IRS Inquires Are Being Issued for Micro-Captive Insurance Companies

Many dealers have received an inquiry regarding “Micro-Captive Insurance” and Notice 2016-66 (“Notice”).  If you continue to participate in a micro-captive insurance transaction covered under the Notice, please continue to disclose your participation in the transaction with your tax return and no other response is necessary.  If you ceased these transactions, please contact your tax advisor to assist with the response.

It appears that these letters were automatically generated for hundreds of taxpayers who have filed Form 8886 (“Form”), Reportable Transaction Disclosure Statement, pursuant to the Notice.  The Form was filed for any reinsurance company that sold gap or other dealer obligor products and the participants in the reinsurance company transaction, which would include the dealership entity selling the products.  If the company is a pass-through entity, the owners also filed the Form.

Please note that the letter does not represent a notification of an audit or examination of the reinsurance company, dealership entity or individual to which the letter was directed. Rather, it is a request for information. The transaction identified in IRS Notice 2016-66 and the tax court cases cited in the letter do not necessarily describe your reinsurance company’s current transaction as we understand it, and we remain confident that a properly structured F&I reinsurance program will continue to meet IRS approval.

If you have any questions regarding your Micro-Captive Insurance Company, please contact our tax advisors listed below.

Sincerely,

SCHNEIDER DOWNS & CO.

Kathy Petrucci, Tax Shareholder

 

Steve Barber, Tax Shareholder

[email protected]

Phone: 614 586-7214

 

[email protected]

Phone: 412 697-5463

 

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
The American Families Plan – Proposed $1.8 Trillion Spending and Tax Plan
Florida Enacts Sales and Use Tax Economic Nexus
International, Tax BY Vicky Lu
FBAR Deadline/Extension Clarification
Introduction to The American Jobs Plan and The Made in America Tax Plan
Tax Credits for Electric Vehicle Charging Stations
2021 Standard Mileage Rates
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us
Map of Pittsburgh Office
Pittsburgh

One PPG Place, Suite 1700
Pittsburgh, PA 15222

[email protected]
p:412.261.3644     f:412.261.4876

Map of Columbus Office
Columbus

65 East State Street, Suite 2000
Columbus, OH 43215

[email protected]
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102

[email protected]
p:571.380.9003