A Florida federal jury has ruled in favour of RMC Group in a captive dispute against the Internal Revenue Service (IRS).
In the verdict, the jury cleared RMC Group, owned by Raymond Ankner, from penalties under Internal Revenue Code Section 6700, which governs the promotion of abusive tax shelters.
The IRS claimed that RMC's captives were not real insurance companies, accusing the business of making false statements in connection with illegitimate insurance plans.
Ankner had filed the lawsuit after being fined almost US$4 million by the IRS for their promotion of micro-captive arrangements between 2010 and 2016.
US district judge John Steele ruled in February that a jury should decide whether Ankner knowingly lied to clients by telling them they could take illegal tax deductions in connection with captive insurance arrangements.
The IRS alleged the penalties were proper because Ankner and his companies created, sold and managed a plan to skirt federal income taxes by using illegal deductions for supposed insurance premiums related to microcaptive insurance programmes.
Ankner argued that the federal government built its case on its own summary interpretations of statements, and that he and his businesses followed IRS guidance.
Under microcaptive insurance transactions, companies set up small, in-house insurers that are taxed only on investment income, excluding payments received under the insurance contract from taxable income.
Matthew Reddington, attorney for RMC Group, comments: “The jury understood that captive insurance is a complicated area and one in which IRS guidance has been scarce.”
RMC becomes the first captive manager to prevail against the IRS in court on this issue, marking a big step in the ongoing dialogue surrounding compliance in the management of captive insurance companies.
Ankner states: "The jury's decision has validated our commitment to ethical business practices and regulatory compliance.
“This victory not only vindicates our position but also reinforces the importance of clarity and collaboration in regulatory frameworks.”
