Legal Articles & Cases

Captive Insurance Legal Articles and CasesCertain landmark cases have contributed to the process by which the captive insurance industry operates today. The Harper v. Commissioner case in 1992, The Malone & Hyde, Inc. v. Commissioner case in 1995, and most recently, and the Rent-a-Center v. Commissioner case in January of 2014 shed light on the need for alternative risk management options like captives—and their legitimacy. The growth of 831(b) captives and support entities such as reinsurance companies and captive managers is undeniable. Mid-market companies are seeking more comprehensive methods for insuring their risks and becoming more cost-efficient.

In this section, you will have the opportunity to read the details of each case as well as insightful legal articles. Even as new laws are passed, you will be able to see the progression of how captive insurance came into its own as a viable alternative risk management solution. The court decisions for each case act as a reminder that the ancillary benefits offered by captives combined with the supplemental risk coverage they provide is a powerful combination and option for many business owners and advisors.

We invite you to review these legal articles and cases as part of your due diligence on the captive industry.

State Independently Procured Premium Taxes

Captive Structuring and Insurance Authorities

  • T.C. Memo 2024-34 – Sunil S. Patel & Laurie Patel, et al. v. Commissioner of Internal Revenue, T.C. Memo 2024-34 – Filed March 26, 2024
  • T.C. Memo 2024-13 - Bernad T. Swift, Jr. & Kathy L. Swift v. Commissioner of Internal Revenue, T.C. Memo 2024-13 - Filed February 1, 2024
  • T.C. Memo 2024-2 - Terence J. Keating & Janet D. Keating, Et al v. Commissioner of Internal Revenue, T.C. Memo 2024-2 - Filed January 3, 2024
  • IRS Notice 2023-11 - IRS officially concedes to the CIC Services case and obsoletes Notice 2016-66. In the announcement, the IRS also issues proposed regulations on reportable transactions and Section 831(b) electing insurance companies.
  • CIC Services, LLC v. Internal Revenue Service, Et. Al., - The US District Court of the Eastern District of Tennessee vacates Notice 2016-66 and orders the IRS to return all documents and information produced by taxpayers and material advisors pursuant to the notice. – March 21, 2022
  • CCA 202134017 – IRS Office of Chief Counsel Memorandum advising IRS agents that in audits involving foreign-based captives that have elected to be treated as a US corporation for tax purposes under IRC Sec. 953(d), where the IRS has determined that the captive is not an insurance company for federal tax purpsoses, the agnet may also impose a 30% withholding tax on payments made to the foreign captive. – Released August 27, 2021
  • IR-2021-82 – IR-2021-82 IRS News release dated April 9, 2021 on Section 831(b) captives and the Caylor captive insurance tax court case. – Released April 9, 2021
  • IR-2020-226 – IR-2020-226 IRS New release dated October 1, 2020 on “abusive micro-captive insurance schemes.” – Released October 1, 2020
  • IR-2020-26 - IR-2020-26 IRS News release dated January 31, 2020 on Notice 2016-66, settlement offers and captive insurance audits. – Released January 31, 2020
  • IR-2019-157 - IR-2019-157 IRS News release dated September 16, 2019 on time-limited settlement offers for certain captive insurance audits. – Released September 16, 2019
  • Notice 2016-66 - Certain Section 831(b)'s captive arrangements are "Transactions of Interest" to be reported to the Internal Revenue Service – Released November 1, 2016
  • TAM 200827006 - TAM 200827006 - Ruling discusses whether a manufacturer’s original product warranty risks covered by the Reimbursement Policies purchased by Taxpayer constitute insurable risks for federal tax purposes – Released July 4, 2008
  • IRS Issued Proposed Regulations - IRS issued proposed regulations that provide guidance regarding the treatment of transactions involving obligations between members of a consolidated group and the treatment of transactions involving the provision of insurance between members of a consolidated group
  • Relief under 301.9100-3 - Relief under 301.9100-3 of the Procedure and Administrative Regulations granting an extension of time to file under election under section 831(b)(2))(A)(ii).” – Released April 6, 2007
  • Notice 2003-34 - Notice 2003-34 – Insurance definition – offshore entities in hedge funds – Released June 9, 2003
  • Notice 2003-35 - Notice 2003-35- The purpose of this notice is to remind taxpayers that an entity must be an insurance company for federal income tax purposes in order to qualify as exempt from federal income tax as an organization described in 501(c)(15) – Released June 9, 2003
  • 2003 TNT 40-10 - Final Tax Shelter Regulations – February 28, 2003
  • Tax Shelter Prop - TD 9017 - Tax Shelter Props. Regs.- The IRS has published temporary regulations (T.D. 9017) that revise the categories of transactions that must be disclosed on returns under temporary reg. section 1.6011-4T – Effective January 1, 2003
  • IRS Revenue Ruling 2002-89 - In this ruling, the IRS determined that where a captive derives 50% of its premiums from underwriting its parent's risks (with the other 50% of premium revenue from unrelated parties), there was sufficient risk distribution to constitute "insurance." – December 30, 2002
  • IRS Revenue Ruling 2002-90  - In this pronouncement, the IRS ruled that a captive which insured 12 subsidiaries of a common parent, with no unrelated insurance underwriting, had sufficient risk distribution to constitute "insurance." – December 30, 2002
  • IRS Revenue Ruling 2002-91 - In this ruling, the IRS determined that if within a group captive no one member's covered risks exceeded 15% of the group's total risks, then that captive possessed sufficient risk distribution to constitute "insurance." – December 30, 2002
  • PLR 200242005 - Ruling on Risk Retention Groups – Released October 18, 2002
  • PLR 200242023 - Relief for late filed 953 (d) election granted under 301.9100-3(a) – Released October 18, 2002
  • Cumulative Bulletin Notice 2001-51, I.R.B. 2001-34, August 2, 2001 - On February 28, 2000, the Internal Revenue Service issued Notice 2000-15 , 2000-12 I.R.B. 826, identifying certain transactions as "listed transactions" for purposes of §1.6011-4T(b)(2) of the temporary Income Tax Regulations and §301.6111-2T(b)(2) of the temporary Procedure and Administration Regulations. This notice restates the list of transactions identified in Notice 2000-15 as "listed transactions" effective February 28, 2000, and updates the list by adding transactions identified in notices released subsequent to February 28, 2000 – Released August 2, 2001
  • TREAS. REG. Section 1.337(d)-4 abd Exempt Organizations - The IRS issued final regulations generally affecting a taxable corporation that transfers all or substantially all of its assets to a tax-exempt entity or converts from a taxable corporation to a tax-exempt entity in a transaction other than a liquidation