WASHINGTON (CN) – Series limited liability companies (LLCs) that sell insurance would be treated as separate legal entities for tax purposes, according to regulations proposed by the Internal Revenue Service.
Series LLCs are like the subsidiaries of a corporation and are usually established to provide only one narrowly defined service or product line, such as specialized insurance coverage, reinsurance of contracts, debt securitization or annuities.
Companies form series LLCs to insulate each parent from liabilities incurred by daughter companies.
Several states now recognize series LLC incorporations and their treatment for federal tax purposes has not been previously addressed by the IRS.
As separate entities, losses at cell companies can not be used to offset capital gains at parent corporations to reduce the tax burden of the parent. Ambiguity in the different state laws might have allowed such offsetting in some jurisdictions.
Click the document icon for this regulation and others.