24 July 2020Accounting & tax analysis

More than 20 captives bodies file key brief in IRS CIC vs IRS Supreme Court case

More than 20 organisations representing most of the US states with a significant interest in captive insurance have filed a brief with the Supreme Court relating to the CIC Services LLC vs IRS case with the intention of iterating concerns the captive insurance industry has about certain actions by the Internal Revenue Service (IRS).

Captives associations from Alabama, Arizona, Connecticut, Delaware, the District of Columbia, Georgia, Hawaii, Kentucky, Missouri, Montana, Nevada, New Jersey, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Utah, the US Virgin Islands and Vermont all signed the brief as did the Captive Insurance Company Association (CICA) and the Self-Insurance Institute of America (SIIA).

The CIC Services LLC vs IRS ‘CIC’ case challenges Notice 2016-66 that forces the owners of certain 831(b) captive arrangements (microcaptives) to report details of their tax structure to the IRS.

The coalition said the purpose of the brief is to make the case for easing unnecessary regulatory burdens. The brief states that Notice 66-2016 has had a “chilling” effect on the captive insurance industry and will cause “irreparable harm to the captive insurance industry and its stakeholders”.

It also notes: “The IRS claims that Notice 2016-66 is necessary to identify which 831(b) arrangements should be identified specifically as tax “avoidance” transactions. In reality, however, Notice 2016-66 appears to be designed to burden the industry and thereby diminish its size and scope.”