Captive Insurance In Crosshairs As Tax Dodge

Captive insurance companies – subsidiaries set up one or a number of businesses to self-insure – have long been seen as an advantageous alternative by many companies, large and small. Captives offer a number of tax advantages, including tax deductible premiums and favorable treatment for accumulated funds when they are passed to heirs. Now, says an article in the New York Times, some of these programs are coming under scrutiny by the IRS.  One ploy said by the IRS to be abusive: paying premiums to the subsidiary for risks that are extremely remote. A jewelry company that insured against “radioactivity from a ‘dirty’ bomb or from nuclear fuel or nuclear waste” is among those that have been targeted.