1403, 2018

CICA: Standing up to the IRS can be good for the industry

By |March 14th, 2018|captives, publishedarticles|0 Comments

March 14, 2018
By Ned Holmes
Published in captive insurance times

For a good captive, standing up to the Internal Revenue Service (IRS) may be the right answer and could positive for the industry as a whole, says John Dies, managing director of tax controversy at alliantgroup.

Speaking at Captive Insurance Companies Association’s (CICA) 2018 Conference, Dies suggested the impact of winning a case against the IRS could be felt across the captive industry.

He said: “It is great for the industry when a captive stands up to the IRS, wins and creates a precedent that the industry can use.”

“We have seen the impact in cases where outsiders thought there was not a chance a captive could win and they made changes in the industry–and I believe that is positive for the industry.”

According to Dies, in the right context fighting the case is the correct move for a captive.

He explained: “In many cases, great […]

1001, 2018

John Dies: Captives Must Be Mindful of Trump’s Tax Reform

By |January 10th, 2018|captives, publishedarticles|0 Comments

January 10, 2018
By Ned Holmes
Published in captive insurance times

Captives need to be mindful of the changes brought by Trump’s US tax reform plan, despite its positive effect on the insurance industry in general, according to John Dies, managing director of tax controversy at alliantgroup.

The Tax Cuts and Jobs Act, which was signed into law on 22 December 2017 by President Trump, brings a permanent cut on corporate tax rates and a temporary cut on individual rates.

The decrease in tax rate means improved profitability and therefore represents a positive for the insurance industry in general.

Although this improved profitability will in turn impact the competitiveness of the market, Dies explained that while rates may go down, he doesn’t expect this to have a huge effect on the captive market.

Dies commented: “I don’t expect captive insurance to take a competitiveness hit, although, it’s undeniable that insurance rates and other things may go […]

1310, 2017

Tax Pros Seeking Clue On Small Captive Insurance Cos.

By |October 13th, 2017|captives, publishedarticles|0 Comments

October 13, 2017
By Eric Kroh
Law 360

As the Internal Revenue Service continues to scrutinize the tax treatment of small captive insurance companies, tax practitioners are looking to a trio of cases before the U.S. Tax Court to discern where the lines will be drawn between legitimate insurers and shams.

The cases — one that has already been decided and two in which decisions are pending — are the court’s first to make it to trial over the intersection of captive insurance companies and Section 831(b) of the tax code, under which companies can elect to be treated as small insurance companies subject to tax on investment income but exempt from tax on premiums received.

In its August opinion in Avrahami v. Commissioner, the Tax Court provided some guidance on how it will decide which captive firms are true insurance companies that merit the small insurer tax exemption, but left tax attorneys and their […]

2408, 2017

Irs Wins Tax Court Ruling in Captive Insurance Case

By |August 24th, 2017|captives, publishedarticles|0 Comments

Published in Accounting Today
By Michael Cohn

The Internal Revenue Service has prevailed in U.S. Tax Court in a case involving an Arizona jewelry store business that received a tax break by insuring itself for millions of dollars, in part against the risk of terrorism.

Benyamin and Orna Avrahami, a couple who own three jewelry stores and three shopping centers in the Phoenix area, spent more than $1.1 million in 2009 and $1.3 million in 2010 insuring their businesses. They set up an insurance company called Feedback, but there were no claims made on any of the company’s policies until the IRS began auditing them, according to the court.

Tax Court Judge Mark V. Holmes summarized the competing claims of the Avrahamis and the IRS in a colorfully written opinion Monday. “With money flooding in and none going back to pay claims, Feedback accumulated a surplus of more than $3.8 million by the […]

2308, 2017

Avrahami Decision Offers Microcaptives Details, No Bright Line

By |August 23rd, 2017|captives, publishedarticles|0 Comments

August 23, 2017
By Emily L. Foster
Published in TaxNotes

Although the Tax Court’s long-awaited Avrahami decision provided a detailed analysis shedding some light on what might constitute insurance for a microcaptive arrangement, it didn’t provide clear guidance on resolving long-standing issues, according to some practitioners.

IRS officials and practitioners “were hoping for a bright line or at least a brighter line,” John H. Dies of Alliantgroup LP said, adding that the IRS has been holding decisions on some captive cases in anticipation of further guidance. But the Avrahami case does not provide the necessary level of guidance, he said.

In Avrahami v. Comm’r, 149 T.C. No. 7 (2017), Judge Mark V. Holmes decided the reportedly first microcaptive insurance case and determined that the arrangements were not insurance and that the company’s section 831(b) election was invalid.

Under section 831(b), captive insurers that qualify as small insurance companies can elect to exclude some of the annual […]

2308, 2017

‘Avrahami’ Decision Could Embolden IRS in Micro-Captive Efforts

By |August 23rd, 2017|captives, publishedarticles|0 Comments

August 23, 2017
By Allyson Versprille

Taxpayers should expect the IRS to take an even harder stance on “micro-captive” insurance arrangements after a recent U.S. Tax Court decision in the agency’s favor, practitioners told Bloomberg BNA.

The Internal Revenue Service will likely feel emboldened after the Aug. 21 decision, said John Dies, managing director of tax controversy at Alliantgroup LP. In the decision, the court ruled that taxpayers—Benyamin and Orna Avrahami—who set up a micro-captive arrangement to protect their three jewelry stores from terrorist attacks can’t claim deductions for amounts paid to their captive insurance company ( Avrahami v. Commissioner, 149 T.C. No. 7, T.C., No. 17594-13, 8/21/17).

“I actually see this case as making it harder to resolve the mass number of captive cases that are out there being examined,” Dies said. “If anything, it’s likely to entrench the positions of both parties even more.”

The facts and circumstances that led the […]

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