Following up on our earlier Insurance and Reinsurance Blog on this matter (the relevant post can be found here), the Internal Revenue Service today filed an appeal to the United States Court of Appeals for the District of Columbia Circuit of the recent United States District Court decision in the Validus case (holding that the excise tax imposed on the foreign insurance/reinsurance of U.S. risks by Section 4371 of the Internal Revenue Code does not apply to retrocession policies). Validus, a Bermuda reinsurer, filed a refund suit in this case with respect to excise taxes it had paid on nine retrocession policies, and the District Court, refusing to extend the application of the insurance/reinsurance excise tax to retrocessions, allowed the refund attributable to these retrocession policies.
As mentioned in our earlier blog, insurers/reinsurers who have paid excise tax on retrocession policies with respect to any tax period for which the statute of limitations for obtaining a refund will soon expire may, before this period expires, want to file a protective excise tax refund claim under the principles of the original decision during the pendency of this appeal. By filing the refund claim prior to the expiration of the statute of limitations, insurers/reinsurers will preserve the ability to receive a refund of the excise tax pending a taxpayer favorable disposition of the Internal Revenue Service’s appeal.
We are happy to assist with filing such a refund claim or answer any questions with respect to the Validus decision.