12 US TAX REFORM www.captiveinternational.com
The impact of Trump’s tax reform
Perhaps one of the most
to US tax law has been
passed, but what does it
mean for captives?
pinion seems to be
split as to what the full
implications of the US Tax
Cuts and Jobs Act of 2017
will be on captive insurance companies.
The tax cuts have been hailed as
the most dramatic tax change for
corporations in decades, with corporate
tax rates dropping significantly in 2018.
There are provisions included in the
legislation that affect captives and risk
retention groups (RRGs), and market
players are in the process of examining
the bill and advising captive owners on
any action they should be taking.
The key changes of the law introduced
by the Trump administration include
the slashing of the corporate tax rate
to 21 percent, a dramatic fall from its
previous rate of 35 percent.
Anne Marie Towle, executive vice
president and consulting practice
leader for JLT Insurance Management
(USA), commented on the bill, saying “it
is crucial that both life and propertycasualty
insurance captives review
their reserves and surplus positions
because the tax bill may impact them”.
The changes highlighted by JLTIM
that should prompt a review include the
tax rate slashed from 35 percent, and
changes affecting reserve positions
JLTIM advised that captives and RRGs
should consider the changes in treating
foreign taxes differently, including the
deduction in dividends and minimum tax
rate for base erosion anti-abuse situations,
as well as the foreign tax position and
payments to foreign affiliates.
It has also been advised to consider
changes that alter how life and annuity
companies can treat net operating
losses and how life companies calculate
risk-based capital (RBC).