Microcaptive Disclosure Rule Tossed by Federal Judge (Correct)

An IRS regulation that was meant to clamp down on microcaptive insurance transactions that the agency sees as abusive was partially struck down by a federal judge Wednesday.

Though the IRS properly categorized microcaptive transactions as transactions of interest for purposes of the rule, it didn’t have the authority to designate the transactions as “listed"—those the IRS has determined are tax avoidance moves and require additional reporting, Lee H. Rosenthal, chief judge of the US District Court for the Southern District of Texas, said.

Drake Plastics Ltd., a captive insurer, and its micro-captive plan administrator sued the IRS because ...