There is little question that the tax implications of owning and operating a captive insurance company will be significant. For most organizations, the decision to insure through a captive versus a combination of traditional insurance and self-insurance is significantly influenced by tax implications. Many organizations first discover this difference in tax impact from a captive promoter—especially when the tax impact is significant in a way that is beneficial to the potential captive owner. However, if your only motive in forming a captive is to gain some tax advantage, you would be well advised to reconsider. must pay claims if they are incurred, and so on. If, however, your operation is little more than a shell organization designed to provide predictable tax deductions, you should plan on an expensive and uncomfortable series of interactions with the regulators. If you ever receive different advice than this, please get a second opinion before making any commitments. Assuming an organization decides to pursue a captive because operating a legitimate insurance company makes good business sense, the organization has passed the first hurdle to deductibility: a valid purpose for existence. If a captive exists for no other valid purpose than tax benefits, then no other   Read more…