From: Captive Insurance Times

Elevate Risk Solutions’ Cassie Bachman discusses the IRS’ recent petition to the US Court for the District of Delaware to issue a summons against the Delaware Department of Insurance for documents related to its micro captive investigation

In an attempt to enforce a summons against the Delaware Department of Insurance (DDOI), the Internal Revenue Service (IRS) has recently petitioned the US District Court for the District of Delaware. Their ultimate goal – to allow a federal agency to override a state agency’s laws – has serious implications as a precedent.

While the summons is for documents related to the IRS investigation of Artex Risk Solutions and Tribeca Strategic Advisors (as of 2010 fully owned by Artex), there are a few statements included by the IRS that I have not yet seen be directly addressed.

To understand how events have transpired to reach the point of the IRS requesting a court to enforce its summons, it is worth taking a minute to consider what exactly is the purpose of the DDOI’s captive bureau. As any authority granted to a regulatory body, we look to the statutes.

For Delaware this is 18 Del.C. § 6901 ‘Finding Purpose’, which states as follows:

It is determined and declared as a matter of legislative finding that captive insurance companies can serve a valuable risk management function and that their responsible utilisation and the growth of the captive insurance industry in the State of Delaware are in the best interests of this state.

It is further determined and declared that the purpose and policy of this chapter shall be:

To provide for the regulation of captive insurance companies consistent with their nature and purpose;

To provide flexibility and opportunity to captive insurance companies and to persons utilising them; and

To foster economic development in this state through the growth of the captive insurance industry.