Question 1

Is The Latitude Plan a micro-captive?

Accepted Answer

No. The Latitude Plan operates under the 831(a) designation. It does not use the 831(b) micro-captive election that has drawn IRS scrutiny. It deliberately leaves out the structural elements associated with abusive captives: no offshore accounts, no risk pooling with unrelated parties, no trust agreements, and no trustees.

Every policy is priced against a formal actuarial assessment of real, identifiable business risk. Premiums are never sized to a target deduction.

Question 2

Is a privately owned reinsurance company legal? How does the IRS view it?

Accepted Answer

Private reinsurance is an established, roughly $800 billion industry, and 92% of Fortune 500 companies use some form of it. The Latitude Plan carries the 831(a) designation, is structured to satisfy the four-part federal test for insurance, and builds on the direct-procurement doctrine. Case law supporting the doctrine dates to 1897.

Your reinsurance company files annual federal tax returns and is reviewed by licensed CPAs, attorneys, and actuaries. Bring your own CPA and attorney to the introductory call. We'll walk them through the structure.

Question 3

Could this trigger an IRS audit?

Accepted Answer

The structure is designed to steer clear of the red flags the IRS looks for: no micro-captive designation, no offshore accounts, no risk pooling, no trust agreements, and no 'transaction of interest' characteristics.

The IRS does pursue the small percentage of abusive captives formed outside the tax code. That small percentage generates most of the headlines. The Latitude Plan uses a simple, linear transfer of risk through a policy and a treaty, documented end to end.

Question 4

What's the difference between 831(a) and 831(b), and why does it matter?

Accepted Answer

831(b) is an election that lets a small insurance company be taxed only on investment income, capped at an indexed annual premium ceiling. Because the deduction can outrun the actual risk, poorly designed 831(b) micro-captives became a tax-shelter vehicle. The IRS responded with disclosure requirements and enforcement.

The Latitude Plan doesn't take the election. Your reinsurance company is taxed as a true insurer under 831(a), with no premium ceiling and none of the micro-captive audit profile. The premium is supported by actuarial pricing, not by fitting under a cap.

Question 5

Who files my reinsurance company's tax return, and how is it taxed?

Accepted Answer

The carrier's experienced team prepares the cession statements, financials, and federal tax returns, and handles annual reports and domicile communications. That's included in the annual administrative fee from year two.

Under statutory accounting, an insurance company is taxed on earned premiums minus expenses such as claims, claims reserves, ceding fees, and reserves for incurred-but-not-reported losses, plus investment income after deductions. Many structures run an initial net operating loss for several years of the policy's five-year earning cycle.

Compliance & the IRS

A FAQ can take you this far. One hour on a call takes you the rest.