Groups representing captive insurers made a concerted appeal tothe Internal Revenue Service asking it to withdraw a proposal thatwould change the way captives deduct losses, saying that the rulingis contrary to existing legal precedent.

The IRS' proposed regulation would require captives to deductlosses on a cash basis rather than an accrual basis by changing theexisting treatment of inter-company transactions to match rulesgoverning manufacturing companies not those governingproperty-casualty insurance companies.

Two groups, the Coalition for Fairness to Captive Insurers,which was set up to contest the rule, and the Vermont CaptiveInsurance Association, in comment letters to the IRS, asked the IRSand the Treasury Department to hold a public hearing on theissue.

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