The Tennessee Captive Insurance Association (TCIA) will write a letter to the Internal Revenue Service (IRS) regarding IRS Letter 6336, it has confirmed.
The IRS letter was sent out to micro captive owners and has been widely criticised by captive insurance associations for being overly aggressive in tone, and poorly timed. It has also been condemned as an attempt to intimidate captive owners into paying more tax than they are legally required to.
The TCIA said it plans to send out a letter in the coming days, following similar letters from a number of other captive insurance associations.
The Vermont Captive Insurance Association (VCIA) was the first to send such a letter to the IRS, criticising the letter to captives for its content and timing. Others quickly followed, including the Utah Captive Insurance Association (UCIA), the North Carolina Captive Industry Association (NCCIA) and the Arizona Captive Insurance Association (ACIA).
Kevin Doherty, president of the TCIA, said it broadly agreed with the points raised by the other captive associations.
In its letter, the UCIA called on the IRS to “leave these businesses alone, or at the very least, suspend this unnecessary and overly-aggressive audit and examination activity until at least a year after the National COVID-19 emergency declaration is withdrawn.” This would be consistent with the extensions and suspensions of various tax filing deadlines and audit activity it has agreed for individuals and businesses, it added.
Meanwhile, NCCIA president and chief executive Thomas Adams called on Congress to “demand that the IRS suspend this unnecessary audit and examination activity until at least a year after the National COVID-19 emergency declaration is withdrawn.”
NCCIA said “the IRS already has much, if not all, of this requested information” from IRS Form 8886, which the IRS has required captives to file for the past two years.
The UCIA reiterated that Congress has supported the captive insurance industry, by establishing section 831(b) for all qualifying insurance companies. By increasing the allowable premium under section 831(b) in 2015, to make micro captives more effective, Congress further demonstrated its support of these structures, UCIA said.
UCIA described the IRS’ actions as “nothing less than intentional thuggery”, accusing it of “taking advantage of the worst business climate in decades to scare and harass captive owners who are doing their best to keep afloat.”
Tennessee Captive Insurance Association, TCIA, VCIA, UCIA, NCCIA, Internal Revenue Service, IRS, Kevin Doherty