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Microcaptive Insurance as Transactions of Interest Heading to Supreme Court abusive-tax-shelters-sm.png

09 / 26 / 2020

CIC Services, LLC v. Internal Revenue Service

Do Microcaptive Insurance Companies have the right to sue the United States Government over its efforts to "tag" certain micro-captive insurance arrangements as "transactions of interest" necessitating the filing of IRS Form 8886?

The United States Supreme Court granted writ of cert, to bring up the case from the Sixth Circuit.  

Various amicus briefs have been filed on both sides.

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While in recent years the Treasury Department have not felt the need to add to the number of "reportable transactions" or even "transactions of interest" which must be reported to the IRS on IRS Form 8886 each year by taxpayers participating in the same, one of the transactions that has caught their eye are certain arrangements involving microcaptive insurance companies.  Practitioners and taxpayers are encouraged to be wary of transactions that seem too good to be true, when layered with assurances or guarantees of success, even if coupled with a generic legal opinion.  Often a name will be given to the plan or scheme, and marketed as such, and often under requirements that it be kept strictly confidential.  If anyone is faced with any such product or marketing effort, you are strongly encouraged to seek independent tax counsel to review the plan or proposal before entering into the same.  If you have already entered into any such transaction, it is critical that you determine if you have a reporting obligation with respect to the same, using IRS Form 8886.  If you are advising with regard to any such plan, or are an accountant involved with a client who is considering or already involved in any such plan, you have to further consider if you have become a material advisor with respect to the same, and know the reporting requirements, using Forms 8918.  Mr. Tufts is available to assist with such issues, and can be reached at 407-647-7887.