The 831(b) Institute has launched in the US and is asking for clarity from the IRS around how it regulates micro-captives, arguing that it “unfairly” scrutinises them.
Instead of creating guidelines that allow for micro-captive plans to be fairly regulated, the 831(b) Institute argues that the IRS is attempting to push forward harmful regulation that will make micro-captives less effective.
The 831(b) Institute said it was formed to bring the business community together and give them a voice around what true risk mitigation and insurance coverage means to small and medium-sized businesses.
“Insurance is an essential part of owning a business, but often complicated rules and lack of proper guidance from the Internal Revenue Service (IRS) result in confusion and misconceptions,” the Institute said.
“Our country is built on entrepreneurial spirit, and micro-captive insurance helps protect the livelihoods of America’s entrepreneurs.”
The Institute argued that micro-captives can serve as an excellent insurance option for small business owners, as they allow for self-reliance, independence, and flexibility for businesses.
“The inability of the IRS to create clear regulatory standards for micro-captives is harmful to good faith business owners looking to have an insurance plan in place that allows them to participate in the risk and premium of their insurance programs in the same manner as large enterprises,” said Nate Reznicek, president and principal consultant at Captive.Insure, and advisor to the Institute.
“This includes the ability to help to cover unpredictable expenses and potentially catastrophic events.”
Captive Intelligence reported in April that the IRS had proposed new regulations for “micro captives”, which have divided opinion across America’s captive landscape, with some saying they could destroy the industry, while others have branded it a refreshing change.
Oklahoma’s Insurance Commissioner Glen Mulready recently 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.