Topic: Tax Related Developments

New York Insurance Exchange Considering Requesting Lower Federal Tax Rate

This updates our February 10, 2010 posting.  According to media reports, New York Insurance Department (the “Department”) Superintendent James Wrynn announced at a membership meeting of the Association of Insurance & Reinsurance Run-Off Companies (AIRROC) that the Department’s tax working group is reviewing whether a revived New York Insurance Exchange (the “Exchange”) should request a lower federal corporate tax rate.  The current federal corporate tax rate is approximately 35%. 

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Obama Proposes Budget That Would End Foreign Reinsurer Tax Advantages

President Barack Obama’s recently released proposed Budget of the U.S. Government for the Fiscal Year 2011 (the “Proposed 2011 Budget”) would disallow the deduction for excess non-taxed reinsurance premiums paid to foreign affiliates by a U.S. insurance company.  The Proposed 2011 Budget projects that this disallowance would result in tax receipts of $22 million in 2011, and totaling $223 million over the next five years. 

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In Private Letter Ruling, IRS Says Captive Reinsurance of Fronted Pools is “Insurance” for Tax Purposes

The Internal Revenue Service (IRS) issued a private letter ruling on December 11, 2009, resolving a taxpayer’s question as to whether its business as a captive reinsurer is “insurance” for tax purposes.  The IRS provides private letter rulings upon individual taxpayer request in which the IRS interprets and applies tax law to a taxpayer’s specific set of facts. 

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Insurance and Financial Regulatory Reform Update

As the House of Representatives prepared to leave for its month-long August recess last week, Rep. Richard Neal (D-MA) introduced legislation to repeal a controversial tax deduction used by foreign reinsurers.  The bill, H.R. 3424, would disallow the deduction for excess non-taxed reinsurance premiums with respect to United States risks paid to affiliates. 

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House of Representatives to Reintroduce the Nonadmitted and Reinsurance Reform Act

Reps. Dennis Moore (D-Kan.) and Scott Garrett (R-N.J.) recently announced their intention to reintroduce the Nonadmitted and Reinsurance Reform Act (the “NRRA”).  As we previously reported here and here, the NRRA would establish national standards on how states may regulate and tax surplus lines insurers and also sets national standards concerning the regulation of reinsurance. 

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