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U.S. Court of Appeals Affirms Decision by Lower Court That Retrocessions with Underlying U.S. Risks Between Two Non-U.S. Reinsurers Are Not Subject to U.S. Federal Excise Tax

Christine K. Lane

Christine K. Lane,

Washington, D.C.

Jason Kaplan

Jason Kaplan,

New York

10 June 2015
The U.S. District Court of Appeals for the District of Columbia Circuit recently affirmed the U.S. District Court’s decision in Validus Reinsurance, Ltd. v. United States of America, that the U.S. federal excise tax (“FET”), sometimes referred to as the “cascading” FET, does not apply to retrocessions between two non-U.S. reinsurers even if the underlying risks are U.S. risks. In so deciding, the Court determined that the statute imposing the FET is ambiguous with respect to retrocession agreements between two non-U.S. reinsurers and such ambiguity is properly resolved by application of the presumption against extraterritorial application of a U.S. statute.

The Court of Appeal’s decision is significant to non-U.S. reinsurers that have previously paid FET on retrocessions with underlying U.S. risks. Impacted non-U.S. reinsurers should consider filing refund claims to the extent protective claims for refund have not already been filed to recover previously paid amounts of FET on affected retrocession transactions.

Access prior Hogan Lovells’ coverage on Validus and the FET at:

"U.S. District Court issues taxpayer-favorable opinion in Validus Reinsurance, Ltd. v. United States." "“Cascading” federal excise tax challenged in recent U.S. District Court case."

 

Christine K. Lane

Christine K. Lane,

Washington, D.C.

Jason Kaplan

Jason Kaplan,

New York

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