IRS petition should be granted in DDOI summons, says judge


IRS petition should be granted in DDOI summons, says judge


An Internal Revenue Service’s (IRS) summons sent to the Delaware Department of Insurance (DDOI) seeking information related to a micro-captive investigation should be granted, according to a magistrate judge.

Judge Christopher Burke, of the US District Court for the District of Delaware, also recommended that DDOI’s motion to quash the summons, or obtain a protective order, be denied.

In June last year, the IRS petitioned the Delaware court to enforce a summons, which stemmed from the agency’s investigation into the role of non-parties Artex Risk Solutions, Tribeca Strategic Advisors (which is owned by Artex) and others, in transactions involving micro-captive insurance plans.

The IRS began its investigation years ago—in December 2013, it issued two administrative summonses to Artex. When Artex produced certain documents, they included e-mail correspondence between Artex and DDOI.

Fast-forward to 2017, and the IRS issued the summons at issue here, seeking information pertaining to approximately 200 insurance certificates of authority that DDOI had issued to micro-captive insurance companies associated with Artex and Tribeca.

DDOI objected to the summons, citing confidentiality objections. At the same time, DDOI also produced numerous documents to the IRS, but none of these documents were the emails between Artex and DDOI.

After discussions, DDOI continued to produce documents which were not client-specific on a rolling basis, but refused to produce client-specific documents.

In October 2019 and February 2020, DDOI sent communications to all of the micro-captive insurance companies associated with Artex, asking them to voluntarily consent to DDOI’s release of the documents to the IRS. Only 19 of the micro-captives consented and these files were produced to the IRS.

With its June 2020 petition, the IRS sought the outstanding documents and testimony.

In a potential victory for the IRS, on July 16 this year, Burke recommended that the DDOI be required to produce the documents.

Objections to the recommendations are due by July 30. If a party fails to object to the legal conclusions, it may result in the loss of the right to de novo review in the district court.

IRS, Delaware Department of Insurance, Captives, Insurance, Reinsurance, Artex Risk Solutions, Tribeca Strategic Advisors, North America

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