Micro-Captive Insurance Transactions to Come Under IRS Scrutiny

The IRS Large Business and International division (LB&I) is rolling out a series of campaigns focused on specific compliance issues. The division analyzed extensive data as well as suggestions from IRS compliance employees and the tax community to improve large business compliance activities.

The Micro-Captive Insurance campaign addresses transactions described in Transactions of Interest Notice 2016-66, where contracts are treated as insurance contracts and a related company is treated as a captive insurance company in order to reduce aggregate taxable income through claimed deductions for insurance premiums. According to the IRS, the manner in which the contracts are interpreted, administered, and applied is inconsistent with arm's length transactions and sound business practices. LB&I will be training agents and initiating examinations of taxpayer returns with related claims.

For more information on this and other IRS LB&I compliance campaigns, click here: https://www.irs.gov/businesses/large-business-and-international-launches-compliance-campaigns

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