Nearly two dozen national and state organisations in the US have filed a joint amicus brief before the US Supreme Court in the case of CIC Services LLC v. Internal Revenue Services (IRS).
The coalition is comprised of leading national, state and territorial captive domicile associations, including Alabama, Arizona, the Captive Insurance Company Association (CICA), Connecticut, Delaware, the District of Columbia, Georgia, Hawaii, Kentucky, Missouri, Montana, Nevada, New Jersey, North Carolina, Oklahoma, Puerto Rico, the Self-Insurance Institute of America, Inc. (SIIA), South Carolina, Tennessee, Texas, Utah, the U.S. Virgin Islands and Vermont.
The coalition was formed to demonstrate through an amicus brief to the US Supreme Court the concerns of the larger captive insurance industry with recent actions by the IRS and in support of the CIC Services case.
The 23 organisations stated that while the industry continues to support “appropriate IRS actions to curb abusive practices, it objects to the unnecessary regulatory burdens being imposed on taxpayers without a formal rulemaking or appeal process, contrary to law and Congressional intent”.
The brief focuses on three key arguments at issue including the heavy regulatory burden and harm being caused to taxpayers, the Administrative Procedures Act (APA), and the Anti-Injunction Act (AIA).
The captive organisations argued that the court should consider the heavy regulatory burden and harm being caused to taxpayers, namely the captive insurance industry.
It explained that Notice 2016-66 requires taxpayers to report duplicative information and imposes an undue financial burden to small- and medium-sized businesses, all for little to no benefit to the IRS.
“These requirements have come at a tremendous cost to taxpayers,” it added.
On the APA, the brief explained that it requires federal agencies to allow for a meaningful opportunity for public comment on proposed rules.
Additionally, the brief argued that the IRS did not comply with the APA, rather issuing the notice without offering public comment and review.
It stated: “Despite the lack of a formal comment and review process, coalition members nonetheless provided comments to the IRS that went unheeded.”
Reflecting on the AIA, it stated that this prohibition on preventing challenges to the IRS should not extend to reporting requirements, such as are imposed by the notice.
The case is set to be heard at the beginning of October
The coalition members stated that it is important to note that while the CIC Services case is specific to captive insurance companies electing under IRC 831(b), the unnecessary and overbroad regulatory actions of the IRS are of concern to both the broader captive insurance industry and US business in general.