IRS Loses Captive Insurance Case on Good Taxpayer Facts

3 Pages Posted: 18 Aug 2018

See all articles by F. Hale Stewart

F. Hale Stewart

The Law Office of Hale Stewart

Beckett G. Cantley

Northeastern University

Date Written: November 17, 2014


In 2002 the IRS issued several revenue rulings that established two safe harbor rulings for the appropriate structure of a captive insurance company. Those rulings followed — and were the result of — a long case history that saw taxpayers successfully rebut an IRS argument that a captive insurance company was not a bona fide insurer and therefore was not eligible for deductions related to the paid-in insurance premiums. The IRS losses began in the landmark Humana case, when the court held that insurance premiums paid by brother-sister subsidiaries were deductible. Those losses continued in AMERCO, when the Service unsuccessfully challenged a captive company established by U-Haul International Inc., arguing that Republic Western Insurance Co. was not a viable, stand-alone insurer. The final loss was handed down in UPS, in which the government lost on appeal. For about a decade after the 2002 rulings (until approximately 2010-2011), the Service was relatively quiet regarding captive insurance companies. However, the recent Securitas Holdings case — which followed the Rent-A-Center decision earlier this year — resulted in another loss for the Service in its attempts to challenge captive insurance companies established and operated by larger companies.

Suggested Citation

Stewart, Hale and Cantley, Beckett Gordon, IRS Loses Captive Insurance Case on Good Taxpayer Facts (November 17, 2014). Tax Notes, 2014. Available at SSRN:

Hale Stewart

The Law Office of Hale Stewart ( email )

No Address Available

Beckett Gordon Cantley (Contact Author)

Northeastern University ( email )

4471 Dean Martin Dr. #3708
Las Vegas, NV 89103
United States
702-881-4849 (Phone)

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