Challenge to IRS Micro-Captive Rule Partially Survives Dismissal

The IRS failed to fully escape a legal challenge to a rule identifying some micro-captive insurance transactions as abusive after a federal judge in Texas allowed some claims to proceed.

The rule (RIN 1545-BQ44), published in January, highlights micro-captive arrangements where the participants attempt to reduce their income tax liability using purported insurance contracts with a related entity that lacks the necessary characteristics of bona fide insurance, like risk distribution.

Judge Jane J. Boyle of the US District Court for the Northern District of Texas Wednesday allowed Dallas-based consulting firm Ryan LLC to proceed with its Administrative Procedure ...