On April 23, Treasury released proposed regulations to curb hedge funds' use of offshore reinsurance arrangements for tax avoidance, meeting the 90-day deadline proposed earlier this year, reported Tax Analysts.

The article notes that the proposed regulations define insurance business to include not only the actual issuance of insurance, annuity and reinsurance contracts, but also supporting and substantially related investment activities and administrative services, as long as income from those activities comes from assets held by the foreign reinsurance subsidiary to meet its insurance contract obligations.

Commenting on the proposed regulations, Susan Seabrook told the publication that "the proposed active business definition, by looking only at a particular entity's employees and officers for the test, does not seem aligned with the realities of the global reinsurance industry."

When it comes to the approach implied by the government's request for specific comments, Seabrook says "Taking a snapshot for a particular tax year is not necessarily a true representation of that particular entity. I understand the purpose [of the proposed regs] is to get a test in place that the government can administer, a test that gives you an answer, but to me, the proposed regulations don't seem to do that -- they don't seem to be focused enough on the purported target."

Read the full article, "Government Meets Wyden's Deadline for Releasing Reinsurance Regs" (Tax Analysts, April 24, 2015). Subscription required.