As the Internal Revenue Service (IRS) moves forward with the process of developing new regulations for micro-captives, a major question for owners of the small captive insurance companies or those considering forming them is what comes next.
In a webinar presented by the South Carolina Captive Insurance Association (SCCIA) titled “Micro-Captive Update: What You Need To Know,” two experts discussed the status of the proposed IRS regulations and what they might mean for micro-captives going forward.
So-called micro-captives are small captive insurance companies that elect to be taxed under section 831(b) of the Internal Revenue Code, which allows small insurance companies to be taxed only on their investment income. They have been the target of IRS scrutiny in recent years.
One webinar panelist, Allan Autry, tax partner at Johnson Lambert LLP, noted that while the IRS has ratcheted up pressure on micro-captives and new regulations might further increase that pressure, the agency doesn’t have the authority on its own to overturn section 831(b).