Daily Tax Update - December 23, 2015: IRS Will No Longer Apply Excise Tax to Certain Purely Foreign Retrocessions

IRS Will No Longer Apply Excise Tax to Certain Purely Foreign Retrocessions:
Today, the IRS issued Revenue Ruling 2016-3, which revokes Revenue Ruling 2008-15, in view of the decision of the US Court of Appeals for the District of Columbia in the case of Validus Reinsurance, Ltd. v. United States, 786 F.3d 1039 (D.C. Cir. 2015).  As a result, the IRS will no longer apply the one-percent excise tax imposed by section 4371(3) to premiums paid on a policy of reinsurance issued by one foreign reinsurer to another foreign insurer or reinsurer under the situations described in Rev. Rul. 2008-15.  In Validus, the court, applying the presumption against extraterritoriality, held that the excise tax under section 4371 did not apply to reinsurance policies purchased by one foreign reinsurance company from another foreign reinsurance company.


Affordable Care Act Changes in the Omnibus/Tax Extenders Legislation:  The omnibus spending/tax extenders legislation enacted on December 18 contains several provisions relating to the Affordable Care Act (ACA).  For more in-depth coverage, click here.

Expensing and Depreciation Provisions in the Omnibus/Tax Extenders Legislation:  
Among the tax provisions included in the Protecting Americans from Tax Hikes (PATH) Act of 2015 are sections that make permanent the enhanced Internal Revenue Code (Code) section 179 expensing and phaseout limits and the 15-year write off for qualifying retail, restaurant, and leasehold improvements, as well as extend bonus depreciation for five years.  The PATH Act also provides a retroactive extension for various other business depreciation provisions.  For more in-depth coverage, click here.