19 April 2021Accounting & tax analysis

SIIA calls on IRS to publish micro-captives guidance

The Internal Revenue Service (IRS) should publish guidance relating to the use of micro-captives, to ensure businesses that want to use them appropriately can do so, according to the Self-Insurance Institute of America (SIIA).

The SIIA insisted the vast majority of captive participants are using micro-captives as the tax code intended, to protect themselves against appropriate risks. While the IRS has found some cases where the structure has been abused, such as Caylor Land, such cases do not reflect what is happening in the broader industry, it argued.

“Across the country, businesses are using captives to mitigate against real risk in a time of uncertainty and interruption,” SIIA said. “Congress gave the IRS authority to undertake guidance related to abusive captive practices as part of the PATH Act of 2015. Six years later, the industry is still waiting, as are policymakers in Congress. As these small businesses are being attacked by the IRS for doing the right thing, many are simply trying to stay afloat.”

SIIA stressed it supports the IRS’ efforts to curb abusive practices within the industry, and called on anyone that is engaged in an abusive scheme to heed the IRS’ advice. However, it insisted the majority of micro captives do not fit into that category, calling on the IRS to recognise what an appropriate structure is, and issue appropriate guidance to that purpose.