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Wyden Unveils New Bill to Close Offshore Reinsurance Tax Loophole
WASHINGTON –Senate Finance Committee Ranking Member Ron Wyden, D-Ore., today introduced legislation that would prevent offshore tax avoidance by some U.S. hedge fund “reinsurers.” The bill, “The Offshore Reinsurance Tax Fairness Act,” would close the tax loophole which allows hedge fund reinsurers to take advantage of an exception to the passive foreign investment company (PFIC) rules of the U.S. law.
“We need a fair tax code that doesn’t allow for winners and losers,” Wyden said. “For over ten years now this loophole has allowed some hedge fund investors to avoid paying hundreds of millions of tax dollars. It’s time we shut it down for good.”
This new legislation builds on requests over the past year by Wyden to the Treasury Department and IRS to issue guidance to help end this abuse. In April, the agencies proposed regulations that provided a first step in addressing the issue. The Offshore Reinsurance Tax Fairness Act goes further in fully closing this long-standing tax loophole by creating a bright-line test for determining whether a company is an insurance company for purposes of the exception.
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