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Tax Clause

A clause in an insurance policy which provides that in the event of a return of premium becoming due any tax allowed for by the insurer on the original premium shall be deducted from the return.

Tax Equity and Fiscal Responsibility Act (TEFRA)

Federal legislation passed in 1982 that raised tax revenue, instituted many provisions for managed care plans, set up Medicare payment limits, and added Medicare coverage for hospice care. It established that an employee or spouse age 65 to 69 years is entitled to the same health insurance benefits offered under the same conditions to younger employees and their spouses. TEFRA applies to employers with at least 20 full- or part-time employees. A TEFRA provision allowed states to extend Medicaid coverage to certain disabled children.

Tax havens

Low tax areas offshore, particularly attractive to captives. Bermuda tops the list followed by the Cayman Islands, Guernsey, Gibraltar and the Isle of Man. Taxes on profits are deferred until they are repatriated. Formation is more straightforward and, given that captives will have one main or only customer, this is appropriate as the procedures in the developed countries are stringent as their aim is to protect the general public.

Tax Reform Act of 1986

Required individuals who filed tax returns to include the taxpayer identification number, usually the Social Security number, of each dependent age 5 or older. The Act defined a highly compensated or key employee as follows: (1) directly or indirectly owns more than 5% interest in the company, (2) receives compensation from the company of more than $75,000, (3) is paid more than $50,000 and was among the top 20% of employees ranked by compensation, or (4) is at any time an officer and receives compensation that was more than 150% of the Section 415 defined-contribution dollar amount.