Internal Revenue Code that offers significant and powerful incentives to qualifying small insurance companies.
831(b) applies only to insurance companies that are U. The special tax treatment of 831(b) captives is a powerful tax incentive for small US insurance companies; it encourages businesses to protect themselves, build loss reserve investments more easily, and make themselves stronger by increasing the probability they will have the needed liquidity within the related entity enterprise group to withstand catastrophic loss events otherwise uninsured. Read this valuable e Book with detailed information on the pros, cons and costs if considering an 831(b) captive or an adviser in such transactions - 831(b) Captive Insurance Companies. Disclaimer: This site is for informational purposes only.
Bonney said he would like clarification from the IRS on the partnership representative’s role and whether that person has to report back to the other partners.
“While IRS has addressed this I think it was done in vacuum and I would like to see some guidance,” he said in an email.
A technical corrections bill that would address that issue and other industry concerns was introduced in the last session of Congress by top tax-writers but has yet to be reintroduced this year.
Practitioners hoped the bill could be attached to a broader tax reform package, but it’s unclear whether legislation will be passed this year before the new audit regime goes into effect.
Both Bresson and Greenwald said they would like to see the IRS provide more guidance on how the new partnership audit rules will affect a partner’s outside basis or capital account.
Outside basis measures the adjusted basis of a partner’s interest in the partnership, and a capital account reflects the partner’s equity investment in the partnership.
“Taxpayers are in a bind because these new rules are coming and they need to get ready for them, but there’s still a lot of uncertainty,” Michael P.
“It’s a new issue under these new rules so we don’t have any road maps for how to handle it,” he said. Crouch, a managing partner at Meadows, Collier, Reed, Cousins, Crouch & Ungerman LLP in Dallas, said in an email that if the IRS leaves any areas open to interpretation, they will likely end up being resolved through litigation. 15 to clarify when the proposed regulations permit a partnership representative to be changed) To contact the reporter on this story: Allyson Versprille in Washington at [email protected] contact the editor responsible for this story: Meg Shreve at [email protected] © 2017 The Bureau of National Affairs, Inc.
These incentives help reduce the cost of risk finance transactions, making it far more affordable for successful businesses to insure itself from potentially disruptive risks. Qualifying small insurance companies that make the 831(b) tax election are often referred to as "micro captives" or "enterprise risk captives." Designed, formed and operated correctly, an 831(b) captive does not pay any income tax on its insurance premium revenue (underwriting income), yet payment of those premiums by insured affiliated businesses could be deductible as ordinary business expenses under IRC section 162. The IRS has been discouraging the use of 831(b) qualifying small insurance companies for many years, and will continue increasing review of these arrangements as IRS staff resources allow.
Greenwald said he would like to see the IRS give partnerships more flexibility to change their partnership representatives prior to examinations.
“The partnership representative has a tremendous amount of power and so partnerships should have more flexibility with respect to making changes in that area.” The proposed regulations provide that a partnership representative designation may not be changed—either by resignation or evocation—until the IRS issues a notice of administrative proceeding to the partnership, except when the partnership files a valid administrative adjustment request.