To: John Koskinen, IRS Commissioner
Tell the IRS: Close This Hedge-fund Loophole
I urge the Treasury Department and Internal Revenue Service to end the hedge fund reinsurance loophole. I was shocked when I found out that many hedge fund managers are further reducing their taxes by pretending to run offshore reinsurance firms. The IRS and Treasury Department have a duty to preserve fairness in the tax code, and the hedge fund reinsurance loophole is plainly abusive and unfair. I urge you to adopt a test that will prevent even the most creative and pernicious hedge fund managers from utilizing this loophole. The three-prong test proposed by former Representative David Camp is the best proposal for preventing abuses and ensuring tax fairness.
Why is this important?
Hedge-fund managers are earning exorbitant incomes, and many are avoiding paying taxes by pretending to run offshore reinsurance firms. The top 25 hedge-fund managers earned more than all of our nation's kindergarten teachers in 2014. Despite this, these hedge fund managers are paying a lower effective tax rate than most middle-class families.
The IRS and Treasury department is considering a proposal to close the reinsurance loophole, which enables hedge fund managers to pay minimal amounts in taxes on their unbelievable earnings. They do not need the additional benefit of funneling their earnings through an offshore reinsurance company so that they can further reduce their taxes. The IRS and Treasury Department have a duty to preserve fairness in the tax code, and the hedge fund reinsurance loophole is plainly abusive and unfair.
Former Representative David Camp has a three prong test that would prevent abuses and ensure tax fairness. That test says that “an insurance company would have to have more than 50 percent of its gross receipts consist of insurance premiums, have insurance liabilities equal to 35 percent of its total assets, and be subject to tax as an insurer if it were a U.S. business.”
The IRS and Treasury Department should do the fair thing for the American people by closing this loophole. It’s only fair that people making so much money should be playing by the same rules as the rest of us.