Stroock Special Bulletin
"D.C. Circuit Court Rules Sec. 4371 Federal Excise Tax Does Not Apply to Foreign-to-Foreign Retrocessions"
On May 26, 2015, the D.C. Circuit Court held in Validus Reinsurance, Ltd. v. United States that the federal excise tax (“FET”) under Section 4371 of the Internal Revenue Code does not apply to foreign-to-foreign retrocessions. This decision will, unless the issue gets to the Supreme Court, have significant implications for the U.S. taxation of retrocession transactions between foreign (i.e., non-U.S.) parties. Nevertheless, as explained in this Stroock Special Bulletin, the D.C. Circuit Court left many questions unanswered.