The Internal Revenue Service has filed a lawsuit asking an Arizona District Court to force Coral Beauty Insurance PCC to provide documentation for its investigation into potentially abusive micro-captive transactions between the captive and Radiologic Associates of Northwest Indiana P.C. during 2019 and 2020.
While the Respondent has provided some of the documentation requested, the IRS has claimed the PCC has not provided all.
According to Court filings, Coral Beauty was originally formed and licensed in Anguilla in 2011, before receiving a licence in Delaware in 2018.
Coral Beauty Insurance PCC is no longer licensed in Anguilla, while in Delaware the structure now appears to have been transformed into a series captive and named Fortress Coral Beauty Series.
“It has failed to produce all documents required by the summons and has thus failed to fully comply with the Summons,” the IRS said.
The IRS said that the summoned documents for years 2015-present will bear on whether Coral Beauty made valid section 831(b) exclusions or whether they were abusive.
Respondent’s exclusions were specifically for insurance premiums of approximately $800,000 and $750,000, paid by Radiologic in 2019 & 2020.
Some of the documentation Coral Beauty has provided to the IRS include its 2018 Delaware licence, and its 22 December, 2015 and 26 September, 2018 management services agreements with Artex.
“Examination of documents from these years will provide Revenue Agent Schiffer with a comprehensive outlook of Respondent’s arrangement with Radiologic over the years and its “insurance” related activities, dating back to its inception,” the IRS said.
The IRS claims Coral Beauty could be acting as an abusive tax shelter for Radiologic rather than paying legitimate insurance premiums.
In April, the Delaware Department of Insurance (DDOI) lost its latest attempt to block an IRS summons concerning 831(b) captives managed by Artex Risk Solutions and Tribeca Strategic Advisors, wholly owned by Artex, in the State.
The IRS originally issued its summons to the DDOI on 30 October, 2017 during its investigation into Artex and Tribeca, seeking filings and communications between the Department and the captive managers.
The IRS said that Coral Beauty should be ordered to appear and show cause before the court why it should not be “compelled” to produce the books, records, papers, and other data as specified in the pending Summons document requests.
The Court has agreed, and Coral must now appear before it to show cause as to why it should not be compelled to obey the request of the Summons.