Update from Sandra Fenters

The IRS issued a notice earlier this week which provides a settlement offer to certain taxpayers who are currently under audit and possess bad fact patterns within their captive program.

According to DugganBertsch, the IRS has touted several recent victories with respect to “micro-captive” transactions, but these cases have illustrated bad taxpayer fact patterns that were strongly in the IRS’s favor. By litigating these bad fact pattern cases first, the IRS hopes to discourage taxpayers with stronger fact patterns from continuing their defense of their positions. However, many of the several hundred pending cases in Tax Court have more taxpayer-favorable facts and circumstances; they are likely to create a more favorable precedent.

Capterra Risk is very active on Capitol Hill, and our staff regularly conducts Congressional meetings focused on key committees of jurisdiction, including Senate Finance and House Ways and Means, as well as leadership and Chairman offices. This ongoing engagement centers around educating Members of Congress and their staff about captive insurance in general, the importance of risk mitigation and the issues facing the captive owners and managers. As part of this effort, Capterra is working to establish a set of proactive principles to help further advance and benefit the industry, in partnership with state and federal regulators.

While the recently announced settlement only applies to a small percentage of captives under current IRS examination, we wanted to make you aware of the Notice.

If you would like to discuss this news further, please contact Capterra Risk at 412.802.2600.