The tax insurance market is experiencing a significant uptick in demand, particularly in the context of mergers, acquisitions (M&A), and energy credit deals. This growth is driven by companies and their legal advisors seeking to mitigate potential financial risks associated with uncertain tax treatments by the Internal Revenue Service (IRS).
One of the primary reasons for this heightened demand is the unpredictability surrounding how the IRS might rule on complex transactions, especially those involving energy tax credits and M&A activity. These uncertainties have prompted businesses to seek tax liability insurance policies as a precautionary measure. Such insurance can help bypass hurdles that could otherwise delay or even derail significant deals. According to experts in the field, including Brianne de Sellier, a partner at Crowe’s Washington national tax office, acquiring a tax liability insurance policy can address many impediments that typically slow down deal-making processes.
Large insurance companies have responded to this demand by expanding their offerings in tax liability insurance. Businesses view these policies as a safety net, providing assurance and stability in the case of adverse rulings by the IRS.
This trend indicates a broader shift within the industry, where transactional parties are increasingly incorporating risk management solutions within their deal strategies. For further details, you can read more about this development in Bloomberg Tax’s coverage.