IRS’s Micro-Captive Insurance Final Rule Challenged as Arbitrary

The IRS exceeded its statutory authority by issuing a final rule identifying some micro-captive insurance transactions as abusive, a Dallas-based tax consulting firm said in its lawsuit against the agency.

Ryan LLC, which manages captive insurance companies for its clients, told the US District Court for the Northern District of Texas on Jan. 10 that the newly released Treasury regulation was “conjured up by the IRS through administrative fiat” and is contrary to Congress’s encouragement of captive insurance arrangements. The court should declare the rule in violation of the Administrative Procedure Act and block enforcement, the suit said.

The rule ...