Trump tax cuts to impact captives; "crucial" to get tax advice


The Tax Cuts and Jobs Act of 2017 introduced by the Trump administration includes provisions affecting captives and risk retention groups (RRGs), and they should therefore contact their tax advisor to learn how it may affect them, according to captive management and consulting company JLT Insurance Management (USA).

“It is crucial that both life and property-casualty insurance captives review their reserves and surplus positions because the tax bill may impact them,” says Anne Marie Towle, executive vice president and consulting practice leader for JLTIM (USA).

The tax cuts have been considered the most dramatic tax change for corporations in decades, with corporate tax rates dropping significantly in 2018.

A few of the changes that JLTIM suggested should prompt a review include changes reducing the maximum federal income tax rate from 35 percent to 21 percent, and changes affecting reserve positions and discounting.

Furthermore, JLTIM said captives and RRGs should consider the changes treating foreign taxes differently, including the deduction in dividends and minimum tax rate for Base Erosion Anti-Abuse (BEPS) situations, as well as the foreign tax position and payments to foreign affiliates.

Finally, they should consider changes that alter how life and annuity companies can treat net operating losses and how life companies calculate risk-based capital (RBC).

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Captive International