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Adkisson's Captive Insurance Companies
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Adkisson's Captive Insurance Companies  Real Experience Means Over 100 Captives Formed Since 1998      
Riser Adkisson LLP
The Captive Insurance Law Firm
Newport Beach, CA - Athens, GA
info @ risad.com or 949-200-7753
Formation & Licensing -- Second Opinions -- Ongoing Review -- Litigation of Captive Issues

 

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Comment on 831(b) Captives

News and upcoming events involving captive insurance companies and alternative risk management, including association meetings, educational forums, etc. Please send us your news, press release, or meeting information to add to our list! Send to jay <at> captivebook.com

Comment on 831(b) Captives

Postby Riser Adkisson LLP » Thu Nov 27, 2008 8:36 am

Click for Diagram: http://www.captiveinsurancecompanies.com/images/831b_structure.jpg

An insurance company, including a captive, may elect under 26 U.S.C. sec. 831(b) to be taxed on its investment income only, so long as the company receives less than $1.2 million in premium each year ($2.2 million beginning in 2017 and indexed against inflation thereafter). The 831(b) election is filed along with the company's first tax return, and cannot be revoked without the consent of the Secretary of the Treasury.

This election is an incentive provided by Congress to encourage the formation of new insurance companies. What 831(b) effectively allows a small insurance company to receive up to $1.2 million per year in premiums, without paying any income taxes on those premiums.

The 831(b) election does not affect -- at all -- the deductibility of the premiums paid by the operating business to the captive. So long as those premiums are otherwise deductible, they may be deducted by the operating business just like any premium payments to a captive. This has the effect of creating an up to $1.2 million deduction in the operating business, with the premium moneys transferred to the captive, and with the captive not paying any income taxes on the receipt of those premiums.
My book: Adkisson's Captive Insurance Companies: An Introduction to Captives, Closely-Held Insurance Companies and Risk Retention Groups
My website: http://www.captiveinsurancecompanies.com
My e-mail: jay >>>at<<< risad.com
My phone: 900-200-7284
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Riser Adkisson LLP
The Captive Insurance Lawfirm - http://www.risad.com
The Captive Insurance Lawfirm - http://www.risad.com
 
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