Excise Taxes and Reinsurance: Wholly Foreign Retrocessions Are Not Taxable, Part II.

This post will continue my discussion of Validus Reinsurance, Ltd. v. United States, 2015 U.S. App. LEXIS 8602 (D.C. Cir. May 26, 2015), focusing on the D.C. Circuit’s analysis of the presumption against extraterritoriality, which led it to conclude that the excise tax on reinsurance purchased from foreign insurers imposed by Section 4371 of the Internal Revenue Code did not reach wholly foreign retrocession transactions.

The D.C. Circuit began its analysis by explaining that the presumption against extraterritoriality directs a court to presume that a statute has no extraterritorial effect unless affirmative Congressional intent is “clearly expressed.” Validus, 2015 U.S.… Read More

Excise Taxes and Reinsurance: Wholly Foreign Retrocessions Are Not Taxable.

Under Section 4371 of the Internal Revenue Code, foreign insurers are subject to an excise tax on casualty insurance and indemnity bonds, provided that they are issued to an “insured.” I.R.C. § 4371(1). Related reinsurance policies are also subject to this tax. I.R.C. § 4371(3). An “insured” is either “a domestic corporation or partnership, or an individual resident of the United States, against, or with respect to, hazards, risks, losses, or liabilities wholly or partly within the United States,” or “a foreign corporation, foreign partnership, or nonresident individual, engaged in a trade or business within the United States, against, or with respect to hazards, risks, or liabilities within the United States.” I.R.C.… Read More

Reading Really Is Fundamental: A Reminder that Statutory Language Is Important.

Lawyers are prone to focus on case law. Perhaps it’s because our education was focused upon reading cases. Or it may just be that cases are easier to read: even a weak judicial opinion is far better written than the vast bulk of legislation. But we need to remember to focus on statutory language because it is often controlling. A recent local tax case from the Commonwealth Court drives this point home.

In Giles & Ransome, Inc. v. Whithall Twp., No. 645 C.D. 2012 (Pa. Commw. Feb. 11, 2012), the court addressed a dispute over the extra-territorial impact of a business privilege tax.Read More