In an article published on February 28, 2020 by Bloomberg Tax, Chamberlain Hrdlicka Philadelphia-based Shareholder Philip Karter and Atlanta-based Associate Patrick McCann, Jr. discuss the recent captive insurance global settlement initiative by the IRS explaining that the announcement likely overstates the true impact of the initiative but makes clear the government’s commitment to increased scrutiny of the captive insurance industry.
“On Jan. 31, 2020, the IRS announced that nearly 80% of taxpayers who received an offer under a global settlement initiative related to transactions with small captive insurance companies had accepted the terms of that settlement,” explain Karter and McCann.
Under the terms of the IRS settlement, operating companies that claimed a deduction for insurance premium payments made to a related captive insurance company would concede 90% of the claimed deduction. In exchange, the IRS agreed not to assert any additional income to the captive insurance company.
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