From: Captive Insurance Times

Micro captives remain under intense scrutiny from the Internal Revenue Service (IRS) as tax issues continue to concern the captive industry, according to panellists at the Captive Insurance Companies Association (CICA) International Conference.

Speaking at a panel session discussing hot topics in the captive industry, Paul Shimomoto, partner at Goodsill Anderson Quinn & Stifel, noted the continued presence of micro captives on the IRS’ ‘Dirty Dozen’ list of tax scams and abusive arrangements as a warning of the agency’s intent for further investigation.

In addition, Shimomoto mentioned the IRS’ recent plans to hire up to 200 attorneys to address its increasing number of corporate and partnership audits against alleged abusive tax schemes.

This includes micro captives, targeted for their high premiums and niche risk coverage which are apparently indicative of a lack of legitimate business or insurance purpose.

IRS scrutiny is particularly concentrated in Delaware. The ongoing dispute with the Delaware Department of Insurance (DDOI) over the enforcement of an IRS summons as part of the agency’s investigation into transactions related to micro captives is at a stalemate, with DDOI citing its confidentiality statute.