Insights: Article

Required Disclosure of Captive Insurance Arrangements

By Ben Peeler

November 15, 2016

The Internal Revenue Service issued Notice 2016-66, 2016-47 IRB on November 1, 2016, which will make it mandatory to disclose certain captive insurance arrangements as "Transactions of Interest." The specific targets are the "micro-captives" created under IRC Section 831(b).

These captives had made it onto the IRS annual "dirty dozen" list of tax scams for the 2016 filing season. The notice does not change the law for legitimate captive arrangements but does list some of the characteristics of abusive arrangements. And it now requires all micro-captives and all participants to disclose these arrangements on Form 8886, Reportable Transaction Disclosure Statement.

Required Disclosure Due January 30, 2017
Form 8886 must be filed by January 30, 2017, with the Office of Tax Shelter Analysis. If this is not filed timely with all of the required information, penalties will apply. A second copy of Form 8886 will be attached to the 2016 tax returns of the captives, the insured and some of the shareholders/owners that are reportable parties.

Caution is recommended in reacting to this, as we are confident that our captives possess legitimate economic and legal justification. This Notice 2016-66 does not reflect any change in the law and these captives remain legitimate and legal structures.

Should you need assistance in this area, please contact Ben Peeler (801.456.5476) from our National Tax Office.

Latest Insights

March 21, 2019
Article
Arizona has filed a lawsuit against California over its “doing business” tax. 
March 21, 2019
Firm News
The union adds a new office and state to the regional CPA firm and adds additional ERP talent to their growing NetSuite practice.
March 20, 2019
Infographic
If your answer to this question is yes – or you are considering doing business internationally – you probably know there are many fine details that need your attention. Some questions to ask yourself: Do you have related parties in different…
March 20, 2019
Article
Ready to think about what life is like post-business? If a transition is on the horizon, we offer seven steps to help you create a successful succession plan.
March 20, 2019
Article
The decision to transition your business is a big one, but there are a few questions you can ask to determine if you’re ready.
March 20, 2019
Article
Cyberthreats are a clear and present danger, and hackers can target manufacturing and industrial companies for trade secrets, business plans and more. Are you protected?