A panel of captive insurance experts have reviewed a number of recent actions taken by the Internal Revenue Service (IRS) as well as the Senate’s finance committee in over micro captives, or 831(b)s.
The IRS is currently examining several companies that market captive insurance to small and medium businesses as well as those that form captives.
Former IRS acting commissioner and Alliantgroup national director of tax, Steven Miller, and former senior counsel to the US Senate’s finance committee and alliantgroup national managing director, Dean Zerbe, were present at the roundtable discussion, which was hosted by the American Bar Association.
"The IRS is looking hard at captive insurance to make sure it looks and acts like insurance, Alliantgroup is representing before the IRS a number of companies that have utilised captive insurance and it is clear that the IRS wants to understand how the captives are promoted and marketed as well as administered," said Miller.
During the hour-long roundtable, the panel discussed the addition of micro captive insurance abuse to the IRS's ‘Dirty Dozen’ scams list for 2015, the proposed amendments to Section 831(b) and senator Charles Grassley's request that the US Treasury "perform a study on the abuses of captive insurance for estate planning purposes".
Combined all together, the panel concluded that these actions point to a renewed emphasis on micro captive insurance compliance and highlighted the need for both micro captive owners and providers to be up to date on the latest regulations, case law and other guidance.
The panel noted that several audits of micro captive providers and their clients were already underway and confirmed that more audits will be coming as the IRS increases its enforcement activities.
"The Treasury has placed captives on their priority guidance list and the Senate’s finance committee has already asked the Treasury for feedback on rumoured abuses with a requested report," commented Miller.
"Companies that have utilised captive insurance want to get ahead of this and make sure their operations are in order and not wait until the IRS calls.”
Zerbe added: "With captives on the Dirty Dozen list it is clear that the IRS and Congress's interest as to captive insurance is quite broad—including use of captives for estate tax, life insurance and other tax planning.”
“Having an actuary or a piece of paper from the state insurance commissioner isn't going to be enough to get a company past an IRS audit.”
