Articles, White Paper

Articles

Summary: The Final Legislative Changes to IRC 831(b)

In this article, Beckett Cantley provides explanation of the legislative changes, specifically geared around the two new definitional terms as well as the key addition to IRC 831(b).

The IRS & SFC Anti-§ 831(b) Actions: Targeted or Broad Based?

Beckett G. Cantley & F. Hale Stewart, The IRS & SFC Anti-§ 831(b) Actions: Summary: In this article published in Captive Visions Magazine Online, Prof. Cantley and F. Hale Stewart discuss the recent listing of certain captive transactions on the IRS Dirty Dozen list as well as the U.S. Senate Finance Committee hearings on captive insurance. Many of the issues were addressed during the ABA roundtable discussion on Monday, March 2nd. IRS SFC Broad Based?

IRS Loses Captive Insurance Case on Good Taxpayer Facts

Beckett G. Cantley & F. Hale Stewart, IRS Loses Captive Insurance Case on Good Summary: In this Tax Analysts article, Prof. Cantley and F. Hale Stewart discuss why they believe the next wave of captive litigation cases will be more fruitful for the IRS, and why practitioners should be cautious. Tax Notes, Nov. 17, 2014

What is Anti-Avoidance Law, and How Might it be Used by the IRS?

Beckett G. Cantley & F. Hale Stewart, What is Anti-Avoidance Law, and How Might it be Used by the IRS?, Captive Visions Magazine (October 2014).
Summary: In this article published in Captive Visions Magazine, Prof. Cantley and F. Hale Stewart discuss the basic tenets of anti-avoidance law, as well as some of the ways the IRS might apply them to the captive insurance industry. What is Anti-Avoidance Law, and How Might it be Used by the IRS?

Can An 831(b) Captive Become An Impermissible Virtual IRA?

Beckett G. Cantley, Can an IRC § 831(b) Captive Insurance Company Become an Impermissible Virtual IRA?, Captive Visions Magazine (July 2014).
Summary: This article published in Captive Visions Magazine discusses how the IRS may take issue with investments being the driving force for the formation of a captive insurance company (CIC). Can An 831(b) Captive Become An Impermissible Virtual IRA?

Captive Insurance Company Premium Loan Backs: Proper Investment or Improper Return of Capital?


Beckett G. Cantley & Bruce G. Luna, Captive Insurance Company Premium Loan Backs: Proper Investment or Improper Return of Capital?, Captive Visions Magazine (March 2014).

Summary: This article by Profs. Cantley and Luna discusses the risks inherent in a captive insurance company (CIC) loaning paid-in premiums back to the joint owners of the CIC and insured business. CIC Premium Loan Backs Proper Investment or Improper Return of Capital?

Risks Posed by the IRS Offshore Crackdown and Recent Case Law to International IRC 831(b) Captive Insurance Companies

Beckett G. Cantley, Risks Posed by the IRS Offshore Crackdown and Recent Case Law to International IRC 831(b) Captive Insurance Companies, Cayman Financial Review (January 15, 2014).
Summary: In this article published in the Cayman Financial Review, Prof. Cantley discusses several of the current IRS compliance issues specifically facing captive insurance companies formed in foreign jurisdictions. Risks Posed by the IRS Offshore Crackdown and Recent Case Law to International IRC 831(b) Captive Insurance Companies

Current Tax Issues with Captive Insurance Companies

Beckett G. Cantley & F. Hale Stewart, Current Tax Issues with Captive Insurance Companies, The Business Lawyer (ABA Business Law Section), January 2014 (online edition).
Summary: In this article published with the American Bar Association, Prof. Cantley and F. Hale Stewart provide an overview of several current IRS compliance issues with captive insurance companies. Current Tax Issues with Captive Insurance Companies | Business Law Section

Environmental Preservation and the Fifth Amendment: The Use and Limits of Conservation Easements by Regulatory Taking and Eminent Domain

Becket G. Cantley, Environmental Preservation and the Fifth Amendment: The Use and Limits of Conservation Easements by Regulatory Taking and Eminent Domain, Hastings West-Northwest Journal of Environmental Law & Policy, Vol. 20, No. 215 (2014).
Summary. Successful preservation of environmentally and historically significant property requires the utilization of various innovative land conservation strategies. The government has three alternative land conservation strategies, including (1) using the police power to issue environmental and land use regulations; (2) the use of the eminent domain power over environmentally sensitive lands; and (3) the use of conservation easement programs.

Repeat as Necessary: Historical IRS Policy Weapons to Combat Conduit Captive Insurance Company Deductible Purchases of Life Insurance

Beckett G. Cantley, Repeat as Necessary: Historical IRS Policy Weapons to Combat Conduit Captive Insurance Company Deductible Purchases of Life Insurance, 13 U.C. Davis Bus. L.J. 1 (2012).
Summary. This article argues that the IRS is likely to view an arrangement where a small business owner funds a CIC for the primary purpose of obtaining deductions on owner-insider life insurance premium payments as similarly abusive to prior listed transactions involving IRC § 419 plans, IRC § 412(e)(3) plans, and IRC § 831(b) PORCs, as well as in violation of its historical tax enforcement policies against discriminatory insider tax benefits, and improper uses of key man life insurance. The article states that the IRS should view the use of an entity as a direct conduit for achieving an impermissible tax-deductible premium payment in the same manner as it would the taxpayer taking the deduction directly. This article discusses (1) the history of IRS enforcement and tax policy in combating improper tax uses of life insurance, and (2) evaluates the likely success of applying these historical arguments to establish that insider life insurance premiums are not deductible, nor should any tax-deducted funds be used to purchase such policies.

Steering Into the Storm: Amplification of Captive Insurance Company Compliance Issues in the Offshore Tax Crackdown

Beckett G. Cantley, Steering Into the Storm: Amplification of Captive Insurance Company Compliance Issues in the Offshore Tax Crackdown, 12 Hous. Bus. & Tax L.J. 224 (2012).
Summary. This article provides: (1) a discussion on the compliance issues surrounding the use of CICs; (2) a detailed discussion of the progression of the IRS offshore crackdown; (3) an analysis of the rationales for choosing an offshore jurisdiction for forming a CIC; and (4) a discussion of the IRS crackdown’s potential negative effect on the choice to utilize an offshore IRC § 831(b) CIC.

The Forgotten Taxation Landmine: Application of the Accumulated Earnings Tax to IRC § 831(b) Captive Insurance Companies

Beckett G. Cantley, The Forgotten Taxation Landmine: Application of the Accumulated Earnings Tax to IRC § 831(b) Captive Insurance Companies, 11 Rich. J. Global L. & Bus. 159 (2012).
Summary. This article discusses: (1) the requirements, benefits, and tax attributes of an IRC § 831(b) captive insurance company (“CIC”); (2) an overview of the Accumulated Earnings Tax (“AET”) and the reasonable needs test which must be met to avoid the AET; and (3) the potential future application of the AET to an IRC § 831(b) CIC and the negative results that could arise if the IRS chooses to do so. Given that the IRS has yet to announce any policy about applying the AET to combat the growth of this popular tax arrangement, this article seeks to analyze how the IRS may prospectively make use of this tool and how CIC owners and managers should conduct themselves to not run afoul of the IRS.

The New Tax Shelter Opinion Letter Regulations: Cutting Back a Client’s Ability to Rely on the Advice of His Counsel

Beckett G. Cantley, The New Tax Shelter Opinion Letter Regulations: Cutting Back a Client’s Ability to Rely on the Advice of His Counsel, 18 Akron Tax J. 47 (2003).
Summary. This article analyzed certain Proposed Treasury Regulations (“Opinion Regs”) relating to the issuance of tax opinions by counsel on matters that are “reportable transactions”. The Opinion Regs were the seemingly final piece in Treasury’s offensive against tax shelters. The Opinion Regs put up significant barriers to a client being able to rely on advice of counsel in tax shelter matters. The main question this article discussed was whether the inability of a client to rely on a client’s counsel on such complicated matters as tax shelters is good public policy. This article answers the question by concluding that it is not good public policy.
Citations. This article has been cited in the following articles, cases, congressional reports, and/or books:

  1. Matthew Piper, Gimme Shelter: How the Accountant’s Contingency Fee and the Attorney’s Opinion Letters Have Contributed to the Proliferation of Abusive Tax Shelters, 83 N. Dak. L. Rev. 261, 278 (2007).
  2. Peter A. Prescott, Taxpayer Civil Penalty Protection: Long Term Capital Holdings and Its Wake, 81 Temp. L. Rev. 995, 1016, 1033 (2008).
  3. Marina Vishnepolskaya, Permissible Offshore Funding Arrangements for Nonqualified Deferred Compensation Plans Under Treasury Regulation § 1.409A-1, 15 Journal of Deferred Compensation: Number 4 (Nonqualified Plans and Executive Compensation), at 27.
  4. Cogdell, 620-2nd T.M. (BNA), Practice Before the IRS; Attorney’s Fees in Tax Proceedings.

United States v. KPMG

Beckett G. Cantley, United States v. KPMG: Does Section 6103 Allow the IRS to Put Taxpayer Names on the Front Page of the Wall Street Journal?, 50 Clev. St. L. Rev. 1 (2002-2003).
Summary. This article discussed whether the IRS violated Section 6103 of the Internal Revenue Code (“IRC”) when it disclosed the names of several prominent taxpayers in a public lawsuit involving KPMG, a “Big Four” CPA firm. The disclosure lead to a Wall Street Journal article titled “IRS Releases Names of People in Disputed KPMG Tax Shelters”. Section 6103(a) sets forth the general rule that taxpayer “return information” is generally confidential, subject to certain limited exceptions. Section 6103(b)(2) provides that “return information” includes taxpayer names as well as other information. The article concluded that it is likely that the United States (“US”) violated the general rule of Section 6103 because the US improperly disclosed taxpayer names in the KPMG case. However, the article further concluded that it is unlikely that the named taxpayers would recover damages because the US is likely to meet the exception where the disclosing party has a good faith, but erroneous, interpretation of Section 6103.

The Tax Shelter Disclosure Act: The Next Battle in the Tax Shelter War

Beckett G. Cantley, The Tax Shelter Disclosure Act: The Next Battle in the Tax Shelter War, 22 Va. Tax Rev 105 (2002).
Summary. This article analyzed the most important sections of the draft “Tax Shelter Disclosure Act” (“TSDA”), including the significant amendments to the Internal Revenue Code that would have been made by the TSDA. Two of the main provisions of the TSDA define what constitutes a “tax shelter” and raise the penalties associated with tax shelters. The article synthesized and analyzed the criticisms of several important organizations who issued public comments on the legislation and provided policy assessments of its likely benefits and burdens.
Citations. This article has been cited in the following articles, cases, congressional reports, and/or books:

  1. Camilla E. Watson, Tax Compliance: Should Congress Reform the 1998 Reform: Legislating Morality: The Duty to the Tax System Reconsidered, 51 Kan. L. Rev. 1197, 1214 (Dec. 2003).
  2. Memorandum from Brian L. Anderson, Victoria B. Bjorklund, Karl E. Emerson, Jonathan B. Forman, Perry Israel, & David Mullon, Advisory Committee on Tax Exempt and Government Entities (ACT), TE/GE Abusive Tax Shelters Involving Tax-Exempt and Government Entities Project Group (May 12, 2003) (on file with IRS), available at http://www.irs.gov/pub/irs-tege/act_rpt2_part2.pdf.
  3. James S. Eustice, Federal Income Taxation of Corporations and Shareholders: Corporate Tax Shelters § 5.10 (Thomson/RIA 6th ed. 2011).
  4. 5 Am. Jur. Proof of Facts 2d 89 (Originally published in 1975).
  5. 10 Am. Jur. Proof of Facts 2d 165 (Originally published in 1976).

White Papers

Updating the Summary of Abusive Captive Insurance Practices originally published with the Utah Association of CPAs in 2013

The following additional White Papers are also available upon request:

  • Updates on IRS Ant-831(b) Captive Insurance Companies
  • Alternative Investment Strategies through Life Settlement Portfolios
  • Current Disclosure Requirements for Material Advisors and Certain Taxpayers
  • IRS Anti-abuse Actions

Presentations

Montana 11th Annual Captive Insurance Conference, Corporate Government Essentials for Captives Insurance Companies – IRS 831(b) Enforcement, Whitefish, MT (July 21, 2016)

Montana 10th Captive Insurance Conference , The Evolving Tax Environment for Captive Insurance Companies, Whitefish, MT (July 21-23, 2015)

Western Regional Captive Insurance Conference, Uncertain Landscape: The Investment Uses and Abuses of IRC 831(b) Captive Insurance Companies (May 21, 2014).

American Conference Institute’s Captive Insurance Conference, New York City, NY, April 23-24, 2014

American Bar Association, Business Law Section Spring Meeting, Los Angeles, CA, Captive Insurance and Organizational Risk Management: Issues and Solutions (April 11, 2014).

American Bar Association, Captive Insurance Committee, Hot Topics in Captive Insurance (November 7, 2013).

University of Houston Law Center (March 7, 2012), Issues in International Taxation, Houston Business and Tax Law Journal’s Annual Symposium.

Georgia Society of CPAs (February 21, 2012), Taxation Issues Involving Captive Insurance Companies.

Brigham Young University Law School (October 11, 2011), Current Issues in Taxation & Captive Insurance Company Law.

Annual Meeting of the National Society of Certified Healthcare Business Consultants in Cincinnati, Ohio (June 24, 2011), Captive Insurance Company Law.