Too much candy for a nickel?

Captive Review

PUBLISHED ON: April 8, 2010

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Occasionally tax advisors get questions about whether a §831(b) captive’s $1.2m annual limitation on net written premiums will become inflation-indexed.

Most recently, on 22 July 2009, a bill (HR 3301) was introduced in the US House of Representatives that proposes raising the annual premium limitation to $2,025,000 for a §831(b)-electing insurance company and inflation-indexing such limitation in future years.

The proposal is similar to previous bills in previous Congresses going back to 2003. The National Association of Mutual Insurance Companies says it has led efforts to amend the tax legislation. The Property Casualty Insurance Association of America and the Allstate Insurance Company have also reportedly lobbied for such legislation. Advocates of the proposal bemoan that the $1.2m limitation, which was established by the 1986 Tax Reform Act, has not been updated since then.