IRS Life Insurance Notice Wrongly Skipped Rulemaking Steps

The IRS should have followed a formal rulemaking process to issue reporting requirements for employee-benefit plans that have cash-value life insurance polices, the Sixth Circuit held in overturning a lower court ruling.

In a 2007 notice (Notice 2007-83), the IRS designated certain employee-benefit plans featuring cash-value life insurance policies—which combine insurance coverage with a cash-value investment account—as “listed transactions.” In the notice, the IRS said that taxpayers who failed to disclose or register the transactions as required could be subject to penalties.

The U.S. Court of Appeals for the Sixth Circuit, in an opinion issued Thursday, ...