On January 10, 2025, the Internal Revenue Service (IRS) and Treasury Department finalized regulations (REG-109309-22) that identify certain micro-captive insurance transactions, as well as transactions that are "the same as, or substantially similar to" those micro-captive transactions, as "listed transactions." In addition, certain other micro-captive transactions are identified as "transactions of interest." Both listed transactions and transactions of interest are "reportable transactions," a category of transactions that requires material advisors and certain participants in the transaction to file disclosures with the IRS.
Background
The final micro-captive regulations were preceded by an extended period of IRS scrutiny of micro-captive arrangements and public debate over the IRS's aggressive approach to micro-captives. So-called "abusive" microcaptive arrangements were first included in theIRS's annual "Dirty Dozen" list of tax scams in 2015. In the years that followed, the IRS issued notices directed to disclosure and list maintenance obligations, announced a micro-captive campaign, and issued proposed regulations. At each step, micro-captive advisors and participants demonstrated their vigorous disagreement with the IRS's position. However, the IRS has generally prevailed in a series of cases litigated in the United States Tax Court and shows no sign of compromising its position on micro-captives.
Notice 2016-66, published on November 21, 2016, first identified certain...
