The Internal Revenue Service (IRS) will increase the annual premium limit for captives taking the 831(b) election in the United Stateso to $2.85m for 2025.
The change is part of the IRS’ annual release of inflation adjusted items.
“For taxable years beginning in 2025, under 831(b), the amount of the limit on net written premiums or direct written premiums (whichever is greater) is $2,850,000 to elect the 18 alternative tax for certain small companies under § 831(b)(1) to be taxed only on taxable investment income,” the note states.
In April 2023, the IRS “obsoleted” its notorious Notice 2016-66 and issued new proposed regulations that identify certain micro captive transactions – those making the 831(b) tax election – as “listed transactions” and other micro captive transactions as “transactions of interest”.
Last month, the IRS announced plans to release the text of the 2024-2025 priority guidance, which includes plans to finalise its micro captive regulations.