IRS RULINGS

A closely held insurance company should only be implemented when it makes economic and business sense. There must be an inherent need to cover uninsured risk in a business before considering the implementation of such a company.

The IRS has issued multiple Revenue Rulings, Procedures, Notices and Bulletins addressing various issues associated with the use of closely held insurance companies. Recently issued IRS publications include:

Revenue Ruling 2008-8 Cell Captives
Notice 2005-49 - IRS asks for comments on qualification of certain arrangements as insurance.
CICAcomments_IRSnotice2005-49 - The Captive Insurance Company Association's comments on IRS notice 2005-49
Revenue Ruling 2005-40 - Risk Distribution
Notice 2003-34- Use of Insurance Companies / Hedge Funds
Revenue Ruling 2002-89 - 50 Third Party Insurance Risk
Revenue Ruling 2002-91 - Spreading of Risk in Captive Group
Revenue Ruling 2002-90 - 12 Brother / Sister Subsidiary Requirement
Revenue Procedure 2002-75 - Private Letter Rulings on Insurance Co. Issues
Revenue Ruling 2001-31 IRS Gives Up on "Economic Family Theory"

KEY COURT CASES

Landmark court cases involving Captives and Closely-Held Insurance Companies.

• United Parcel Service of America v. IRS
• AMERCO Inc.; Republic Insurance v. IRS
• Gulf Oil Corporation v. IRS
• Harper v. Commissioner
• Humana Inc. v. Commissioner
• Guy Helvering v. Edyth Le Gierse and Bankers Trust Company
• Ocean Drilling & Exploration Company v. United States

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