WASHINGTON (Feb. 21, 2008) – The Internal Revenue Service’s decision to withdraw the proposed consolidated return regulation is a positive development for the insurance marketplace, according to the National Association of Mutual Insurance Companies (NAMIC). NAMIC submitted comments and met with members of the IRS and the U.S. Department of Treasury raising concerns about the regulations and urging the IRS to abandon the proposed rule.
“We’re pleased the IRS has withdrawn this proposal,” said Carl Parks, NAMIC’s senior vice president for government affairs. “The IRS has not shown - or even alleged - abuse of the consolidated return rules, and the proposed policy change would have had a significant and potentially negative effect on the insurance marketplace.”
By amending the consolidated return regulations, the proposed rule would have prohibited captive insurers from taking a tax deduction when reserves are established; instead delaying deductions for related party reserves until claims are paid, thus creating an unlevel playing field.
In its comments, NAMIC said the single entity approach of the proposed regulation would have been inappropriate in the context of intercompany transactions. NAMIC also argued that any such change should first be open to public input via hearings.
“We look forward to working with the IRS to foster an efficient and effective business environment for our nation’s insurers and policyholders,” Parks said.
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Posted: Thursday, February 21, 2008 12:00:00 AM. Modified: Thursday, February 28, 2008 2:26:20 PM.
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