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Tax Reform: Insurance Provisions—Spotlight on Property & Casualty Insurers

A number of provisions included in the Senate’s tax reform bill, H.R. 1 (the Senate Bill) would impact the insurance sector. Many of the provisions would affect only the life insurance industry. Others affect property & casualty (P&C) insurance companies. Still others affect both life and P&C insurance companies. Many of these proposals align with proposals in the tax reform bill passed by the House of Representatives and given that alignment, may be on the way to becoming law. We will be watching these provisions closely as this historic tax reform initiative proceeds. Continue Reading

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A 360-Degree View: July and August 2017

Wrapping up July—and Looking Forward to August Tax Controversy Activities in August: August 7, 2017: Elizabeth Erickson and Kristen Hazel will be representing McDermott Will & Emery at the 2017 US Captive Awards in Burlington, Vermont. McDermott has been shortlisted in the Law Firm category. August 8, 2017: Tom Jones is presenting an update on Captive Insurance Tax in Burlington, Vermont, at the Vermont Captive Insurance Association Annual Conference “Mission: Possible”— the largest captive insurance conference in the US by number of paid attendees. August 18, 2017: Todd Welty is speaking at the Texas Society of Certified Public Accountants Advanced Estate Planning Conference about: Current developments in federal transfer taxes Current state of federal tax reform Proposed changes to state death tax laws and the impact of those changes on estate Gift and trust planning Consistent basis regulations The state of valuation discounts Recent rulings on defined...

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Run for Cover—IRS Unveils Initial “Campaigns” for LB&I Audits

They’re here!  On January 31, 2017, the Internal Revenue Service (IRS) Large Business & International (LB&I) division released its much-anticipated announcement related to the identification and selection of campaigns.  The initial list identifies 13 compliance issues that LB&I is focused on and lists the specific practice area involved and the lead executive for each campaign.  Prior coverage of audit campaigns can be found here. The initial list, along with descriptions of each campaign, is as follows: Domestic Campaigns Section 48C Energy Credits This campaign is designed to ensure that only taxpayers whose advanced energy projects were approved by the Department of Energy, and who have been allocated a credit by the IRS, are claiming the credit.  Apparently, there has been confusion regarding which taxpayers are entitled to claim the credits. Micro-Captive Insurance This campaign addresses certain transactions described in Notice 2016-66 in...

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SALT Implications of Final Section 385 Debt-Equity Regulations

The recently released regulations under Internal Revenue Code Section 385, addressing the circumstances under which related company debt will be classified as equity for federal income tax purposes, will have a significant impact on not only federal taxes but also on state and local taxes. For a more detailed discussion of these implications by our own Peter Faber, please see here.

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Ax v. Commissioner: The Tax Court Reaffirms that It Is Not Subject to the APA

On April 11, 2016, the US Tax Court issued its T.C. opinion in Ax v. Commissioner.  The notice of deficiency in the case determined that certain premium payments made to a captive insurance company were not established by the taxpayer to be (1) insurance expenses and (2) paid.  But this is not a run of the mill captive insurance case—at least not yet. The Internal Revenue Service (IRS) moved for leave to amend its answer in the case to assert additionally that (1) the taxpayers’ captive insurance arrangement lacked economic substance and (2) amounts paid as premiums were neither ordinary nor necessary (and to allege facts in support of both assertions).  The taxpayers opposed, citing Mayo Foundation for Med. & Educ. Research v. United States, 562 U.S. 44, 55 (2011), and arguing that the Administrative Procedure Act (APA) and SEC v. Chenery, 318 U.S. 80 (1943) barred the IRS from “raising new grounds to support [the IRS’s] final agency action beyond those...

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