District Court Denies Motions to Prevent IRS from Enforcing 831(b) Micro-Captive Reporting Requirements

On March 27, 2017, two captive insurance managers, CIC Services, LLC and Ryan, LLC, filed motions in the U.S. District Court for the Eastern District of Tennessee to prevent the IRS from enforcing the IRS’s reporting requirements under Notice 2016-66 requiring most 831(b) “micro-captive” participants to file Form 8886 and material advisers to file Forms 8918.  On April 21, 2017, the court denied the managers’ motions (see CIC Memorandum Opinion and Order).

The case is not over.  The court will consider the managers’ motion for partial summary judgment after the IRS has responded, but that won’t happen until after the May 1st filing deadline for the Forms 8886 and 8918.

So, the due date for Forms 8886 and Forms 8918 related to the 831(b) Micro-Captive Transaction of Interest is still May 1, 2017.  Participants and material advisors should file by May 1st, and material advisors should be prepared to respond to IRS requests for material advisor lists shortly thereafter.