(EDITORS NOTE: Due to a Special Session of the NC General Assembly in early August and the need to cover it’s results, the July & August editions of this Newsletter have been combined).
(SOUTHERN PINES) Excitement is growing as the Annual Conference of the NC Captive Insurance Association draws near. There is still time to register for the August 21-23 conference at the Ballantyne Hotel & Lodge in Charlotte. According to Thomas Adams, President &CEO of the association, “Registration and interest in the conference has been strong”. The program kicks off on Monday afternoon with John Jong discussing the strength of the economy and how it will shape the prospects for the
captive industry. Jong is Senior Managing Director of BB&T Capital Markets.
The Conference features 3 Plenary Sessions, 15 Breakout Sessions and numerous opportunities for networking including an opening night reception and the Annual NC Pig Pickin’ and Beach Music Reception.
From Washington: The Association continues to push back on IRS implementation of its burdensome Notice 2016-66. To date, efforts to secure rescission of the Notice have focused on several fronts. Notably, the best opportunity may occur during the forthcoming tax reform debate.
In prior years, major tax law changes have often been the vehicle for delaying, modifying or rescinding IRS regulatory actions that Congress believes contravene the Internal Revenue Code, exceed Congressional intent, or just represent misdirected policy choices. The Association initially supported a delay in the effective date for the Notice, and Treasury bowed to wishes of the captive insurance industry. May 1, 2017 became the initial compliance date for captive submissions. Kicking off our lobbying efforts, your NCCIA outreach team met with Congressional staffers in Washington DC on March 2. Our efforts focused on rescission via the Congressional Review Act, and without success. To date, Congress has only moved 14 rescission bills thru the cumbersome process according to the Wall Street Journal on August 5.
Concurrently, several captive service providers sought to enjoin the Treasury from implementing the Notice, seeking an injunction in Tennessee Federal District Court. The presiding judge declined to grant the relief sought. The case is subject to pending motions by the Government to dismiss, which will likely be granted in the coming weeks. NCCIA filed an “Amicus” or Friend of the Court brief in the TN case, advancing strong arguments why the IRS failed to follow the Administrative Procedures Act in promulgating the Notice. Directly involved, Alex Webb, Esq. co-founder of NCCIA, serves as co-counsel in the TN case proceedings.
Further opportunities presented themselves for the Association to lodge its comments and objections to the Notice. The White House issued major Executive Orders seeking to reduce regulatory red tape in the Government in general and in the IRS in particular. EO 13777 and EO 13789 afforded NCCIA platforms to submit comments as to why we believe the Treasury should rescind Notice 2016-66. Initially, we lodged our position on June 20 with communications to the Secretary of the Treasury and the Director of the Office of Management & Budget. Further Comments were formally filed on July 31 and August 4. NCCIA endorsed the positions taken of record with Treasury by the Self-Insurance Institute of America (“SIIA”) and we collaborated with the SIIA Governmental Affairs team in this regard.
Responding, the IRS initially snubbed the captive insurance industry when it released its Interim Report to the Administration, totally disregarding the concerns expressed and making no mention of the Notice as a “regulation” justifying rescission. While all of this activity played out, NCCIA continued its out-reach to the NC Congressional Delegation, with an all member letter to our 13 Representatives and two US Senators. Subsequent efforts have been focused on direct communications with the staffs of Congressman George Holding (House Ways & Means Committee) and Senator Richard Burr (Senate Finance Committee), as well as Congressman Mark Meadows (who chairs the House Govt. Affairs Subcommittee that has oversight jurisdiction over Treasury). Ultimately, we trust that all of these efforts will become productive, and possibly accomplished thru procedural amendments to the Tax Reform legislation (mark-up begins the week after Labor Day).
These efforts will attempt to obtain a prospective prohibition against further implementation of the Notice by the IRS. All of these lobbying activities have been taken in cooperation with the NC Department of Insurance. NCDOI recognized early that IRS Notice 2016-66 represented a real threat to the growing captive insurance industry. Jeremy Colombik, Chairman of NCCIA, observed that “your Association has been involved in a full court press on the Notice issue for the past 9 months and will continue to advocate for Treasury (IRS) rescission of the Notice as the tax reform legislation progresses. Continuing, “Working in concert with other stakeholders in the captive industry, the Association has committed substantial resources to this effort, and will continue to do so” Colombik concluded.
Meanwhile in Raleigh: The primary focus of the Association’s activities with the NC General Assembly has been that of working in concert with NCDOI to secure changes to the NC statutes that govern the calculation of premium taxes due by captives licensed and domiciled here. A technical corrections bill containing multiple changes to the State’s revenue laws became the vehicle for this undertaking. Senate Bill 628 was amended to rewrite and clarify the language contained in NCGS 105-228.4A. In the late hours of the session on June 30, the Senate declined to concur in the House changes to S.628. This meant the bill had to go to Conference Committee.
When the legislature reconvened on August 4, the Conference Report that was adopted deleted the premium tax calculation changes as well as dollar cap language contained in the prior House amendments. That short session has now adjourned, but will reconvene on August 18 for unrelated reasons. We have learned that the Conferees on the bill were divided – some were for captive tax caps and others were opposed. The amendment was not included in the final bill as adopted.
Working with DOI, NCCIA will revisit this legislation in the coming months to improve on the previous amendments prior to the next Session that convenes May 18, 2018. Stay tuned for developments as we participate in this process.
NCCIA continues to monitor the activities of the NC Department of Revenue (DOR)which proposed several months ago to implement a one-time filing requirement with DOR for domiciled captives of those same documents captives are required to file with the IRS pursuant to Notice 2016-66. NCDOI pushed back on this unnecessary duplicative effort, holding several meetings with top Revenue officials. To date, DOR has not responded to the strong and documented objections lodged by DOI. There is some thought this issue may go away with the passage of time. DOR got what it wanted in a paired down version of S.628 with multiple technical and other corrections to the state’s revenue laws, and it should be busy implementing those for the 2017/2018 tax filing season.
The NCCIA Staff looks forward to seeing you in Charlotte.