Final and Proposed Regulations on PFIC Rules Provide Helpful Clarifications for Insurers

14 December 2020
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Key takeaways:
  • The Treasury and the IRS have released Final and Proposed Regulations relating to passive foreign investment companies (“PFICs”), including the rules granting an exception for active insurance companies.
  • The Proposed Regulations give foreign insurance companies more flexibility in establishing that they are sufficiently active to avoid PFIC status, but the rules may be difficult to satisfy for foreign insurance companies that rely to a significant degree on outsourcing.
  • The Final Regulations also improve rules for groups with U.S. insurance and other subsidiaries, as compared with previously proposed regulations.