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

January 18, 2019
Article
While having your audit team onsite can be stressful, there are certain steps you can take to reduce that stress and make the most of your audit.
January 17, 2019
Article
In this installment of our Common Single Audit Findings and Remediation Series, we discuss the three distinct parts that make up Requirement “G.”
January 17, 2019
Article
Here’s a list of what the IRS is and isn’t doing as the  partial government shutdown rolls on.
January 17, 2019
Article
Eide Bailly recently sat down with Bill Stovall, CEO of Community National Bank in Texas, to hear his thoughts on the current state of the banking industry.
January 15, 2019
Article
The back and forth on tariffs is wreaking havoc for many businesses. Here’s what you can do to help ease the pain.
January 15, 2019
Article
If you are a farmer who sold to a cooperative in 2018, you will need to provide additional information if you’re looking to take advantage of deductions this tax season.