Political Quotes

“I rise today to introduce the Offshore Reinsurance Tax Fairness Act. This bill closes a tax loophole that is being used by some U.S.-based hedge funds that set up insurance companies in places like Bermuda and the Cayman Islands where they aren't taxed and where their earnings are sheltered from U.S. taxes. Offshore businesses that reinsure risks and that invest in U.S. hedge funds create the potential for tax avoidance of hundreds of millions of dollars. Under these arrangements, a hedge fund or hedge fund investors make a capital investment in an offshore reinsurance company. The offshore reinsurance company then reinvests that capital, as well as premiums it receives, in the hedge fund. The owners of the reinsurer take the position that they are not taxed on corporate earnings until either those earnings are distributed, or the investors sell the corporation's stock at a gain reflecting those earnings. However, the hedge fund ``reinsurers'' are taking advantage of an exception to the passive foreign investment company--or PFIC--rules of U.S. tax law. The PFIC rules are designed to prevent U.S. taxpayers from delaying U.S. tax on investment income by holding investments through offshore corporations. However, the PFIC rules provide an exception for income derived from the active conduct of an insurance business.…”