JUNE 2018


The N.C. General Assembly Gives Final Approval To Legislation That Exempts Foreign Captive Insurance Companies

(Southern Pines)…..The N.C. General Assembly has given final approval to legislation that exempts “foreign” captive insurance companies from all state taxes. Currently, North Carolina does not tax captives chartered in other states that do business or write coverage in the state. This is in contrast to states, like Tennessee, which impose a “procurement” tax on captives chartered outside their domicile but insure risks for companies doing business in the state.  The exemption law changes are contained in SB 99, codified as SL 2018-5 and can be found at Sections 38.2(f), (g), page 234. See

Specifically, the exemption language would  prohibit NCDOR from taxing premiums earned, for example, by a South Carolina chartered or licensed captive doing business and insuring a risk located in North Carolina. The specific tax exemptions are for premium taxes, corporate income taxes, franchise taxes, privilege taxes and insurance regulatory charges imposed by NCDOI. Raising fairness and equal protection issues, your Association sought unsuccessfully to have the legislative proposal amended to also provide the same exemption for “alien” captives insuring North Carolina risks. We believe that further amendments will be sought in the 2019 Regular Session when other technical amendments to the NC captive law are considered.

Since the original Captive Insurance Act was passed in 2013, it has been the stated policy of our domicile to encourage both “foreign” and “alien” captives to re-domesticate to the state

The General Assembly (HB 382) Approves Three Technical Changes To The NC Captive Act.

The General Assembly (HB 382) has also approved 3 technical changes to the NC Captive Act. In GS 58-10-345(g), the word “investigation”  was eliminated because the word “audit” sufficiently addresses the type of work that may be conducted by consultants retained to assist NCDOI with its responsibilities under the statute. Next, GS 58-10-355 was amended to delete the word “investigation” as the word “audit” again sufficiently addresses the activities of the section.  Finally, when captives update changes in officers or directors, the bio changes shall be deemed approved unless disapproved within 30 days from the Commissioner’s review of the bio affidavit GS 58-10-385(a). These technical changes are codified at SL 2018-120.

NCCIA is Considering a Push For A “Premium Tax Holiday” During The 2019 Session Of The NC General Assembly

Looking ahead to the 2019 session of the General Assembly NCCIA is considering a push for a “premium tax holiday” next year – bringing home captives chartered on-shore and off-shore that are insuring risks located in North Carolina. This tax incentive could be of benefit to health care providers, as well as banking, finance organizations and other companies.

Efforts By A Captive Insurance Industry Service Provider to Block Implementation Of IRS Notice 2016-66 Continues

Efforts by a captive insurance industry service provider to block implementation of IRS Notice 2016-66 continue. A Memorandum Opinion & Order by a Federal Judge in Tennessee on November 2, 2017 denied injunctive relief to CIC Services (a manger of captive insurance companies). Subsequently the Plaintiffs gave Notice of Appeal to the United States Court of Appeals for the 6th Circuit. That Brief was completed on June 21st with CIC Services, the appellant, filing its Reply Brief.  

The IRS continues to assert that the Anti-Injunction Act (“AIA”) bars this suit, despite its acknowledgement that the Service failed to comply with the Administrative Procedures Act (“APA”). This occurred when the agency declared certain types of captive insurance transactions to be “reportable transactions” by unilateral fiat. NCCIA filed an Amicus brief supporting CIC Services in April 2017. The association continues to follow the appellate process as it continues in Cincinnati, Ohio.

CIC Services is represented by the Dayton, Ohio law firm of Falke & Dunphy (Adam Webber, Esq.).  Alex Webb, former NCCIA Chairman, served as Of Counsel in the original Complaint for Injunctive & Declaratory Relief filed in March 27, 2017.

Continuing Education Credits Are Available For Attorneys and CPA’s (10.5 hours) At The Upcoming NCCIA Annual Conference

Continuing education credits are available for attorneys and CPA’s (10.5 hours) at the upcoming NCCIA Annual Conference at Charlotte’s LeMeridien & Sheraton Hotels. Kicking off with an opening plenary session on Monday, August 20 featuring Col. Quincy Collins, hero of the Vietnam War and roommate of US Senator John McCain in the infamous Hanoi Hilton POW prison followed by a networking reception and the opening of the conference exhibition hall. Over the next day and a half there will be numerous networking opportunities and special breakout sessions on topics current to the industry. The conference closes on Wednesday with an overview of current legal issues presented by Chas Lavelle and Bruce Wright. To register for the conference go to  or call the Diane Waltman at association headquarters at 910.684.8379.

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