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Important Legislative Changes to IRC 831(b)

On Friday December 18th Congress passed the ‘Tax Extenders Bill’ as part of the “Protecting Americans from Tax Hikes (PATH) Act of 2015”. On page 176 were new rules affecting small captive insurance companies.

The language is complicated, but in summary;

  1. The new rules will be effective 1/1/2017
  2. The 831(b) limit will be increased from $1.2M to $2.2M with an inflation provision each year thereafter.
  3. There are new rules relating to spouses or lineal descendants (collectively “Specified Holder”) owning the captive. Basically, if a ‘Specified Holder’ is going to own or have interest in the captive it must own or have equal interest in the insured company subject to a 2% di minimus exception.

For more detail download the Compliance Bulletin.