10.5 billion in profit, being a tax exempt organization under Section 501(c) of the Internal Revenue Code. For well over a decade our clients have long been aware of this unusual tax provision. (Full article here)

As “reported” by CNN, in what obviously is a slow news day:
The National Football League made $10.5 billion in 2013, yet paid no federal income taxes. This historical anomaly dates back to 1942 when the IRS ruled the NFL was a trade association for its now 32-member teams and therefore exempt from taxes as a nonprofit under section 501(c)(6) of the IRC.

Similarly, since 1998 Capstone has operated tax exempt captive insurers formed under Section 501(c)(15) of the Internal Revenue Code, all in conjunction with The Feldman Law Firm LLP. We have had continued success in this area of planning. Our Firm has obtained on behalf of clients approximately forty rulings from the Service confirming the tax exempt nature of these small insurance companies. Our work in this area continues through this day.

If you represent or are a closely-held manufacturer, distributor, fabricator, retailer or service provider and have an interest in alternative risk planning which can provide a platinum level of property & casualty insurance protection to related insureds, please contact either Capstone or our Firm. You can also complete the form below.

Editor’s Notes: As of CURRENT_YEAR, Capstone has been in operation for CAP_YEARS_NUMBER years and has formed over CAPTIVE_FORMATIONS captives. As of CURRENT_YEAR, The Feldman Law Firm has been in operation for LAW_YEARS_NUMBER years and has successfully completed TAX_CONTROVERSIES. The current cap on the 0% Federal income tax rate on premiums is CURRENT_PREMIUM_CAP million.



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