The IRS has decided to back off its position that the 1 percent excise tax is due on a policy of reinsurance where a foreign reinsurer reinsures a policy of reinsurance issued by another foreign reinsurer (referred to in the industry as a retrocession policy). Foreign reinsurers who have previously paid the excise tax on such retrocession policies should determine whether opportunities exist to file excise tax refund claims for those payments.

The IRS publicly announced its shift in position in Revenue Ruling 2016-03, which revoked a 2008 Revenue Ruling in which the agency stated that the 1 percent excise tax applied to reinsurance policies where a foreign reinsurer purchased a retrocession policy from another foreign reinsurer.