The Delaware Captive Insurance Association (DCIA) has teamed up with 15 other captive associations, including the Self-Insurance Institute of America (SIIA), to request guidance on recent changes regarding enterprise risk captives.
The 15 associations sent a letter to the Internal Revenue Service (IRS) and treasury after growing concerns from captive industry participants who suggest there is a need for guidance or clarification before the Protecting Americans from Tax Hikes (PATH) Act revisions to Section 831(b) are enacted.
The letter requests both regulatory bodies to issue guidance on the recent changes, subject to notice and comment; to grant transitional relief pending guidance; and to allow for a safe harbour under common practices until such guidance is issued.
It refers to changes, passed by congress, to the Internal Revenue Code Section 831(b), which will affect how enterprise risk captives will operate, effective 31 December this year.
As of 31 December, the allowable premium threshold will increase from $1.2 million to $2.2 million, however the new law will also impose a number of ownership limitations on the use of small and medium-sized captives.
In addition, the letter seeks clarification on IRS look-through provisions, and asks for clarity on new diversification tests included in the updated law.
Peter Cavanaugh, president of DCIA, said: “DCIA taking action on important issues to the captive industry, engaging policymakers and regulators, and having our voice heard is why membership is so important. Joining so many other state association partners demonstrates just how important it is to pay attention to captive insurance policy and take action.”
