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Captives Fight Off Second IRS Threat

Latest victory on taxation of reserves echoes 1990s battle over 'insurance'

By George Rusu | Updated on March 02, 2008

In a stunning surprise to the captive industry, the Internal Revenue Service announced last month that it is withdrawing a proposed captive regulation that would have effectively eliminated a key federal tax benefit for insurers that cover other members of the consolidated group, included in a consolidated federal return.

This close call gives me cause to reflect on the tremendous growth of the captive market over the last 25 years, and its response to a similar threat in the 1990s.

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