EXCLUSIVE: Captive organisations file brief for IRS Supreme Court case

EXCLUSIVE: Almost two dozen captive organisations will today file a brief with the Supreme Court in the CIC Services LLC vs IRS ‘CIC’ case.

Twenty captive organisations from a range of domiciles, as well as national organisations Captive Insurance Company Association (CICA) and the Self-Insurance Institute of America (SIIA), have signed the brief.

The case challenges Notice 2016-66 that had compelled owners of certain 831(b) captive arrangements (known as micro captives) to report details of their tax structure to the IRS.

“This broad coalition formed with the goal of demonstrating through an amicus brief to the U.S. Supreme Court the broader concerns of the larger captive insurance industry with recent actions by the Internal Revenue Service (‘IRS’) and in support of the CIC Services case,” a statement from the group of associations said.

“While the industry continues to support appropriate IRS actions to curb abusive practices, it objects to the unnecessary regulatory burdens being imposed on taxpayers without a formal rulemaking or appeal process, contrary to law and Congressional intent.”

The coalition of captive organisations involved include 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 U.S. Virgin Islands and Vermont.

The brief states that Notice 66-2016 has had a “chilling” effect on the captive insurance industry.

“Notice 2016-66 imposes a heavy burden on the public and causes ongoing irreparable harm to the captive insurance industry and its stakeholders,” the brief also says.

The brief makes a number of other arguments, including that the captive industry was not given a “meaningful opportunity” to participate in the making of Notice 66-2016, that it causes a heavy administrative burden for captive owners, and that the notice is “arbitrarily and capriciously” applied to all micro captives.

The coalition also acknowledges that there are some abusive transactions, but is in full support of efforts by the IRS to find those transactions and structures.

“The Amici offer no opinion on any other particular facts or structure of any insurance program at issue or otherwise, and fully support appropriate efforts by the IRS to curtail those transactions which are actually abusive that serve to undermine the industry,” the brief states.

Ryan Work, vice president of SIIA, said that the coalition of captive industry associations was “truly unique” and that it shows the common goal of all associations.

“This is an issue far beyond the captive industry, it’s an issue that impacts how federal agencies listen, respond and respect U.S. taxpayers,” he said.

“Through the coalition brief, those issues have now been raised by nearly two dozen captive associations who have expressed a unified voice  to educate the highest court in the land, in addition to supporting businesses across the country who deserve a voice and appeals process before the IRS.”

12 August 2024
5-6 November 2025
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