Rev. Rul. 77-316, 1977-2 C.B. 53

obsoleted by Rev. Rul. 2001-31, 2001-26 I.R.B. 1348

Premiums paid to the captive were not deductible because there was no transfer of risk outside the “economic family.”

Rev. Rul. 78-277, 1978-2 C.B. 268

obsoleted by Rev. Rul. 2001-31

Federal excise tax is not applicable to payments made to captive if they are not made pursuant to an insurance transaction. Had the captive assumed outside risks, however, the outcome could change.

Rev. Rul. 78-338, 1978-2 C.B. 107

modified by Rev. Rul. 2001-31, 2002-91

Commonly called the “OIL” ruling. Premiums paid to association captive are deductible if there is a true sharing of risk between participants in, or owners of, an association captive. Facts indicated 31 unrelated participants, no one of which accounted for over 5% of aggregate premiums.

Rev. Rul. 79-138, 1979-1 C.B. 359

The computation of federal excise tax is based on gross premiums. Applies to portion of risk assumed by foreign reinsurers.

Rev. Rul. 80-191, 1980-2 C.B. 168

The IRS will not follow the Crescent Wharf and Warehouse Company and Wien Consolidated Airlines, Inc. decisions, which hold that an employer’s liability for workmen’s compensation is deductible in the year of an employee’s death or injury even if the amount of the liability is contingent upon the occurrence of future events. The IRS continues to disallow deductions for expenses not based on a fixed liability.T

Rev. Rul. 80-222, 1980-2 C.B. 211

Federal excise tax is payable on insurance premiums paid to alien insurers. Such payments should not, however, be subject to withholding tax of 30%.

Rev. Rul. 80-225, 1980-2 C.B. 318

Alien insurer is doing business in U. S. and is therefore subject to U. S. income tax if it has an agent in the state.

Rev. Rul. 92-93, 1992-2 C.B. 45

modified by Rev. Rul. 2001-31, 2001-26 I.R.B. 1348

Parent corporation may deduct the premiums paid to its wholly-owned captive subsidiary with respect to group-term life insurance of its employees.

Rev. Rul. 2001-31, 2001-26 I.R.B. 1348

IRS abandoned its 24-year old “economic family” argument for denying “insurance” status (and therefore premium/loss reserve deductions) for single parent and brother-sister captive insurance arrangements.


Rev. Rul. 2002-89, 2002-52 I.R.B. 984

IRS concluded that an arrangement whereby a captive insurance company provided professional liability coverage to 12 brother-sister entities constituted “insurance” for federal income tax purposes. The IRS’s conclusion was based on the application of the brother-sister approach to creating risk shifting and risk distribution.


Rev. Rul. 2002-90, 2002-52 I.R.B. 985

IRS applied the unrelated party risk approach to conclude that a parent’s premium payments to its captive insurance subsidiary were deductible where over one-half of the captive’s premium income and risk exposures derived from unrelated policyholders.


Rev. Rul. 2002-91, 2002-52 I.R.B. 991

IRS ruled that an association captive formed by fewer than 31 unrelated policyholders qualified as an insurance company where no member owned more than 15% of the captive and no member had more than 15% of the vote on any corporate governance issues.


Rev. Rul. 2005-40, 2005-27 I.R.B. 4

The IRS issued additional guidance regarding the required elements for a scenario to qualify as an insurance arrangement for federal income tax purposes. The guidance does not directly address a captive scenario, but has implications for all insurance arrangements, including captives. It reminds taxpayers that the requirement of risk distribution must be met for an arrangement to qualify as insurance. The ruling concludes that an arrangement with an entity that insures the risks of only one policyholder does not qualify as insurance for federal tax purposes because the risks are not distributed among other policyholders. The ruling also explains how the conclusion applies to single-member limited liability companies, which in some cases are treated as disregarded and in other cases treated as separate from their owners.


Rev. Rul. 2007-47, 2007-30 I.R.B

In the context of environmental remediation funding via a commercial insurance policy, essentially requires “event” risk for insurance tax treatment, holding that timing and severity risk alone are insufficient and denying the policyholder a premium deduction and the commercial insurer a loss reserve deduction.


Rev. Rul. 2008-08, 2008-5 I.R.B. 340

This ruling explains how arrangements between an individual cell and its owner are analyzed for purposes of determining whether there is adequate risk shifting and risk distribution to constitute insurance. The IRS says it will treat a captive cell arrangement as insurance for income tax purposes if the cell insures several different subsidiaries of the corporation that owns control of the cell.


Rev. Rul. 2009-26

This ruling presents two situations to illustrate the application of insurance principles to whether a reinsurance arrangement is sufficient for the assuming company to qualify as an insurance company under section 831(c) of the Code. The guidance holds that:

  1. where the only business of the assuming company is the assumption of a block of business that itself constitutes insurance, the assuming company qualifies as an insurance company; and
  2. where the assuming company enters into agreements with various insurance companies, an agreement with one ceding company that involves the risks of a single policyholder should be treated as reinsuring risks such that the assuming company qualifies as an insurance company