Tax laws and regulations can be complex. And seeking official guidance, even if it’s an available option, is costly and time-consuming. In today’s fast-moving world, businesses, fiduciaries and individuals may require greater tax certainty to move transactions and business strategies forward than what our complicated tax rules and guidance process can provide. At Willis , a WTW business, we recognize that taking bold business steps shouldn’t create tax risks that can create financial drag. Our tailored tax insurance solutions offer peace of mind and financial security to bridge the gray areas of tax law. Discover how our comprehensive tax insurance services can protect you and your business.
What is tax insurance?
Tax insurance provides specialized coverage designed to protect individuals and businesses against known tax risks. This solution serves as a financial safety net in situations where you take a tax position based on your best interpretation of the tax law, which may be challenged by tax authorities, potentially necessitating financial reserve or creating financial liability. The primary purpose of tax insurance is to mitigate risks associated with tax uncertainties, so policyholders can navigate complex tax landscapes with confidence.
Several scenarios highlight the benefits of tax insurance:
- Energy tax credits involve complex rules and regulations related to structure, qualification and recapture. Tax insurance offers investors, energy project developers and buyers of tax credits the ability to protect the value of the tax credits claimed.
- Mergers, acquisitions and restructurings involve multifaceted tax implications that can be difficult to predict. In such cases, tax insurance can eliminate the need for parties to maintain financial escrow, safeguarding against unexpected tax liabilities that may arise post-transaction and the hassle of haggling over the escrow long after the transaction has closed.
- Sophisticated tax planning by businesses can involve a range of issues—from the treatment of sale proceeds and earnouts, to internal reorganizations involving asset transfers or liability wind-downs, and executive compensation strategies. While such planning may reduce current financial reserves for disclosure purposes, it can still be subject to future audits and potential losses. Tax insurance helps mitigate this risk by offering downside protection, which can lower the materiality threshold for current disclosures.
- Businesses engaged in international trade may face challenges related to cross-border tax compliance, tax treaty interpretation and transfer pricing. Tax insurance offers protection against potential tax audits and disputes in these situations.
- Startups and businesses with unique tax structures also find value in tax insurance, as it provides an extra layer of security against unforeseen tax assessments.
- Individuals engaged in sophisticated estate planning and fiduciaries seeking to de-risk tax positions can utilize tax insurance to protect against unexpected tax liabilities, securing peace of mind while fulfilling any heightened fiduciary obligations.
The tax insurance process starts with an assessment of the legal soundness of a tax position, typically by a third-party advisor who will review relevant laws and risks related to specific transactions. Insurers then evaluate these risks to set the premium. If, even after you have defended your insured tax position, the tax authority nonetheless prevails, the policy covers legal fees, taxes, interest, penalties and gross-up, subject to the policy limits.
At Willis, we specialize in providing tailored tax insurance solutions that meet the unique needs of our clients. Our experienced team of former lawyers and CPAs understands the complexities of tax law and the potential challenges businesses and individuals face, allowing us to provide solutions that offer comprehensive protection. Our expertise and commitment to client success make Willis a leader in the tax insurance market, offering innovative solutions that help businesses and individuals thrive.
What are the benefits of tax insurance?
There are several benefits of having tax insurance:
By providing coverage for potential tax liabilities and associated legal expenses, tax insurance acts as a safety net, ensuring your business is prepared for tax challenges. Tax insurance alleviates concerns over acquired tax risks and enables business owners and individuals to execute transactions with confidence.
Our tax insurance solutions are tailored to meet the unique needs of your business. Willis’ team of experts work closely with you to understand your specific circumstances and provide customized coverage that aligns with your operational requirements.
Why choose WTW’s tax insurance solutions?
Willis offers global tax expertise spanning not only in North America but throughout Europe, Asia, Middle East and South America. Our insurance relationships extend from AAA rated domestic carriers to A- or better carriers throughout the world. With our depth of expertise and breadth of insurance relationships, we are able to provide specialized expert guidance in navigating tax law and regulations while offering you the broadest insurance solutions.
Our team brings a 360-degree perspective to the tax administration process, with a combined 50+ years of experience between law firms, the IRS, in-house head of tax, Big 4 accounting firms and M&A expertise, we examine your tax risks from every angle.
