Tax Insurance for Tax Certainty

Tax insurance provides coverage for a tax risk whereby an insurance company agrees to indemnify the insured for loss resulting from a challenge by a tax authority. Our market-leading Tax insurance Practice includes both tax lawyers and former tax insurance underwriters, allowing us to provide not only sound substantive advice but also an unparalleled insight into the underwriting community’s philosophy and appetite. Lockton’s Tax Insurance Practice is one of the leaders in the field of sophisticated tax liability insurance. Lockton’s team of former tax attorneys uses strategic brokering to bring tax certainty to uncertain tax situations.

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Renewable Energy Tax Credit Insurance Survey Results

Offers a financial guarantee for a position where there is at least a "more likely than not" level of comfort.
May be a means to mitigate the financial statement of a FIN 48 (ASC 740-10) reserve.
Can be used to replace or backstop an indemnity in transaction agreements for a specific tax risk.
No costs are incurred until you agree to move forward with a policy.

What's covered with tax insurance?

Federal, state and local

Coverage could include loss of future use of tax attributes.

Interest & Penalties

Other than for criminal or fraudulent activity.

Gross-up

If the insurance proceeds are taxable.

Defense/ Content costs

May include advance of taxes required to be paid or deposited with a tax authority prior to a final determination. Length of coverage is usually 7-10 years.

Corporate Risk

"Tax Free Reorganizations and Restructurings, 355 spin-offs, Deferred compensation 409a, Transactional Structures and Withholding Taxes."

Deductions

"Debt/ Equity treatment, Ordinary/ Capital Characterization, Bad Debt Deductions, Worthless Stock Deductions."

Qualifications & Elections

"S-Corp Qualifications, 338(h)(10) Elections, REIT Status and Related Risks, RIC Status, Publicly Traded Partnerships, Tax Treaty Qualification, Leveraged Partnerships."