Wednesday, September 21, 2011

IRS Tells Examiners to Step Up Scrutiny of Captive Foreign Insurance Subsidiaries

The Internal Revenue Service Sept. 19 told its examiners to more closely scrutinize captive foreign insurance subsidiaries during excise tax audits of foreign insurance companies.

The new memorandum (SBSE-04-1811-070) is the latest development in a continued crackdown on the use of these subsidiaries to avoid taxes.

In the Aug. 9 document, released on the web Sept. 19, IRS told agents to check whether captive subsidiaries have engaged in closing agreements with the service and whether there is additional information relating to controlled industry cases.

The guidance outlined a detailed list of other issues agents must look for. It follows a series of other documents unveiled by IRS over the past year indicating the agency is not only looking closely at such subsidiaries, but may be auditing them individually.

Text of SBSE-04-1811-070 is available at

1 comment:

  1. Great advice! Everything said here is accurate - captive insurance companies and domestic welfare benefit plans funded with life insurance are like flashing neon signs that scream AUDIT!

    If you have one, contact a competent tax lawyer. Even if you are assessed penalties by the IRS, you may have a right of recovery against the promoter or insurance agent who sold you the plan.

    Great article - thanks

    Brian Mahany