Saturday, July 27, 2024

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Legislative bill in works in response to current 831(b) proposals

The MiniCap Coalition, which includes members such as the 831(b) Institute, is exploring introducing a legislative bill in response to current Internal Revenue Service (IRS) proposals regarding micro-captives.

Captive Intelligence reported in April 2023 that the IRS had proposed new regulations for “micro captives”, with some industry experts saying they could destroy the 831(b) sector.

The 831(b) Institute was launched in the US in June and immediately asked for clarity from the IRS around how it regulates captives that make the 831(b) tax election, arguing that it “unfairly” scrutinises them.

Instead of creating guidelines that allow for captive plans to be fairly regulated, the 831(b) Institute argued that the IRS is attempting to push forward harmful regulation that will make micro-captives less effective.

“We are working on developing legislative language and the idea is to get a bill drafted, and hopefully introduce companion bills in both the House and the Senate,” said Maggi Lazarus, attorney representing the Coalition.

“We’re not sure if there will be a legislative vehicle that could carry this kind of bill to enactment this year, but next year there will be a large tax bill debate necessitated by the expiration of a number of the individual provisions that were enacted in 2017.”

Lazarus said they have not drilled down on specific details yet, but the approach is to focus on a few key areas of concern.

She also said the Coalition is not under any illusion that they are going to resolve every problem with enforcement against captives with one piece of legislation.

“We’re looking at it as incremental progress in response to the IRS’s activities,” she said. “We’d like to try and position ourselves to be part of the mix of items that will be considered in that package.”

Lazarus said they pivoted to a new strategy based on advice from members of Congress which suggests the IRS is not willing to sit down with Congress and other stakeholders to find a fair path forward regarding current proposals.