A look at tax liability insurance in the US: Practical considerations

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

A look at tax liability insurance in the US: Practical considerations

Sponsored by

BMS Group
More US-based multinationals are seeking tax liability insurance guidance

In this interview, Senior Tax Insurance Underwriter at Certa Insurance Partners Ben Furtick talks to Dean Andrews, Division Director and Head of Tax Liability Insurance in London at BMS Group, about US cross-border tax issues and the value of tax liability insurance coverage.

Specialist underwriting agency Certa Insurance Partners appointed Ben Furtick as senior US tax underwriter in April 2020 to strengthen their underwriting team and grow their US tax insurance offering.

Here, Furtick explains the key elements to take into account when considering tax liability insurance policy structures for the US.



Dean: What kinds of tax issues are insurable in the context of inbound investment into the US?



Ben: The flexibility of tax liability insurance to provide coverage for one or more specifically identified potential tax liabilities means tax insurance can be an effective risk management tool in connection with structuring or financing US business operations and managing payment flows into and out of the US. 



As a non-exhaustive list of examples, creation of a federal or state permanent establishment, tax treatment of financing as debt or equity, tax characterisation of payment flows into and out of the US, and application of withholding tax are all issues which may be insurable dependent on specific facts and circumstances.



Dean: How can tax insurance help US-headquartered multinational groups manage tax issues arising on intra-group restructuring transactions? 



Ben: Commercially driven corporate reorganisations can often create tax headaches for US-headquartered multinational groups due to US companies being subject to tax on worldwide income and the operation of various anti-deferral regimes, which have the potential to create dry tax charges. A tax insurance policy can be put in place to back a strong tax opinion on any number of specifically identified tax issues such that US multinationals can limit exposure to low risk tax issues with material associated quantum of potential tax liabilities and can achieve certainty on the economic cost of tax compliance.



Dean: Could US-headquartered multinational groups make use of tax liability insurance in connection with specifically identified tax issues, which arise in jurisdictions outside of the US?



Ben: Yes. At Certa, we have underwritten policies to cover potential tax liabilities which could arise in more than 30 different jurisdictions outside the US. Our underwriting team consists of US and UK qualified lawyers and accountants, and we partner with a global network of tax lawyers and accountants to underwrite tax risks in other jurisdictions. Insurability of potential tax liabilities is a function of the strength of a taxpayer’s technical position, a jurisdiction’s level of rule of law and corruption, and the way in which the relevant jurisdiction’s tax authority operates. 



Dean: Are there any material recent updates to US tax law that acquirers of international business with US operations should be aware of?



Ben: The CARES Act provided welcome relief to US taxpayers on a number of fronts, including creation of the ability to carry back net operating losses (NOLs) to offset taxable income from up to five previous tax years. Depending on a taxpayer’s facts and circumstances, a tax liability insurance policy can be underwritten to cover a taxpayer’s availability and amount of NOLs to be claimed against prior period taxable income. 



Dean: Are there unique tax liability insurance policy structure considerations for US named insureds or for policies covering potential US tax liabilities?



Ben: Tax liability insurance policies to cover US tax issues are generally structured to pay out in the event of an unfavourable Internal Revenue Service (IRS) or state tax authority final determination, with covered losses including any tax liability assessed, any related interest and penalties for late payment, and any defence costs in excess of a pre-agreed retention. Policies for US insureds can also be structured to include a gross up for federal and state income tax purposes as proceeds from insurance contracts are generally treated as US taxable income. Policy periods are set in accordance with relevant federal and state statutes of limitation so an insured’s ability to make a claim under the policy aligns to the period during which an IRS or state tax authority audit could be opened. 






Dean Andrews

T: +44 0 20 7480 0308

E: dean.andrews@bmsgroup.com



more across site & shared bottom lb ros

More from across our site

Heads of tax need to push their teams forward as strategic business advisers to add value across the organisation, says Sandy Markwick
Scott Bessent reportedly felt undermined by Musk naming Gary Shapley as acting IRS commissioner; in other news, Baker Tilly will combine with a top 15 US firm
The promise of nine years’ tax certainty and a ‘rational and pragmatic’ government process makes APAs a no-brainer, Indian tax advisers tell ITR
Despite garnering significant revenues from multinationals, Italy’s digital services tax presents pressing double taxation issues, say Stefano Simontacchi and Francesco Saverio Scandone of BonelliErede
ITR’s research shows that in-house tax counsel in Asia also feel underserved by their advisers’ international networks
World Tax global head of research Jon Moore tells ITR how his team spots standout submissions, and gives early statistical insights into this year’s entries
Australia’s conservative opposition will repeal controversial tax agent reporting rules if elected in the country’s May general election
Shapley would be the fourth person to hold the job this year; in other news, UK tax advisory firm MHA raised fewer funds than expected from its London IPO
The US needs to be involved in pillar one for there to be more international acceptance of the project, Michael Masciangelo says
The UK regulator is investigating EY’s auditing of the national postal service as it relates to the high-profile Horizon scandal, which saw hundreds wrongfully convicted
Gift this article