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Tax Insurance

CAC Specialty’s Tax Insurance Practice

CAC Specialty’s Tax Insurance Practice comprised of seasoned tax attorneys and former tax insurance underwriters, combines deep tax technical expertise, industry experience, and business acumen to craft innovative and unique tax insurance solutions so any client can quickly transfer the risk of the unanticipated and detrimental consequences of a successful challenge by a taxing authority—creating more certainty for sponsors, corporations and stakeholders.

Overview of Tax Insurance

Tax insurance is a risk management tool protecting against tax loss arising from one or more transactions, investments, or events. It is designed to make the insured whole in the event of a successful challenge by a taxing authority and can cover loss for additional taxes, interest and penalties, claim expenses in defense of the covered tax position, and the amount by which the insured’s taxes are increased as a result of the receipt of insurance proceeds under the policy (i.e., “gross-up”). Tax insurance is akin to receiving a private letter ruling (“PLR”) from the taxing authority on the insured tax position. However, unlike a PLR, tax insurance can typically be purchased within 2 weeks—not months or years.

We Are Different

Our team consists of dedicated, experienced corporate tax attorneys (accounting firm, law firm, and Fortune 20 experience) and former tax insurance underwriters.

  • Attorneys capable of handling technical tax issues
  • Equipped to guide the insurance market to understand difficult tax risks
  • Devoted to client service and advising clients through every step of the underwriting process, including policy negotiations
  • Ready to collaborate with the insurance market to craft insurance solutions

Tax Insurance Market: Quick Facts

  • 15 markets with at least $50 million of capacity
  • 20 markets able to participate in any program
  • $1.5 billion of total capacity on any U.S. tax program

Tax Insurance For M&A Transactions

Tax insurance can be used to reduce or eliminate the risk of historic tax positions taken by the target entity, as well as tax issues arising from the transaction itself. Tax insurance removes the identified tax risk from a deal by transferring it to the insurer, providing certainty and flexibility.

Not R&W Insurance

While known tax issues are excluded from coverage under a traditional representation and warranty (“R&W”) insurance policy, tax insurance complements a R&W insurance policy by providing coverage for such tax issues. Tax insurance can be used as a competitive tool by either the buyer or seller as part of the M&A process. It may be purchased by the buyer to make its bid more competitive or by the seller as part of its preparation for sale (thus, removing the tax issue from negotiations with bidders).

Benefits

  • Facilitates deal negotiations by reducing or eliminating the need for tax indemnities and escrows for identified tax issues
  • Facilitates financing and investment decision-making
  • Enables a clean exit by eliminating a long-tail contingent exposure
  • Provides purchase-price certainty by removing an identified tax exposure
  • Secures future tax benefits to be realized from the transaction
  • Offers liquidity and avoids the negative cash flow arising from a tax liability

Insurance Tax Risks

There are three areas of insurable risks in M&A transactions where tax insurance can be utilized. First, tax insurance can be used to reduce or eliminate the tax risk related to historic tax positions taken by the target on the seller’s watch (e.g., debt v. equity treatment, deduction v. capitalization of expenses, or transfer pricing ). Second, tax insurance can be used to address tax issues arising from the transaction itself (e.g., any pre-closing restructuring, treatment of the transaction as a tax-free reorganization, or availability of a tax basis step-up). Third, tax insurance can be used to insure the historic tax treatment of the target entity itself (e.g., S corporation status, REIT status, or MLP status).

Tax Insurance – Practice Leader

CAC Specialty’s Tax Insurance team prides itself on providing exceptional client service and crafting creative insurance solutions.

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Jordan
Tamchin

Executive Vice President, Practice Leader, Tax Insurance
Specialty

Get To Know Our Team

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Specialty

Matt
Movafaghi

Senior Vice President, Head of Tax Insurance Placements
Profile image for Ben Gerber
Specialty

Ben
Gerber

Vice President, Tax Insurance
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Specialty

Brandon
Santulli

Assistant Vice President, Operations Manager, Tax Insurance
Profile image for Hamed Khashayar
Specialty

Hamed
Khashayar

Vice President, Tax Insurance
Profile image for Isaura Del Carmen
Specialty

Isaura
Del Carmen

Senior Tax Analyst, Tax Insurance
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Specialty

Josh
Emmett

Vice President, Tax Insurance
Profile image for Michael Levine
Specialty

Michael
Levine

Assistant Vice President, Operations Manager, Tax Insurance
Specialty

Liam
Duffy

Assistant Vice President
Tax

Mike
Recchia

Vice President