April 7, 2015 (Houston, TX) - The following was published by Captive Review magazine. Here, Capstone's CEO and General Counsel Stewart A. Feldman and Logan R. Gremillion, tax attorney with The Feldman Law Firm LLP provide insight into current tax issues surrounding alternative risk planning.
Q: Federal income tax issues involving small captive insurance companies have been in the news lately. What is the nature of this continued business press reporting of tax issues involving captives?
(Left) Stewart A. Feldman, CEO and General Counsel, Capstone Associated Services. (Right) Logan R. Gremillion, Tax Attorney, The Feldman Law Firm LLP
SF and LG: There are a couple of things happening. First, a mid-west-based national insurance brokerage firm is in litigation with the IRS. This just surfaced last year. This national brokerage firm acquired an Arizona-based captive services firm 4 or 5 years ago that provides "captive management services,” essentially administrative services. No legal, tax, CPA or professional services are provided to the client by the mid-west-based broker, with the client left to secure these on its own.
As we've explained for years, captive management services inherently require the delivery of complex legal services (e.g., tax, corporate, regulatory, etc.). Despite such, we have seen where the mid-west broker "disclaimed" in its usual contract providing any professional legal, tax or CPA services. To the best of our knowledge, there has not been an investigation of this organization for providing unlicensed professional services. However, the IRS has sued the mid-west-based broker in U.S. District Court to enforce a subpoena which essentially mandates the turnover of all its client files and has obtained an order of the U.S. District Court ordering the wholesale turnover to the IRS of these files. These matters were previously reported by Business Insurance on September 14, 2014.
To read more, download a pdf copy of the article.
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