Delaware Can’t Block IRS Summons on Captive Insurance Companies

Delaware can’t shield information on captive insurance companies from an IRS summons because it didn’t meet the threshold established by federal law, the Third Circuit said Friday.

Under Section 6920 of the Delaware Insurance Code, the state’s Department of Insurance is prohibited from disclosing confidential information on captive insurance companies—which are owned and controlled by the insureds and offers tax benefits to members—to anyone, including the federal government, without the companies’ consent. Captive insurance companies have come under scrutiny by the IRS for presenting opportunities for tax avoidance.

In 2017 the IRS issued a summons to the department seeking information ...