Built for the hard questions.

I.The threshold question

Is it really insurance? The IRS four-part test.

Federal courts ask four questions to decide whether an arrangement is insurance for tax purposes. The Latitude Plan is engineered to answer those four questions, with documentation.

1. 1.Risk shifting¹Real economic risk moves from your operating company to a separately capitalized insurance entity. The insurer pays a covered loss directly, keeping it off your operating P&L.
2. 2.Risk distribution²Your reinsurance company is structured to pool independent exposure units, so it is not built as a one-risk shell.
3. 3.Insurance risk²Policies cover fortuitous, real-world perils identified in a formal actuarial assessment. They are not written to cover investment risk or timing games dressed up as coverage.
4. 4.Commonly accepted notions of insurance²Regulated formation, adequate capitalization, arm's-length premiums, issued policies, and claims handling: the structure is built to operate the way insurance is supposed to.

II.The designation that matters

How the 831(a) designation differs from the 831(b) election.

III.The precedent

Direct procurement: over a century of settled law.

Your right to buy insurance directly from an out-of-state insurer, without that insurer being licensed in your state, was recognized by the U.S. Supreme Court in 1897 and reaffirmed for decades since. The Latitude Plan operates inside that doctrine: your operating company procures its policies directly from a licensed third-party carrier, which reinsures the risk to the reinsurance company you own.

• 3.1Recognized by the Supreme Court since Allgeyer (1897)
• 3.2Reaffirmed in Todd Shipyards (1962): states cannot tax or regulate genuinely direct-procured coverage
• 3.3Documented procurement practices are part of every engagement

IV.The domicile

A sovereign domicile inside the United States.

The Latitude Plan's reinsurance companies are chartered in a sovereign U.S. tribal jurisdiction, a framework grounded in the Indian Reorganization Act of 1934. Operations stay fully onshore, with no offshore accounts and no state-registry filings that publish your structure to the world. Premium-tax treatment is favorable relative to state captive regimes.

• 4.1United States jurisdiction (no offshore optics, ever)
• 4.2Regulated insurance framework with licensed professional oversight
• 4.3Your structure is not filed on public state captive registries

V.Compliance questions

Asked by every good CPA.

VI.The authorities

Notes & authorities

1. 1.Helvering v. Le Gierse, 312 U.S. 531 (1941): risk shifting and risk distribution as the defining elements of insurance.
2. 2.Harper Group v. Commissioner, 96 T.C. 45 (1991), aff'd 979 F.2d 1341 (9th Cir. 1992): the four-part framework of risk shifting, risk distribution, insurance risk, and commonly accepted notions of insurance.
3. 3.Allgeyer v. Louisiana, 165 U.S. 578 (1897): the constitutional foundation of the direct-procurement doctrine.
4. 4.State Board of Insurance v. Todd Shipyards Corp., 370 U.S. 451 (1962): direct-procured insurance beyond state taxing power.
5. 5.Indian Reorganization Act of 1934, 25 U.S.C. § 5101 et seq.: the statutory basis of sovereign tribal economic authority.
6. 6.26 U.S.C. § 831(a): taxation of insurance companies. Compare § 831(b) micro-captive elections identified in IRS Notice 2016-66.