(Southern Pines)…..This week there have been federal and state developments affecting the North Carolina captive insurance industry.
NCCIA has retained the law firm of Womble, Carlyle, Sandridge and Rice of Winston Salem to file a Friend of the Court or Amicus Brief in support of a lawsuit in federal court seeking a temporary injunction to stop the IRS from implementing the notice. (See March NCCIA Newsletter for details of the lawsuit).
NCCIA has actively pursued rescission of this draconian IRS Notice, holding briefing sessions with key staffers for Senator Richard Burr (R-NC) a member of the Senate Finance Committee and Congressman George Holding (R-NC 2) a member of the House Ways & Means Committee. Those meetings occurred in Washington, DC on March 2 and 3. Based on reliable sources, there is very little likelihood that the IRS Commissioner will administratively rescind Notice 2016-66 or further extend the compliance deadline of May 1, 2017 for affected CICs.
NCCIA’s Friend of the Court Brief supports litigation now pending in the US Federal District Court for the Eastern District of TN (N. Div.)(Case 3:17-cv-0010). We strongly believe that the Notice fails to comply with the Administrative Procedures Act (“APA”) applicable to the Treasury Department and the IRS issue of tax regulations or compliance notices. NCCIA’s amicus supports plaintiff’s argument that the Notice implementation should be enjoined by a preliminary injunction; and that the Notice should be declared void under the Federal Declaratory Judgment Act. Womble, Carlyle will file the Amicus Brief prior to the expedited hearing on the Plaintiffs’ motions in Greenville, TN now scheduled for April 19, 2017.
Technical Corrections for NC Captive Insurance Companies: The NC House Insurance Committee will consider 3 technical amendments to the NC Captive Law, which are essentially cosmetic in nature. The amendments contained in House Bill 382, make a number of additional non-related technical changes to other insurance laws.
The House Insurance Committee will consider these on Tuesday, April 11, 2017. The 3 technical amendments are summarized as follows: (1)Amends GS 58-10-345(g) by deleting the word “investigations”. (2) Amends GS 58-10-355 by changing the word “survey” to “review” and deletes the words “Investigation or”. And (3) Adds a provision to clarify the Commissioner’s review and approval or disapproval of changes in the executive officers and directors of a captive insurer. Neither NCDOI or NCCIA anticipate any opposition to the proposed 3 amendments.
However, another bill, Senate Bill 628 which amends G.S. 105-288-4A together with other non-captive related technical changes to the NC Revenue laws, reflects a substantive amendment to the way premium taxes are calculated. This proposal clarifies the premium tax structure for a protected cell CIC or special purpose CIC if the special purpose captive insurer has cells or series structures that are similar to that of a protected cell CIC.
If the amendments are adopted the maximum tax to be paid by this type of insurer is the greater of $5,000 or the aggregate of the tax liabilities of each protected cell or series of the CIC. The maximum tax to be paid by a protected call or individual series within an insurer is $100,000. The minimum tax of $ 5,000 applies to the protected cell or special purpose CIC as a whole and not to each protected cell or series.
Additional language has been added to the amendment which clarifies common ownership and control for premium tax purposes. Your Association will continue to follow these legislative matters as they are subject to deadlines for cross-over consideration by the Senate (H. 382 and the House (S. 628). The full text of these changes can be found at the NC General Assembly website- go to link for a specific bill found in the upper right corner of General Assembly Home Page. Type in either H382 or S628 for fuller details. No meeting date for S. 628 has been scheduled by Senate Rules Committee.
The NCCIA Annual Conference Program will be announced on the NCCIA Website next week along with registration and hotel information. The Annual Conference is scheduled for August 21-23 at the Ballantyne Hotel in Charlotte. A limited number of exhibit booths are still available. Contact Diane Waltman in the association office for details.