MONTPELIER - The Internal Revenue Service is dropping plans to change regulations that some believe could have hurt one of Vermont's key financial industries.
The proposal would have prohibited captive insurance companies from deducting from their corporate taxes the value of reserves they have set aside to pay claims. The change was opposed by Vermont's congressional delegation and Governor Jim Douglas.
"IRS officials listened, and they were willing to pull back an overly broad rule change that did not make sense for self-insuring companies," US Senator Patrick Leahy said in a written statement.
Captive insurance companies are wholly owned subsidiaries of corporations that provide property loss, casualty, and liability insurance to the corporate parent.
Vermont is the third-largest home to captive companies in the world, following Bermuda and the Cayman Islands.
The industry accounts for about 1,400 high-paying jobs in Vermont, and last year it accounted for $22.8 million in state taxes.
Industry officials in Vermont feared that if the changes were enacted, the insurance companies might reduce their Vermont presence.
"This is a crucial win for Vermont business and for well-paying Vermont jobs," US Representative Peter Welch said.
