SIIA Offers Insights Following IRS Micro-Captive Settlement Results
February 18, 2020
In response to Internal Revenue Service (IRS) announcement IR 2020-26 issued last month revealing the results of a global settlement initiative offered last year to just 200 "micro-captives," the Self-Insurance Institute of America, Inc. (SIIA), said in a statement that while it continues to be supportive of curbing abusive practices within the industry, it is important to note that the vast majority of captive insurance participants are not only doing the right thing but are left untouched by the recent IRS actions.
In IR 2020-26, the IRS claimed that nearly 80 percent of taxpayers receiving these settlement offers agreed to such settlements and announced the establishment of 12 audit teams to look at certain captive structures.
According to SIIA, this statement is misleading in that the 80 percent of the taxpayers have agreed to participate and consider a settlement, not actually settle. Those taxpayers can indeed settle but also have the option to go to court. In fact, it is SIIA's understanding that, to date, not a single captive has engaged in a final settlement agreement, making such an announcement premature. Additionally, the audit teams will most likely be looking at other issues unrelated to the captive industry, not simply focusing on captive insurers themselves.
Thus, SIIA said, while approximately 160 captive structures have agreed to consider settlements with the IRS, thousands of captives remain in place that are assisting America's small and medium-sized businesses to mitigate important and real risk factors.
Captive insurance companies have long been successfully utilized by employers, large and small, as a means to address employer risk management needs. In fact, enterprise risk captives are simply allowing small and medium-sized businesses access to similar risk structures as their large Fortune 500 counterparts, according to SIIA.
While the IRS may remain focused on certain micro-captive structures, it must do so in a responsible and fair manner, SIIA said. As the industry continues to grow, captive insurance companies remain dedicated to providing a needed risk management structure for America's small businesses to grow and thrive.
February 18, 2020