IRS Micro-Captive Insurance Rule Spurs Calls for Regulatory Reform and Industry Dialogue
The recent final rule by the IRS concerning 831(b) micro-captive insurance companies has raised significant concerns within the U.S. small and mid-sized business community. This regulation potentially classifies a majority of 831(b) arrangements as transactions of interest or listed transactions, imposing increased regulatory burdens and compliance challenges on businesses that have lawfully utilized micro-captives as risk management tools. The rule appears to contradict the original congressional intent behind Section 831(b) of the Tax Code, which aims to provide alternative risk mitigation options for smaller enterprises, a policy affirmed by the PATH Act.