Budget proposal to disallow deduction for reinsurance premiums paid to affiliates; other insurance tax provisions

Insurance Tax Bulletin

President Obama yesterday submitted a Fiscal Year 2014 budget to Congress, including a number of International and insurance industry ‘tax reform’ proposals estimated to raise $157 billion and $30.5 billion respectively over 10 years. Of specific importance to foreign owned US insurance companies is a provision that limits deductions for reinsurance premiums paid by a US insurance company to its foreign affiliates. The provision is similar to previous budget proposal, as well as to the ‘Neal Bill’ originally introduced by Congressman Richard Neal (D-MA) in 2009. Under this proposal, a US insurer with an affiliate that is based abroad and not subject to US tax law, could not deduct as an expense reinsurance premiums paid to that affiliate.

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