From: Captive Insurance Times
The IRS’s Notice 2016-66 is having negative effects on the reputation of the captive insurance industry, according to Skip Myers and Jim McIntyre.
Speaking at the Captive Insurance Companies Association (CICA) International conference, Myers, partner of the insurance group at Morris, Manning and Martin, suggested that the notice adds a “taint” to the industry.
He said: “The notice has already had a chilling effect on the industry, along with the requirements of the Protecting Americans from Tax Hikes (PATH) Act, which [both] are essentially aimed at getting rid of the opportunity for state planning or transfer of wealth from one generation to another and avoiding gift tax.”
He added: “It’s taking its toll and it is going to continue to be an issue for the whole captive industry.”
McIntyre, partner of McIntyre & Lemon, suggested that there is nothing wrong with a captive taking the 831(b) election if it qualifies.
He said: “The real issue is whether the captive is being set up for purely insurance purposes or whether it is being set up for wealth transfer and state planning purposes. The issue is what that is going to do to the reputation of the captive industry. I think the captive industry should be concerned.”
According to Myers, CICA’s position has always been to manage captives right, and not to be driven by their tax benefits. He said: “Unfortunately, there are others who think the tax part of it is more significant than the risk management part of it.”