831(b) Limit to Remain Unchanged for 2019

On the November 15th, 2018 the IRS released it’s tax inflation adjustments for tax year 2019. For captives opting to make an 831(b) election, there will be no change to the limit on annual premium written, which will remain at $2.3m in 2019.

The IRS specifically stated, “For taxable years beginning in 2019, under § 831(b)(2)(A)(i) the amount of the limit on net written premiums or direct written premiums (whichever is greater) is $2,300,000 to elect the alternative tax for certain small companies under § 831(b)(1) to be taxed only on investment income.”

The PATH (Protecting Americans from Tax Hikes) Act, passed in December 2015, increased the premium limit from $1.2m to $2.2m for 831(b) captives, effective January 2017.  It also put in place a new mechanism to review annual limits, indexed for inflation, in $50,000 increments. The first adjustment to the premium limit was made in December 2017 and was effective for the tax year beginning in 2018, which raised the limit to $2.3m.

The full November 15th IRS release can be found here. https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2019