IRS reverses position on insurance Federal Excise Tax

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January 2016

Overview

The IRS released Revenue Ruling 2016-03 concluding that it will no longer apply the one-percent federal excise tax (“FET”) imposed by section 4371(3) to premiums paid on a policy of reinsurance issued by one foreign reinsurer to another foreign insurer or reinsurer. The ruling revokes Revenue Ruling 2008-15 which was recently contested in Validus Reinsurance, Ltd. v. United States, 786 F.3d 1039 (2015). Taxpayers that paid FET in situations described in Rev. Rul. 2008-15 should evaluate the filing of refund claims.

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Mark S. Smith

Managing Director, Tax Services, PwC US

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