"We serve clients well because we offer them a rare mix of skills: great technical strength and deep reach into the public policy process."
Vanda B. McMurtry, Partner
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Insurance Tax


The attorneys at Davis & Harman LLP advise clients on a wide variety of federal income tax and related matters affecting life insurance companies and the products they issue. Located in our nation’s capital, we have been thoroughly involved in the development of many of the federal income tax rules that govern life insurance, annuity, long-term care, and other products that life insurance companies provide, as well as the rules governing the federal income taxation of the companies themselves. Our proximity to – and involvement in – the federal legislative and regulatory processes give our attorneys keen insight into how the relevant tax laws developed, currently apply, and may change in the future.

Our services to clients include advising them on technical compliance with the myriad federal income tax and state insurance law rules governing the insurance products they issue, whether during the design stage for new and innovative products or during the administration of existing products to ensure ongoing compliance. We also help our clients identify when compliance errors have occurred and represent them before the IRS when seeking to remedy those errors.

We also regularly represent clients before the Treasury Department, the Department of Labor, and Congress on federal policy matters relevant to the life insurance industry, including commenting on proposed regulations, requesting IRS guidance, and lobbying for or against legislative initiatives. Our clients also rely on our attorneys to monitor and keep them informed of regulatory and legislative developments in Washington affecting their businesses.

Our distinctive blend of thorough knowledge of the technical aspects of federal tax and state insurance law, extensive experience with the governing regulatory agencies, and regular and effective involvement in the federal legislative process makes Davis & Harman LLP uniquely situated to serve our clients’ needs. As a result, clients ranging from the largest and most well respected financial institutions in the world to smaller, single-state enterprises turn to Davis & Harman LLP for advice on federal income tax and related matters affecting their businesses. Those clients include individual companies as well as ad hoc and formal coalitions of life insurance companies, including the Committee of Annuity Insurers, a coalition comprised of many of the largest annuity writers.


Annuity Products
Our attorneys regularly assist insurers with a variety of annuity tax matters, including counseling and obtaining private letter rulings on innovative design issues and identifying and resolving annuity tax compliance issues. The issues involved range from fundamental questions of whether a product is an annuity for tax purposes to technical issues arising under Internal Revenue Code sections 72 and 817(h), as well as the information reporting and income tax withholding rules applicable to annuities. We are uniquely positioned to represent individual companies on these and other annuity tax matters, having represented the Committee of Annuity Insurers (a coalition comprised of many of the largest annuity writers) before Congress, the IRS, Treasury Department, and Department of Labor for over 25 years.

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IRA, 403
(b), & Other Qualified Retirement Arrangements
We provide extensive services to clients on federal income tax and ERISA issues relating to the use of annuity and life insurance contracts in connection with IRAs, section 403(b) plans, section 457 plans, and qualified retirement plans. These services include counseling on technical issues regarding product design, compliance with federal income tax and ERISA requirements, the treatment of distributions, the tax-free treatment of rollovers and transfers, and the application of federal income tax withholding and information reporting requirements. In addition, we work closely with legislators and regulators to shape new laws, regulations, and guidance affecting the use of insurance products in connection with these arrangements.

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Life Insurance Companies
Our lawyers were heavily involved in the legislation that changed the insurance company tax rules throughout the 1980s and 1990s. With this background and familiarity with prior law as well, we counsel clients on such diverse issues as the characterization and calculation of reserves, the interpretation of the “DAC tax” regulations, the effect of proration on the dividends received deduction, and the application of the rules governing separate accounts for variable contracts and modified guaranteed contracts. We have represented clients (including client groups) before Congress and the Treasury Department in initiatives involving the company tax rules and life-nonlife consolidation, and currently we advise a coalition of insurers on the tax issues involved in the development of principles-based reserves.

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Life Insurance Products
We maintain an extensive practice in advising insurers on the federal income tax compliance of life insurance contracts they issue, including compliance with Internal Revenue Code sections 101(f) and 7702 (defining life insurance contract), section 7702A (defining modified endowment contract), and section 817(h) (regarding variable contracts). We regularly counsel clients on such matters during product development and during the design and implementation of computer systems that administer and monitor product tax compliance. A substantial part of our practice also is devoted to identifying and correcting tax compliance problems affecting life insurance contracts that our clients issue. For example, we help our clients identify and address potential tax problems during compliance reviews (including due diligence reviews of acquired or soon-to-be acquired blocks of business) and during conversions to new computer administration systems. In cases where tax compliance errors arise, we represent insurers before the IRS National Office and IRS Large and Mid-Size Business Division to address and correct the errors.

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LTC Products
Our attorneys regularly assist insurers with a variety of federal income tax compliance issues involving long-term care insurance products. We were present at – and involved in – the development of Internal Revenue Code section 7702B (defining qualified long-term care insurance contract) when it was enacted in 1996, as well as subsequent amendments thereto. We counsel clients on the development and administration of stand-alone long-term care insurance products as well as products that combine long-term care insurance with annuity or life insurance features. The issues on which we provide counsel include compliance with the technical aspects of section 7702B, the interaction between the federal income tax law and the National Association of Insurance Commissioners’ model laws and regulations on long-term care insurance, and tax-free exchanges involving long-term care insurance contracts.

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Special Markets

The advice we provide to clients encompasses virtually all insurance products that life insurance companies offer, including those issued in special or limited markets. The following summarizes some of the more prominent special markets in which we advise clients.

COLI — We counsel insurers and other clients on the federal income tax and state insurance law treatment of corporate-owned life insurance (COLI), including the subsets known as bank-owned life insurance (BOLI) and insurer-owned life insurance (I-COLI). For example, we advise clients on the application of Internal Revenue Code sections 101(a)(2) (regarding transfers for value), 101(j) (defining employer-owned life insurance), 264(f) (regarding interest deductions for COLI owners), 7702 (defining life insurance contract), and 7702A (defining modified endowment contract). With regard to variable COLI products, we also advise clients on the application of Internal Revenue Code section 817(h) and the related federal tax law doctrine of “investor control.” In addition, we counsel clients on the federal income tax consequences of making changes to existing COLI contracts and transacting tax-free exchanges of such contracts, as well as on state insurance law and choice of law matters pertaining to COLI.

Experience Rating — We advise insurers on questions of risk shifting and risk distribution as they pertain to the characterization of an arrangement as insurance for federal tax purposes, including how experience rating features under COLI and other life insurance arrangements affect that characterization.

International — We counsel insurers and other clients on the application of the 30% withholding tax under Internal Revenue Code section 1441 to distributions from insurance contracts and from other funds. Also, we advise on whether income involved in international operations would be “effectively connected income” and whether those operations would otherwise cause an entity to be treated as engaged in business within the U.S. for federal tax purposes.

Split-Dollar Life Insurance — We advise clients on the federal income tax rules governing split-dollar life insurance arrangements, particularly those used in employment contexts. Such advice typically includes the availability of transition rules governing the application of new regulations to such arrangements, as well as advice on structuring and administering arrangements to comply with such regulations.

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State Insurance Law & Regulation
Our counseling of insurers, brokers and employers includes advising on the application and possible jurisdictional interaction of state insurance laws and regulations. These services encompass matters such as evaluation of the requisite insurable interest in employer-sponsored life insurance programs (e.g., COLI and BOLI), interpretation of state-mandated contractual and procedural requirements for individual and group employee life plans, assessment of offshore insurance activities as constituting “doing an insurance business” in a U.S. jurisdiction, and, generally, consulting on the actual and potential implications of the state insurance regulatory regimen for employee benefit arrangements.

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Tax Policy & Legislative
We regularly represent clients before the Treasury Department, the Department of Labor, and Congress on federal policy matters relevant to the life insurance industry, including commenting on proposed regulations, requesting IRS guidance, and lobbying for or against legislative initiatives. On behalf of individual corporate clients and client groups that we represent, we have participated in virtually every major regulatory and legislative effort affecting the federal income tax treatment of life insurance companies and their products in the past 25 years.

A key to our success – and that of our clients – is our combination of political experience in Washington and substantive expertise on federal income tax and state law matters pertaining to the life insurance industry. This combination greatly enhances our credibility and effectiveness when advocating our clients' positions before government regulators and legislators. Through our extensive experience with such government offices, we also are able to carefully monitor developments in Washington that have the potential to affect our clients’ businesses and keep them well informed of those as developments as – or before – they occur.

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Treasury & IRS Practice
A significant portion of our practice at Davis & Harman LLP involves direct interaction with the Treasury Department and the IRS on behalf of our clients. We regularly advocate our clients' views on federal income tax issues affecting their life insurance, annuity, and long-term care businesses before the Treasury Department and the IRS, including commenting on proposed regulations, requesting other forms of favorable guidance, and seeking modifications of government positions that are adverse to our clients’ interests.

We also maintain a substantial practice of seeking and obtaining client-specific guidance or relief from the IRS. For example, we have obtained scores of private letter rulings for our clients over the years, many involving cutting edge product innovations that our clients have thereafter successfully brought to market. Our services also include seeking and obtaining relief for our clients and their customers with respect to tax compliance errors affecting their insurance products, including the remediation of errors under Internal Revenue Code section 7702 (defining life insurance contract), section 7702A (defining modified endowment contract), and section 817(h) (regarding variable contract diversification). In that regard, we have represented insurers in over 100 remediation proceedings to date.

Our thorough knowledge of the federal income tax rules governing insurance products, combined with our extensive experience with IRS and Treasury Department regulators, allow us to better advise our clients on the views they can expect the government to take in areas that lack more formal guidance. In that respect, our clients rely on us to be their “eyes and ears” in Washington and to keep them informed of new regulatory developments as well as to credibly and effectively advocate their positions in front of the relevant regulatory agencies.

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The Willard
1455 Pennsylvania Avenue, NW
Suite 1200
Washington, DC 20004
Tel 202-347-2230
Fax 202-393-3310