In late March 2020, the IRS issued Letters 6336 to participants in micro-captive insurance transactions. The participants were identified based upon the disclosure statements (IRS Forms 8886) included within their federal tax returns filings identifying participation in a program. These letters were issued to notify participants of the IRS’s recent successes in challenging the validity of the micro-captive program and requesting that they notify the IRS if participation was terminated. The Letters 6336 requested responses by May 4, 2020. Earlier this week, the IRS issued a notice extending the response date until June 4, 2020.
We have handled a number of these matters. Each program is different and all participants have varying risks regarding continued participation. Certainly, the Internal Revenue Code allows for micro-captive programs and there are many programs that meet the Code’s requirements. However, many of micro-captive programs do not meet these standards. We have found that an independent review (rather than following advice from only the captive promoter) is the best advice for all participants in these programs.
If you are a participant in a micro-captive insurance arrangement and would like an independent review of the validity of your program, please contact the attorneys at Terrence A. Grady & Associates, Co., LPA at (614) 849-0376.