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AIG Urges Treasury to Issue BEAT Clarifications

OCT. 1, 2018

AIG Urges Treasury to Issue BEAT Clarifications

DATED OCT. 1, 2018
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From: Poms, Douglas
Sent: Monday, October 1, 2018 6:51 PM
To: Byrd, Kimberly
Subject: FW: BEAT and Inbound Reinsurance

For FOIA. Thanks.

From: Gallagher, Shawn <Shawn.Gallagher@aig.com>
Sent: Monday, October 1, 2018 6:06 PM
To: Poms, Douglas <Douglas.Poms@treasury.gov>
Cc: Trigonoplos, Darren <Darren.Trigonoplos@aig.com>
Subject: BEAT and Inbound Reinsurance

Doug — we recently saw the Coalition for American Insurance letter (dated 9/13) to Treasury regarding the BEAT. We were pleased that the Coalition agrees with AIG that Treasury should clarify that claims payments associated with a reinsurance contract between a U.S. reinsurer and a foreign related party (“inbound reinsurance”) should not be treated as base erosion payments. In addition, we agree with the Coalition's view that any guidance related to ceding commissions for inbound reinsurance should be consistent with the treatment provided to similar services or other costs in other similar arrangements and industries. We believe Treasury guidance can accomplish that goal in the following manner:

1. Treasury can use its authority to include at-cost expense reimbursement, including ceding commissions, within the exception under section 59A(d)(5) of the tax reform statute. If necessary, Treasury can choose to include the profit component of the ceding commission within its definition of a base erosion payment.

2. If Treasury is concerned about abuse, it could use a simple definition of a ceding commission to limit the applicability. For example, a ceding commission is generally defined as a payment by the reinsurer to the reinsured to compensate the reinsured for some or all of the acquisition expenses of the reinsured contracts plus a small profit component.

3. The IRS already has substantial tools in doctrines such as economic substance or substance over form to attack exotic and inappropriate uses of a ceding commissions exception.

Please let us know if you have any questions.

Regards,

Shawn Gallagher
AIG
Vice President & Deputy Head
Federal Government Affairs
901 K Street, NW, Suite 350, Washington, DC 20001
Tel +1 202 393 9245 | Cell +1 917 355 8249 | Fax +1 202 513 8970
shawn.gallagher@aig.com | https://hyperlink.services.treasury.gov/agency.do?origin=www.aig.com

 

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