An amendment has been introduced into US Congress that proposes increasing the premium limit of the 831(b) election from $1.2 million to $2.2 million.
The amendment to a Senate-proposed change to HR 34, introduced in the House of Representatives by Kevin Brady, would increase the premium limit and mean that a greater number of small insurance companies, including micro captives, would only pay income tax on their investment income.
According to the amendment, dubbed the Tax Increase Prevention and Real Estate Investment Act, to ensure that the 831(b) election is not abused, no more than 20 percent of net written premiums for a tax year would be attributable to any one policyholder.
The amendment also states that alternatively, a company would be eligible for the exception if each owner of the insured business or assets has no greater an interest in the insurer than he or she has in the business or assets, and each owner holds no smaller an interest in the business than his or her interest in the insurer.
It would also eliminate the ability of small insurance companies to meet the tax tests for risk distribution through risk pooling arrangements.
The provisions would be effective for tax years beginning after 2015.
