By: Mark A. Rysberg
On December 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) was signed into law. Proponents and sponsors of captive insurance structures often refer to the tax benefits of I.R.C. Section 831(b), which allows eligible insurance companies to make an election to be taxed only the company’s taxable investment income.
In effect, the 831(b) election allows such insurance companies to collect a set amount of insurance premium without having to pay tax on said premiums. Effective January 1, 2017, insurance companies electing taxation under 831(b) can collect up to $2.2 million in insurance premiums while being taxed only on the taxable income generated from the collection and retention of such premiums.
This increase expands the benefits and opportunities available for companies that can implement a captive insurance aspect into their risk management strategies by, among other things, increasing the amount of otherwise potentially taxable income and leverage that money into expanding into coverage lines that may otherwise not be available.
Mark A. Rysberg is a construction lawyer who maintains a local and national practice representing owners, contractors, subcontractors, and suppliers on a variety of issues affecting all aspects of the construction industry.