Life Insurers Use State Laws to Avoid as Much as $100 Billion in U.S. Taxes

Source: NY Times

Some companies have been called economic traitors for seeking to lower their tax bills by moving overseas. But life insurers are accomplishing the same goal without leaving the country, saving as much as $100 billion in federal taxes, much of it in the last several years.

The insurers are taking advantage of fierce competition for their business among states, which have passed special laws that allow the companies to pull cash away from reserves they are required to keep to pay claims. The insurers use the money to pay for bonuses, shareholder dividends, acquisitions and other projects, and because of complicated accounting maneuvers, the money escapes federal taxation.

The Transamerica Life Insurance Company used a state law in Iowa last year to reap $1.8 billion from its reserves while also avoiding an estimated $640 million in federal taxes, according to company documents. The deal was unusually large but otherwise followed the general industry trend.

Read more: http://dealbook.nytimes.com/2014/12/12/insurers-use-deals-to-avoid-as-much-as-100-billion-in-taxes/?_r=0