Sean King, president, CIC Insurance Services
CIC Services has reacted to its recent victory in federal court against the IRS, vowing to overturn Notice 2016-66, which labels micro captive arrangements as potentially abusive and requires their disclosure. Last week it secured a preliminary injunction against the IRS’ enforcement of the notice.
Sean King, general counsel for CIC Services, said that it intended to fight on: “At this moment we believe CIC Services to be the only entity in the country that is exempted from the requirements of IRS Notice 2016-66, which we contend was issued illegally, arbitrarily and capriciously,” he said.
“But we are not satisfied with that, and we won’t rest until the court instructs the IRS that it cannot enforce the Notice against any taxpayer or material advisor.”
The injunction followed the Supreme Court decision earlier this year that found the notice failed to comply with the Administrative Procedures Act (APA), which requires rules with the force of law to be issued only after an opportunity for public notice and comment.
“For too long the IRS has behaved as if it was exempt from the basic rules of law-making that govern federal administrative agencies, as if it had carte blanche to make and enforce laws by fiat without following due process,” said Sean King, general counsel for CIC Services.
“Our 9-0 victory against the IRS in the Supreme Court of the United States proved the IRS to be wrong on that point.”
Until the notice was rescinded, however, the business and other advisers and captives would continue to suffer “irreparable harm”, he continued.
“Most clients are referred to us by other advisors – insurance agents, CPAs, risk managers, etc – essentially all of whom fear being deemed to be a ‘material advisor’ and thereby becoming subject to the onerous requirements of the notice. Consequently, they no longer refer. Until that is fixed, and the notice is tossed in its entirely such that it can’t be enforced against anyone, our business will continue to suffer, and too many of our nation’s businesses will be terrorized away purchasing much-needed insurance,” he said.
“Captives managed by CIC Services have paid or are in the process of paying an estimated $12 million to $15 million of COVID-19 related claims alone. That number would likely be at least two to three times higher but for the relief that many of its clients obtained via PPP loans.”
Bryan Ridgway, head of CIC Services, added: “Few Fortune 1000 companies were put out of business by COVID-19, but thousands of small and mid-market businesses were. These businesses are the backbone of our nation’s economy, and they are uniquely vulnerable to risks like pandemics since they usually lack the same access the capital and credit markets as the big boys. When bad things happen, captive insurance can be absolutely essential to keeping small business owners in business and to protecting the jobs they offer.”
CIC Services, IRS, Federal Court, Captive, Insurance, Reinsurance, Sean King, Bryan Ridgway, North America