Back in July I wrote a blog about the possibility of some sort of border tax being proposed by Congress as part of a broader tax reform bill that could have a negative impact on the captive insurance industry. Well, as I write this blog the House and Senate have passed versions of tax reform that both have an effect on our industry.
Now, here’s the deal with this bill: Congress is so desperate to pass a bill that shows they achieved something that this bill isn’t on the fast-track, it’s on a rocket with limited guidance control! So there will be a tax reform bill on the President’s desk by Christmas. Using the streamlined “budget reconciliation” process, the GOP needs only a simple majority in the Senate rather than the standard 60 votes, and because Republicans currently control 52 seats, victory seems assured provided defections are be minimized.
Its politics over policy, I am afraid. And though it seems certain that there will be a reduction in the corporate tax rate to 20%, both houses are looking for place to “pay for” these cuts in other areas, and insurance is a pretty easy target. Domestic reinsurers and specialty insurers would be the primary beneficiaries of tax reform, along with insurance brokers and standard commercial insurers, but captives with off-shore reinsurance agreements will be paying more. Relevant to the P&C insurance industry are provisions affecting net operating losses, discounted loss reserves, and, for P&C carriers with a diverse portfolio, the provisions affecting amortization of policy acquisition expenses.
Luckily for you all, VCIA will be presenting a webinar next week to try and make sense out of this chaos. On December 14th, a group of noted captive tax specialists will also explore the recently introduced Tax Reform bill, its impact on captives, and the process it will go through to get passed by Congress.
Panelists include Daniel Kusaila and Thomas Jones, each of whom have been recognized by Captive Review as well as receiving numerous other industry awards, as well as Charles Boustany, Jr., MD, former U.S. Congressman on the influential House Ways and Means Committee and former chairman of the Subcommittee on Tax Policy. Charles is currently a partner with Capitol Counsel LLC, a Washington law firm with expertise on taxation and insurance issues. His insight will bring great value to this session.
Thank you and I look forward to hearing from you.