We’ve previously discussed the issue of microcaptive insurance companies, such as the IRS’s successful attack on such an arrangement in the case of Avrahami, et al v. Commissioner, 149 TC No. 17.[1]  The IRS has continued to go after taxpayers who had entered into such arrangements, with Tax Notes Today Federal reporting on September 17, 2019 that 500 cases involving this matter were pending before the Tax Court and even more were in process in Exam and Appeals.[2]  Such structures were identified as listed transactions in Notice 2016-66.[3]

The IRS has now decided to offer a settlement option to up to 200 taxpayers with such issues outstanding, per a press release issued by the agency.[4]  The release notes that:

Taxpayers eligible for this offer will be notified by letter with the applicable terms. Taxpayers who do not receive such a letter are not eligible for this resolution.[5]