Notice 2002-70

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IRS identified transactions involving so-called “producer owned reinsurance companies” (“PORCs”) as listed transactions, thereby subjecting such transactions to the disclosure requirements of IRC § 6011, the tax. In a typical PORC transaction, a service provider sells its customers a product or service and offers insurance on the product. The insurance contracts are issued by an unrelated commercial insurer, but are then reinsured with an offshore reinsurer owned by the service provider. The PORC elects domestic tax treatment under IRC § 953(d) and takes advantage of benefits provided by IRC § 501(c)(15) (tax exemption if annual premiums of $350,000 or less) or IRC § 831(b) (tax on investment income only if annual premiums are between $350,000 and $1.2 million).