IRS Defends Disallowing Tax Deduction for Microcaptive Insurance

The owner of more than a dozen San Antonio urgent care clinics can’t treat his microcaptive insurance companies as bona fide insurers for tax purposes because they failed to distribute risk, the IRS told a federal appeals court.

Bernard Swift, a doctor and owner of Texas MedClinic, appealed the US Tax Court’s ruling that the insurance companies he controlled only used the trappings of insurance to help him avoid tax. The IRS on Wednesday urged the US Court of Appeals for the Fifth Circuit to affirm the lower court’s ruling, arguing it rightly considered factors that betrayed how his captives ...