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Economy Industry Trends

The November Election and Your Reinsurance

We are just a few days away from the presidential election – as well as several state, county, and city races. As a dealer principal, you are likely watching the races for their impact on your strategic planning to ensure your financial positions are secure. While we do not have a crystal ball as to the outcome of the election, we do have some data points to assist with your strategic planning.

We all know that historically a typical Democratic policy reflects higher taxes on businesses, and a typical Republican policy touts lower taxes. While it is ineffective to apply this thinking across the board, the historical perspective can be useful in planning scenarios. Perhaps more importantly, there are some specific tax policies which could be in play depending on changes in congressional power.

Democratic Control and Taxes

If the Democratic candidate wins the presidential election and Democrats take a stronger position in Congress, there is a probability that corporate taxes will increase. More specifically, congressional Democrats may seek to remove the Bush-era qualified dividend tax break, affecting Controlled Foreign Corporation (CFC) and Non-Controlled Foreign Corporation (NCFC) reinsurance positions. To understand the implications of this, let’s consider the dividend breakdown. In terms of tax policy, there are two types of dividends: unqualified and qualified.