Insurance update - Reinsurer challenges cascading excise tax  

January 29:  A Bermuda reinsurer has filed a complaint in the U.S. District Court for the District of Columbia, challenging the IRS’s imposition—based on the cascading excise tax theory set forth in Rev. Rul. 2008-15—of excise tax for 2006 and claiming an excise tax refund of over $326,000 plus approximately $110,000 in interest.

The excise tax was imposed on reinsurance transactions between the taxpayer and other non-US reinsurers.


The complaint [PDF 422 KB] claims that:


  • The IRS has incorrectly interpreted section 4371 and
  • The IRS lacks the authority to impose excise tax on an entirely extraterritorial transaction between two non-US parties.

KPMG observation

Until now, many taxpayers had considered challenging the IRS’s “cascading excise tax” position, but had not acted—either because they believed the amounts at issue did not warrant the litigation costs, or for other reasons.


Taxpayers who have been assessed “cascading” federal excise tax under the IRS’s theory may want to evaluate whether to file protective excise tax refund claims.


For more information, contact a tax professional with KPMG's Washington National Tax:


Jean Baxley

(202) 533-3008


Craig Pichette

(312) 665-5267





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