For a good captive, standing up to the Internal Revenue Service (IRS) may be the right answer and could positive for the industry as a whole, says John Dies, managing director of tax controversy at alliantgroup.
Speaking at Captive Insurance Companies Association's (CICA) 2018 Conference, Dies suggested the impact of winning a case against the IRS could be felt across the captive industry.
He said: “It is great for the industry when a captive stands up to the IRS, wins and creates a precedent that the industry can use.”
“We have seen the impact in cases where outsiders thought there was not a chance a captive could win and they made changes in the industry–and I believe that is positive for the industry.”
According to Dies, in the right context fighting the case is the correct move for a captive.
He explained: “In many cases, great captives that are well done and could have minor flaws are being treated with the same approach as those with glaring issues.”
“The problem is that some folks with good captives give up because they are tired or uncomfortable with the process and are very often drawn to accept offers and resolutions that are not fair, not appropriate and in many cases not best for them economically.”
Dies added: “I’ve seen a number of instances where I could go to court, win some issues, and finish substantially better for the client than if they took the deal that is being offered in the exam.”
“It is very rare in tax to see a situation where offers in exam and appeals are not as good as the offer a taxpayer could get from a judge or a jury and for me that is why the decision to pick the fight on the righteous cases is an important one.”
He concluded: “If the best deal is going to come from that venue, and you have the ability to do it because the finances are available to you, especially in this climate, I would.”
