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ARTICLE · 03 MAY 2023

Micro-Captives And Mega Headaches: The US IRS Designates Micro-Captive Insurers As Listed Transactions

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On April 10, 2023, the Internal Revenue Service ("IRS") issued proposed regulations further tightening the circle around micro-captive insurance transactions.

United StatesInsurance
Mark Leeds
Mark Leeds
Amit S. Neuman
Amit S. Neuman
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On April 10, 2023, the Internal Revenue Service ("IRS") issued proposed regulations further tightening the circle around micro-captive insurance transactions.1 The release of these proposed regulations appears to have been prompted, or at least expedited, by a March 2022 Tennessee federal district court decision that vacated an IRS notice on micro-captive transactions (Notice 2016-66, 2016-47 IRB 745).2 Although the proposed regulations make Notice 2016-66 obsolete, the IRS stated that the obsoletion of the notice "has no effect on the merits of the tax benefits claimed from the transactions themselves and related litigation, or income tax examinations and promoter investigations relating to micro-captive transactions." Does that also apply to the horse we rode in on? The proposed regulations identify certain micro-captive transactions as "listed transactions" and certain other micro-captive transactions as "transactions of interest." Both types of transactions

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