Insurer Seeks Tax Credits for $2 Million Microcaptive Payments

The IRS is wrong that a government contractor’s premium payments to a microcaptive insurance agency aren’t eligible for tax credits, it told the US Tax Court.

Fairfax Insurance Co., an affiliate of Maryville, Tenn.-based Relyant Global LLC, petitioned the US Tax Court after the IRS disallowed $2 million in deductible expenses for its 2021 tax year because the microcaptive insurer didn’t actually provide legitimate insurance. Relyant sought to have its premium payments to Fairfax deducted as business expenses, but the IRS rejected that move and required Fairfax to include the payments in its gross receipts.

The change to the company’s ...