The US Tax Court today has ruled that payments to Rent-a-Center Inc’s wholly owned captive, located in Bermuda, were deductible under section as an insurance expense.
The Tax Court majority found that the Bermuda-based captive insurance company was a genuine insurance company because it was created for significant, non-tax reasons and that there was no impermissible circular flow of funds.
The opinion of the Tax Court majority next turned to address whether the policies at issue involved insurance risk and concluded that the premium payments made by the taxpayer’s subsidiaries to the captive insurance subsidiary were deductible.
The majority’s opinion relies for a significant portion of its analysis on a similar case that was heard in 1989, involving Humana Inc.
The case is among a number of similar lawsuits that aim to define what constitutes an insurance company.
