US Tax Court: Securitas a Bona Fide Captive Insurance Arrangement
October 30, 2014
US companies are entitled to premium and interest expense deductions if a captive is created for business purposes, an opinion of the US Tax Court has determined.
The US Tax Court concluded in the Securitas Holdings, Inc. and Subsidiaries case that the captive arrangement is insurance for federal tax purposes.
The court's opinion stated the following:
The captive arrangement shifted risk from the Securitas Holdings, Inc. (SHI), Group to Protectors Insurance Co. and ultimately to Securitas Group Reinsurance Ltd. (SGRL). Further, the captive arrangement distributed risk by insuring a large pool of differing risks. Lastly, the captive arrangement constitutes insurance in the commonly accepted sense.
Accordingly, the premiums paid by the SHI Group are deductible under Section 162 of the Internal Revenue Code as insurance expenses, the court's opinion concluded.
The US Tax Court opinion in Securitas Holdings, Inc., was filed on October 29.
October 30, 2014
