Charles Ruchelman Comments on Recent IRS Settlement Offer for Microcaptive Insurers in Tax Notes

The IRS revealed a time-limited settlement offer for some taxpayers currently under audit that participated in microcaptive insurance transactions, but the announcement provided scant details on eligibility and terms.

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Charles Ruchelman of Caplin & Drysdale pointed out that the IRS didn’t opt for a global offer for all taxpayers but rather limited the availability to select taxpayers. Yet he said he remains concerned that the IRS opted for a one-size-fits-all approach for different captive insurance arrangements.

According to Ruchelman, the IRS’s process for developing the program is concerning. He said it’s troubling that the IRS didn’t solicit input from taxpayers or their representatives in determining the settlement terms.

Appeals weighed in on the settlement initiative, saying in the release that the terms “generally reflect the hazards of litigation faced by taxpayers, and taxpayers should not expect to receive better terms in Appeals than those offered under this initiative.” 

But Ruchelman said practitioners are curious how Appeals reached its conclusion on litigation hazards “this early in the ball game, when these cases are mostly at the examination stage.”

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