INSTRUCTIONS ARE PROVIDED FOR OBTAINING AN EXEMPTION FROM TAX ON FOREIGN INSURERS

Rev. Proc. 84-82

SECTION 1. PURPOSE

The purpose of this revenue procedure is to provide new instructions for establishing an exemption from the excise tax on insurance policies issued by a foreign insurer or reinsurer when the exemption is based on the provisions of a tax treaty. Instructions are currently provided in Revenue Procedure 81-2, 1981-1 C.B. 617.

SECTION 2. BACKGROUND

01 Section 4371 of the Internal Revenue Code imposes a tax on each policy of insurance or reinsurance issued by any foreign insurer or reinsurer.

02 Section 4374 of the Code provides that the tax imposed by section 4371 shall be paid by any person who makes, signs, issues, or sells any of the documents and instruments subject to the tax, or for whose use or benefit the same are made, signed, issued or sold.

03 Section 46.4374-1(a) of the Excise Tax Regulations provides that in the case of premiums paid on or after January 1, 1966, the tax imposed by section 4371 of the Code shall be paid on the basis of a return. Such tax shall be remitted by the person who makes the payment of the premium to a foreign insurer or reinsurer or to any nonresident agent, solicitor, or broker. The phrase "person who makes the payment" means the resident person who actually transfers the money, check, or its equivalent to the foreign insurer or reinsurer (including transfers to any bank, trust fund, or similar recipient designated by the foreign insurer or reinsurer), or to any nonresident agent, solicitor, or broker.

04 Presently, pursuant to treaties between the United States and several countries, policies issued by a foreign insurer or reinsurer that is a resident of any of such countries may be exempt from the tax imposed by section 4371 of the Code. The provisions of this revenue procedure will also apply with respect to policies exempt under treaties that come into force after the effective date of this revenue procedure.

SECTION 3. EXEMPTION PROCEDURE

01 A person required to remit the excise tax on foreign insurance or reinsurance during any taxable period may consider the premiums paid to the foreign insurer or reinsurer exempt under a treaty that allows an unqualified exemption from the excise tax, if the foreign insurer or reinsurer is certified by the taxing authority of the treaty country as having been a resident of the treaty country (1) during the last three months of the calendar year preceding the calendar year in which the taxable period occurs or (2) during the taxable period. Such certification may be in the form of a list compiled by the taxing authority of the treaty country of all insurers or reinsurers that were residents. A copy of such a list or of an individual certification upon which an exemption is based must be retained by the person required to remit the excise tax. The person required to remit the excise tax may not consider the policy exempt if prior to filing the return for the taxable period such person has knowledge that the foreign insurer or reinsurer was not a resident of the treaty country during the taxable period.

02 In addition, if the treaty permits a qualified exemption from tax, i.e., only to the extent that the foreign insurer or reinsurer does not reinsure the risks covered by the policy with a person that would not be entitled to an exemption from the tax on such policy, the person otherwise required to remit the tax may consider the policy exempt only if, prior to filing the return for the taxable period, such person has knowledge that there was in effect for such taxable period a closing agreement as provided by section 3.03 between the insurer or reinsurer and the Commissioner of Internal Revenue for the insurer or reinsurer to be liable as a United States taxpayer of Federal excise tax due under section 4371 et. seq. of the Code on premiums from policies reinsured with reinsurers that are not entitled to exemption from the excise tax under the treaty or any other convention.

03 A foreign insurer or reinsurer who wishes to have its policies considered exempt from the excise tax under a treaty of the type described in subsection .02 must enter into the following form of closing agreement:

CLOSING AGREEMENT ON FINAL DETERMINATION COVERING SPECIFIC MATTERS

Under section 7121 of the Internal Revenue Code (Taxpayers's name, address, and identifying number)

(If taxpayer has no identifying number, indicate date of application for I.D. number) and the Commissioner of Internal Revenue make the following closing agreement:

WHEREAS, under (Provision of Treaty) (the "Treaty"), insurance or reinsurance premiums paid to a resident of (Treaty Country) are exempt from the Federal excise tax imposed by section 4371 et seq. of the Internal Revenue Code of 1954, as amended, (the "Code") to the extent that the (Nationality of Insurer) insurer does not reinsure such risks with a person not entitled to exemption from such tax under the Treaty of another convention.

WHEREAS, Section 3.02 of Rev. Proc. 84-82, provides that if a treaty permits an exemption from tax only to the extent that the foreign insurer or reinsurer does not reinsure the risks with a person not entitled to an exemption on such policy, the person required to remit the tax should consider the policy exempt only if, prior to filing the return for the taxable period, such person has knowledge that the foreign insurer or reinsurer has entered into a closing agreement to be liable as a United States taxpayer for Federal excise tax due under section 4371 et seq. of the Code on premiums from policies reinsured with reinsurers that are not entitled to exemption from the excise tax under the treaty or any other convention.

WHEREAS, the foreign insurer or reinsurer (hereinafter referred to as "the taxpayer") wishes to have its policies of insurance or reinsurance considered exempt from tax under the treaty; IT IS HEREBY DETERMINED AND AGREED THAT:

(1) Taxpayer shall, for purposes of this closing agreement, be liable as a United States Taxpayer for the Federal excise tax due under section 4371 et seq. of the Code on premiums from policies reinsured with reinsurers that are not entitled to exemption from the excise tax under the Treaty of any other convention.

(2)(a) Returns of Federal excise tax due under and pursuant to this closing agreement and section 4371 et seq. of the Code shall be made by Taxpayer, or by Taxpayer's authorized representative on Taxpayer's behalf, be filing Form 720, Quarterly Federal Excise Tax Return, for each return period covered by this closing agreement.

(b) Where Taxpayer reinsures, in whole or in part, a policy of insurance or reinsurance with any person(s) not entitled to exemption from the excise tax under the Treaty or any other convention, the tax reportable on the return, Form 720, shall be computed on the basis of the percentage of such policy reinsured but at the applicable rate specified in section 4371 of the Code as though Taxpayer had not been entitled to any exemption from excise tax at the time such policy was originally issued by Taxpayer.

(c) Such returns shall be filed with the Director, Internal Revenue Service Center, Philadelphia, Pennsylvania 19255, U.S.A.

(d) Taxpayer, or Taxpayer's authorized representative, shall make the required Federal tax deposits of the Federal excise tax in such manner and at such times as are prescribed by regulations and explained in the instructions for Form 720.

(3) Taxpayer agrees that for purposes of examination of the Federal excise tax returns filed pursuant to this closing agreement, the accounts and records of items of insurance and reinsurance in paragraph 2(b) hereof maintained in (Treaty Country) and the United States will be made available upon written request by the Internal Revenue Service at the place mutually agreed upon by the Service and Taxpayer. Taxpayer will be allowed 60 days, or other period of time determined as reasonable by the District Director of Internal Revenue, within which to make available its accounts and records.

(4) If it is determined that there is an underpayment in respect of any excise tax determined to be due pursuant to this closing agreement and sections 4371 et seq. of the Code, the Internal Revenue Service shall issue a statement of notice and demand for the tax due plus any interest and applicable penalties. Notice of any underpayment shall be sent to the Taxpayer at the name and address shown on the Form 720 for the period for which such underpayment is determined. Payment of all additional amounts due shall be made in accordance with the terms specified in the statement of notice and demand. Collection of such amounts not paid per notice and demand shall be in accordance with paragraph 5 hereof.

(5)(a) Taxpayer shall, as security for payment of tax, cause an irrevocable letter of credit to be issued by a United States bank that is a member of the Federal Reserve System in favor of the Internal Revenue Service in the amount of $____ (amount to be agreed upon by Taxpayer and the Internal Revenue Service) or such amount as may from time to time be mutually agreed upon by Taxpayer and the Service. Such letter of credit must be in effect by the due date of the first excise tax return required to be filed under this closing agreement.

(b) Such letter of credit may be drawn upon after and to the extent that.

(1) The Service issues a statement of notice and demand for any tax due shown on a Form 720 (original or amended return) that is not paid with such return.

(2) Any proposed additional excise tax due shall have been sustained by the Internal Revenue Service Regional Director of Appeals having jurisdiction over such matter, or (3) The time for filing a protest of such proposed additional tax due shall have expired, provided that the statement of notice and demand shall have been issued as provided in paragraph 4 hereof.

(c) If, after the conditions in paragraph 5(b) hereof have been met, the tax is not paid in accordance with the terms of the statement of notice and demand, collection of such amounts will be made by resorting to such letter of credit, to the extent thereof, before any levy or proceeding in court for collection is instituted against Taxpayer.

(d) If such letter of credit is drawn upon, it must be reinstated to (amount as may have been agreed upon by the Service and Taxpayer), within 60 days after the date drawn upon.

(6)(a) Solely by reason of Taxpayer and the Commissioner having entered into this closing agreement, any person otherwise required to remit the federal excise tax on foreign insurance or reinsurance policies pursuant to section 46.4374-1(a) of the Excise Tax Regulations may consider policies issued by Taxpayer after the effective date of this agreement as exempt under the treaty from the Federal excise tax.

(b) Taxpayer agrees that the Commissioner may disclose Taxpayer's name as an insurer or reinsurer that qualifies for exemption from the excise tax under the Treaty by publication or otherwise.

(7)(a) This closing agreement shall include, as an attachment hereto, a statement from the Competent Authority of the treaty country certifying that Taxpayer is a resident of (Treaty Country) as defined in Treaty.

(b) The statement certifying to the residency of the taxpayer shall be effective for a period of 3 calendar years beginning with the year of receipt. The taxpayer agrees to renew the certificate of residency every three years, on or before the expiration date of the original certificate, and to provide an original and one copy of the recertification along with a photocopy of this closing agreement to:

                 Internal Revenue Service

(8)(a) This closing agreement shall be effective for the taxable period immediately following the taxable period within which the agreement is signed by the Commissioner. This agreement shall thereafter continue in effect unless terminated as provided in subparagraph (b) of this paragraph.

(b) This agreement may be terminated by either Taxpayer or the Commissioner by giving the other written notice of the notifying party's intent to terminate. The decision to terminate is solely at the discretion of the party giving such notice. This agreement shall be terminated on the last day of the return period immediately following the return period within which the written notice of termination is given.

(c) Taxpayer hereby agrees to file a return, Form 720, marked "Final return" for the taxable period within which this agreement terminates pursuant to paragraph (8)(b) hereof and to furnish a duplicate of such "Final Return" to:

                 Internal Revenue Service

WHEREAS, the determinations set forth above are hereby agreed to by said taxpayer;

NOW THIS CLOSING AGREEMENT WITNESSETH, that the said taxpayer and said Commissioner of Internal Revenue hereby mutually agree that the determinations set forth shall be final and conclusive, subject, however, to reopening in the event of fraud, malfeasance, or misrepresentation of material fact, and provided that any change or modification of applicable statutes or tax conventions will render this agreement ineffective to the extent that is dependent upon such statutes or tax conventions.

IN WITNESS WHEREOF, the above parties have subscribed their names to these presents, in triplicate.

               Signed this (Date) day of (Month), (Year)

SECTION 4. PERIODIC LISTING OF AGREEMENTS

The Service will periodically publish in the Internal Revenue Bulletin a list of foreign insurers or reinsurers that have entered into closing agreements under this revenue procedure and also those whose closing agreements are terminated so that the exemption no longer applies.

SECTION 5. EFFECTIVE DATE

This revenue procedure is effective, December 10, 1984.

SECTION 6. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 81-2, 1981-1 C.B. 617, is superseded, effective December 10, 1984.