2 November 2016Law & regulation

DCIA joins with captive associations to send message to IRS and Treasury

The Delaware Captive Insurance Association (DCIA) has joined with 15 other captive associations in sending a letter to the Internal Revue Service (IRS) and US Treasury asking for guidance and clarification for recent changes made to federal policy regarding enterprise risk captives.

The letter is in direct response to what the DCIA claims are growing concerns among captive industry participants that the IRS and Treasury will not issue needed guidance or rulemaking until well after the end of year enactment date.

Managed by the Self-Insured Institute of America (SIIA), the letter asks the key regulatory agencies to: issue guidance on the recent changes, subject to notice and comment; grant transitional relief pending guidance; and allow for a safe harbor under common practises until such guidance is issued.

After extensive advocacy work by DCIA members and others throughout last year, Congress passed the first changes to Internal Revenue code section 831(b) in over 20 years, impacting how ERCs operate, effective December 31, 2016.

While increasing the allowable premium threshold from $1.2 to $2.2 million, the new law also imposes a number of ownership limitations on the use of small and medium-sized captives.

Among other things, the letter seeks clarification on IRS look-through provisions, as well as asking for definitional clarity on new diversification tests included in the updated law.