Members of the House Ways and Means Committee has sent a letter to the Internal Revenue Service (IRS) Commissioner Daniel Werfel expressing their support for small captives.
Captive Intelligence reported in April that the IRS had proposed new regulations for “micro captives”, those that make the 831(b) tax election, which have divided opinion across the captive landscape.
“The IRS may not eliminate laws that it finds inconvenient to administer or somehow troublesome, nor may it legislate via regulation,” the letter stated.
“Treasury and the IRS are harming the American economy by their misguided effort to eradicate small captive insurance.”
The letter was organised and signed by Rep. Van Duyne (R-TX 24th District), Rep. Mike Carey (R-OH 15th District), Rep. Ron Estes (R-KS 4th District), Rep. Randy Feenstra (R-IA 4th District), Rep. David Kustoff (R-TN 8th District), Rep. Carol Miller (R-WV 1st District), Rep. Greg Stuebe (R-FL 17th District), and Rep. Brad Wenstrup (R-OH 2nd District).
The 831(b) Institute praised the letter and said the lack of guidance provided by the IRS on 831(b) plans is unfair and targets small business owners that are acting in “good faith” on the laws Congress has passed.
The 831(b) Institute was launched in the US in June and has asked for clarity from the IRS around how it regulates micro captives, arguing that it “unfairly” scrutinises them.
“Many of the points raised by this group of legislators are critical to ensuring that this valuable tool is available to small businesses in the coming economically difficult years ahead,” the Institute said.
“The collaboration by both parties in Congress, small business owners, and the IRS will be necessary to build a meaningful micro captive insurance program that helps current and future generations and helps protect jobs.”
Peter Dawson, advisor to the 831(b) Institute, said the letter correctly points out the duty the IRS has in implementing the will of Congress and acknowledging the “flaws” in their current approach to regulating microcaptives.
“Legislative action and advocacy to the federal government is essential to protect the future of 831(b) plans and small business owners in America as desired by Congress.”
In June, Oklahoma’s Insurance Commissioner Glen Mulready called on the IRS to withdraw its Notice of Proposed Rulemaking (NPR) concerning micro captives and form a joint task force consisting of the IRS, regulators and representatives of the captive insurance industry.