The IRS on September 16, 2019 issued a News Release (IR-2019-157) announcing that it was mailing time-limited settlement offers to certain taxpayers then under IRS examination that had participated in what the IRS considered to be ‘abusive’ Section 831(b) micro-captive insurance arrangements.
On October 22, 2020, the IRS followed up with another News Release (IR-2020-241) announcing that a second time-limited settlement offer is being mailed to certain taxpayers that are under audit.
Given the statements in the latest News Release, micro-captives and other similar arrangements will continue to be the subject of heightened IRS attention. Therefore, companies with Section 831(b) micro-captives should review existing arrangements in seeking continuing qualification as an insurance company for federal income tax purposes.
Insurance Tax Leader, PwC US