U.S. District Court Vacates IRS Listed Transaction Rule for Micro-Captive Insurance Arrangements

The U.S. District Court for the Southern District of Texas partially granted summary judgment to taxpayers challenging IRS disclosure regulations for micro-captive insurance transactions, vacating the agency’s designation of certain transactions as “listed transactions” under IRC §6707A(c)(2). The court held that the IRS exceeded its statutory authority by failing to make the required finding that the transactions are presumptively tax avoidant, as the administrative record lacked evidence that most transactions meeting the criteria avoided tax. However, the court upheld the IRS’s designation of micro-captive arrangements as “transactions of interest” under §6707A(c)(1), finding that the agency reasonably concluded such transactions have ...