Final Rules on Micro-Captive Transactions Issued by IRS (1)

The IRS released final rules Friday on certain micro-captive transactions and similar transactions as listed transactions.

The rules (RIN 1545-BQ44) identify certain types of micro-captive moves as transactions of interest and substantially similar transactions as listed transactions. Taxpayers must disclose both types of transactions to the agency. The rules make the advisers and participants subject to penalties for failure to disclose information.

The IRS generally allows entities to form a “captive” insurance company to protect themselves against certain business risks and allow small non-life insurance companies to choose to pay taxes on investment income under Section 831(b), known ...