CIC Services has launched a second lawsuit against the US Internal Revenue Service (IRS), accusing the agency of regulatory overreach that threatens small and mid-sized businesses.
The Knoxville-based firm, which helps companies form and manage captive insurance arrangements, filed the complaint in the US District Court for the Eastern District of Tennessee.
It seeks to overturn a new IRS rule that CIC Services says closely resembles a previous regulation already struck down in court.
In 2021, the US Supreme Court issued a unanimous decision in favour of CIC Services, affirming that federal courts can review and potentially block IRS rules deemed unlawful.
The case centred on IRS Notice 2016-66, which the courts found had been issued without following the required rule-making procedures.
Despite the Court’s decision, the IRS has since issued a final rule earlier this year about micro-captive listed transactions and micro-captive transactions of interest.
CIC Services argues the rule “imposes burdensome reporting requirements, creates reputational risk, and threatens both participants and advisors with potential penalties and criminal liability — without supporting evidence or compliance with administrative law”.
According to the firm, while large corporations have long used these structures, Congress introduced Section 831(b) of the Internal Revenue Code to extend similar benefits to smaller enterprises. These include stable premiums, flexible coverage options, and the opportunity to retain underwriting profits.
CIC Services claims the IRS continues to mischaracterise such arrangements as abusive, without providing supporting data or following administrative law as directed by the courts.
The new lawsuit asks the court to vacate the final rule and block its enforcement against CIC Services, its clients, and affiliated advisers.
The company stresses that this case goes beyond one regulation, arguing it is a broader fight to protect businesses from unchecked government action.
“The perception that the IRS isn’t accountable under the Administrative Procedure Act is no longer true,” says Sean King, general counsel for CIC Services.
“We’ve shown once that they can be challenged — and we’re ready to do it again.”
