Best Tax Liability Insurance Firms in USA

InterpretationGap® offers coverage for loss incurred as the result of one or more tax positions or tax treatments being challenged and disallowed by the relevant tax authority. InterpretationGap® Tax Insurance can reduce or eliminate uncertainty relating to the outcome of one or more tax issues by providing reimbursement for financial loss incurred as a result of a successful challenge by the relevant tax authority. The product can also be an effective complement to private letter rulings.

InterpretationGap® Tax Insurance can cover the following components of financial loss: additional tax, interest and penalties imposed on such additional tax, and the amount by which the taxpayer’s taxes are increased as a result of the payment of proceeds under the InterpretationGap® policy (e.g., “gross-up” coverage). The policy can be designed to cover the subject matter of a tax opinion or tax indemnity, and can match the statute of limitations for the specific tax issue(s), up to 84 months.

• Additional tax
• Interest and penalties imposed on such additional tax
• Gross-up coverage

Examples of where InterpretationGap® Tax Insurance can be responsive include: potential recharacterization of a transaction treated as an asset sale for tax purposes, potential challenge to place-in-service date of equipment intended to qualify for bonus depreciation, requested survival period of a tax indemnity prevents liquidation of a fund. Available for specific tax issues in a taxpayer’s ordinary course of business, as well as for general pre-closing tax liabilities in connection with acquisitions.

• Potential recharacterization of a transaction treated as an asset sale for tax purposes
• Potential challenge to place-in-service date of equipment intended to qualify for bonus depreciation
• Requested survival period of a tax indemnity prevents liquidation of a fund

InterpretationGap® can be purchased before a transaction closes, at the time of transaction, or after close. Common applications include situations in which: no clear guidance from the applicable tax authority or tax law precedent is available; the taxpayer is unable or unwilling to tolerate uncertainty because of the magnitude of the financial exposure relative to the size of a transaction; a buyer has not identified any specific tax issue, but wants to prudently minimize risk relating to the seller’s pre­closing tax issues; parties to a transaction cannot agree on the allocation of potential pre­closing tax liabilities.

• No clear guidance from the applicable tax authority or tax law precedent is available
• Taxpayer is unable or unwilling to tolerate uncertainty because of the magnitude of the financial exposure relative to the size of a transaction
• Buyer has not identified any specific tax issue, but wants to prudently minimize risk relating to the seller’s pre­closing tax issues
• Parties to a transaction cannot agree on the allocation of potential pre­closing tax liabilities

FAQs and Case Studies available for download.

• FAQs
• Case studies

Our tax liability insurance can help a buyer or seller reduce or eliminate its exposure to a specific, identified risk of a tax-related loss. GTS Tax Liability Insurance shifts the responsibility for tax contingencies from the insured to the insurer—minimizing financial risk and exposures and reducing the friction between buyers and sellers.

Post-closing rulings and challenges by tax authorities can prevent the distribution of proceeds while liabilities are determined. Sellers often set aside funds in escrow accounts for up to seven years. GTS Tax Liability Insurance gives sellers peace of mind with a single, calculated insurance premium and can limit each seller’s exposure to one another.

M&A deals are a huge investment for buyers. Unknown tax liabilities, pre- or post-closing, can turn a lucrative deal into a financial disaster. GTS Tax Liability Insurance reassures buyers and lenders that outstanding liabilities may be covered.

Insight article: Tax Liability Insurance – A strategic tool during unsettling times (10 Sept 2020).

GTS Global Tax Liability Insurance Brochure available for download.

The global tax system is complex and ever-changing, inherently leading to challenging business decisions for taxpayers and their advisors. Tax liability insurance limits the uncertainty and risk of tax positions – whether in the context of an M&A deal or a strategic position. Tax liability insurance is an efficient risk management tool that protects against identified, supportable tax positions not qualifying for their intended tax treatment.

In the M&A context, uncertain tax positions often lead to tense negotiations that can force the parties to walk away from a deal. With tax liability insurance, buyers can avoid self-insuring the risk or negotiating an indemnity/escrow and sellers can insulate themselves from an indemnity obligation. Regardless of an opinion’s strength, no tax position is free from doubt. Private letter rulings are not always available and can take time and energy to procure. As a result, tax liability insurance is an ideal solution to protect against a tax position not qualifying for its intended treatment.

Subject to certain terms and conditions and satisfactory underwriting, tax insurance policies provide coverage for the tax owed, any associated interest, fines or penalties, and the costs related to defending the position. Coverage may also include a ‘gross-up’ to compensate for any income taxes assessed on the receipt of the insurance proceeds.

• Coverage for tax owed
• Coverage for associated interest, fines, or penalties
• Coverage for costs related to defending the position
• Coverage may include a ‘gross-up’ for income taxes on insurance proceeds

M&A insurance provides protections designed to help both buyers and sellers mitigate risks and facilitate the closing of a deal. This type of insurance includes coverage for Representations and Warranties, Tax Indemnity, and Tax Credit insurance.

• Representations & Warranties Insurance: Safeguards business deals against losses resulting from breaches of representations and warranties. Available for transactions where the target company is based in the U.S. or Canada and U.S. or Canadian law is applicable.
• Tax Credit Insurance: Covers legal risks associated with investments in tax credits.
• Tax Indemnity Insurance: Addresses known tax issues, including potential damages for taxes, interest, penalties, and gross-up. Appetite for exposures under U.S. or Canadian law. Policy limits up to $25 million.

The team has more than 15 years of underwriting experience, is highly responsive and flexible, and offers policies backed by a dedicated team of experts and an A+ rated carrier.

• Dedicated team of seasoned underwriters, legal, tax and accounting experts
• Highly customized coverage
• Experienced claims handling
• A+ rated carrier, committed to long-term engagement

Specific insurance products offered under Mergers & Acquisitions Liability.

• Representations & Warranties Insurance
• Tax Credit Insurance
• Tax Indemnity Insurance
• Carbon Protect

Chubb has protected businesses of all sizes, their employees and their reputations against industry-specific risks for more than 200 years. Let our risk specialists work to find the right business insurance coverage for your unique needs.

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• #1 Commercial lines insurer in the U.S.
• 200+ years of experience
• $21B claims paid globally (2023)
• 92% overall claims satisfaction (2022-2023)

Chubb’s industry practice specializations continue to grow in response to rising business segments, ensuring that our capabilities and products align strategically to the evolving risks that matter most in your industry.

• 30+ industry practices
• Industry-specific risk solutions

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Learn more about market conditions and risks that affect your industry, leverage tips and strategies for protecting your business and see Chubb’s expertise in action with white papers, articles, and success stories.

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