Weitere ähnliche Inhalte Ähnlich wie InKnowVision September 2013 Captive Insurance Powerpoint (20) Mehr von InKnowVision (20) Kürzlich hochgeladen (20) InKnowVision September 2013 Captive Insurance Powerpoint2. www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
Today’s webinar qualifies for 1 Continuing Education credit for CPAs and CFPs. We will send an email to all attendees following the
webinar with details regarding CE credits.
Polling questions are asked at various points in the presentation. People must respond to polling questions to indicate that they are
actively participating in the presentation. People who are logged into the call, but do not respond to any polling questions will not
receive a Certificate of Attendance.
An evaluation form must be completed and returned via fax or email in order to receive CPE credits.
CPA CE
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Agenda
Benefits
Business Owner Profile
Case Study
Formation
Taxation
Application
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Benefits
Wealth accumulation
Favorable tax treatment
Minimize/reduce insurance costs
Customize risk coverage
Increased cash flow
Wealth preservation
Asset protection
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Profile Client
Successful business or profession
Has uninsured risk
Has insured risk willing to self insure
Gross revenue - $10M or more
Taxable income and free cash of at least $500k or
more
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Developers
General Contractors
Subcontractors
Manufacturers
Professional Services Firms
Franchisees
Restaurant / Hotel Chains
Physician groups
Hospitals
Profile Client
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Case Study
Manufacturing company (C Corp)
$35M sales
Operations in and out of the US
300 employees
Net profit - $4.5M annually
Significant insurable risks
Estimated premium to insure all risks totals $2M
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Captive Formed
Captive formed
Insurance coverage selected and written by captive
Captive makes 831(b) election
Premium paid $1.2M
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Income Tax Year 1
Deduction to manufacturing company
Saves approx. $400k in income tax
Captive has no taxable income on premium received
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Income Tax Year 2
Deduction to manufacturing company
Saves approx. $400k in income tax
Captive has some taxable income
Premium is non-taxable (if less than $1.2M)
Investment income on reinvested underwriting profit is
taxable
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Process - Qualification
Financial qualification
Risk assessment
Cost - benefit analysis
Decision to proceed or not
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Process - Implementation
Engage manager
Underwriting review and report
Actuarial analysis and pricing of risk
Risk coverage selection
Formation, capitalization and licensing
Premium payment
Policy issue
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Captive Insurance Companies
Insurance company
Formed to insure risk
Liability
Operating Risks
Business Risks
Exclusions
Deductibles
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Captive Jurisdictions
Nevis
Anguilla
Bermuda
Utah
Nevada
Vermont
Kentucky
Delaware
District of Columbia
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Types of Captives
Pure Captive – Single Family House
Risk reinsurance
Cell / Series Captive – Apartment Building
Less expensive
(Revenue Ruling 2008-8) Uses the 12 or more subsidiary safe
harbor (Rev. Rul. 2002-90)
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Single Parent Captive
Group Captive
Homogeneous – same industry
Heterogeneous – multiple industries
Types of Captives
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Foreign corporations taxed as US taxpayer
Foreign corporation not taxed as US taxpayer
CFC’s and 50% or more US shareholders
US Shareholder means at least 10% ownership
CFC’s and less than 50% US shareholders
Domestic companies – US taxed
Types of Captives
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Capital Required
Statutory Requirements
$125k Cayman
$10k Anguilla
$35k Nevis
$250k Vermont and Delaware
$200k Nevada
Other Requirements
Amount of coverages and premiums
History of claims
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Tax Issues
Premium deductibility by US taxpayer
Ordinary and necessary
Real insurance – Helvering v. Le Gierse, 312 U.S. 531 (1941)
Risk distribution
Risk shifting
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Real Insurance
Risk sharing (spread risk over a number of insured)
Harper Group v Commissioner (1991) 96 TC 45 – 30% OK
Rev. Rul. 2002-89 - less than 50% OK
Pooling – Reinsurance
Actual exposure to risk of loss
Risk shifting – move the risk off of the balance sheet
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Reinsurance Pool
Reinsurance
Pool
Company
1
Company
2
Company
3
Company
4
Company
5
Company
6
Company
7
Company
8
Company
9
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Tax Issues
Income to the captive
If captive is a:
Foreign corporation and not a CFC – no US tax
But 4% excise tax if writing domestic business
CFC or 953(d) company – US tax (unless 831(b) election)
Domestic company – US tax (unless 831(b) election)
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953(d) Election
Election by non-US company to be taxed as a US
company
No excise tax on insurance premiums
Can own US real estate
Company files US 1120-PC as if domestic company
Reduced filing requirements
Company must post LOC equal to 10% of gross income or have
assets in the US equal to that amount
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953(d) Election
Election to be treated as US company
Waive all treaty benefits
File US tax returns
Disclose all shareholders
Name POA in US to receive notices
Maintain an office in US
Have assets in US equal to 10% of captive income
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831(b) election
For small insurance companies including captives
Companies making the election can exclude up to
$1.2M in net premium
In lieu of reserve calculation requirement
Must pay tax on investment income
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Distributions from Captives
Distributions are taxable when paid out from the
captive (pure or cell)
Taxable as dividends
May be a favorable rate
If company is sold in stock or stock redemption, then sale
proceeds are taxed at capital gains rates
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Planning Ideas
Captives may be often owned by their parent
Captives may have one or more owners
Captives do not have to be owned by a parent
company
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Planning Ideas
Captive
Trust for
children/grand
children
Underwriting profit passes gift
tax and GST tax free to trust
and its beneficiaries
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Key Employees
Have stock owned by key employees
Can have vesting
Buy out/redemption provisions
Underwriting profits benefit loyal and productive key
employees
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Asset Protection
Transfer for adequate consideration
Fraudulent conveyance laws
Ownership by trust
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Costs
Pure Captive
$80,000-$190,000 in year of formation
$72,000-$115,000 in subsequent years
Fee is also related to premium (pool costs)
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Scott Hamilton, CEO
InKnowVision, LLC
www.inknowvision.com
630-596-5090 x80
Questions or Comments?