Earlier this year, final regulations were issued under Prop. Reg. Section 1.6011-10, setting forth the criteria that classify certain micro-captive insurance arrangements as listed transactions or transactions of interest. These designations require extensive tax return disclosures and impact all parties, including related entities. 

As micro-captives continue to be a focal point for Internal Revenue Service (IRS) enforcement, understanding these regulations is crucial for businesses aiming to maintain compliance and avoid potential penalties. Micro-captive insurance arrangements have long been a topic of concern for the IRS due to their potential for abuse in tax planning. The recent regulations aim to address these concerns by providing clear guidance on what constitutes a reportable transaction. 

In this episode, Brooks Nelson, Partner and Strategic Tax Leader, and Sarah McGregor, Tax Director, are joined by Rick Woods, Tax Partner. Together, they dive into the implications of these regulations, discuss IRS enforcement efforts and explore what constitutes a listed transaction versus a transaction of interest.

Listen to learn more about:

• 04:11 – IRS interest in micro-captives
• 06:01 – Section 831(b) in micro-captives
• 08:29 – IRS history with micro-captives
• 11:48 – Criteria for micro-captive transactions
• 17:13 – Reporting micro-captive transactions
• 19:49 – Exceptions in micro-captive coverage
• 21:24 – Exiting micro-captive arrangements
• 22:37 – Economic reasons for micro-captives
• 24:30 – Risk management in micro-captives

Related Guidance 

• Article: IRS Issues Final Regulations Impacting Micro-Captive Insurance Arrangements