1607, 2019

The Curious Case of Cryptocurrency

By |July 16th, 2019|alliantNational Blog, Resource Library|0 Comments

Cryptocurrency is…complicated. You’ve definitely heard about it, and probably know someone who has either lost big or became an overnight millionaire because of it. Buzz words and terms get thrown around constantly like “blockchain” and “mining”, but what exactly is cryptocurrency? And why is IRS’ treatment of the new currency shrouded in so much mystery?

As a decentralized, virtual form of currency that only exists in the digital world, cryptocurrency is truly unique. There is no dealing with tangible crypto-dollars or crypto-cents, as well as no regulation or oversight by any national government or central bank.

Cryptocurrency exists in an exclusively virtual state and relies on a technology known as blockchain to keep it secure and transferrable. Cryptocurrencies are created through a “mining” process, whereby miners use powerful computers to authenticate transactions in a digital ledger of transactions. People can trade cryptocurrency […]

307, 2019

Recent Developments in the Captive Insurance Space

By |July 3rd, 2019|alliantNational Blog, Resource Library|0 Comments

We at alliantNational wanted to discuss some recent developments with regard to the captive insurance space – specifically, with respect to IRC § 831(b) micro-captives. However, let’s begin by walking through the definition of captive insurance.

When businesses can’t find affordable commercial insurance to cover their risks, they may establish an insurance company of their own to do it for them. This company is what we refer to as a captive insurance company. The Internal Revenue Code provides that captives earning less than $2.2 million in premiums may make an election to only have their investment income taxed. These are what are referred to as 831(b) captives or “micro-captives”.

Due to their increasing popularity and favorable tax treatment, our friends at the IRS have increased their scrutiny of micro-captives. Following the rulings in Avrahami v. C.I.R., Reserve Mechanical v. C.I.R., and most recently Syzygy Insurance v. C.I.R. (all U.S. Tax Court cases), taxpayers […]

3005, 2019

Court of Appeals Denies Injunction Action against Notice 2016-66

By |May 30th, 2019|alliantNational Blog, Resource Library|0 Comments

On May 22, 2019, the Sixth Circuit Court of Appeals upheld the District Court’s holding that Notice 2016-66 does not violate the Administrative Procedure Act (APA). The District Court held that it didn’t have subject matter jurisdiction over the case because the Anti-Injunction Act and Declaratory Judgment Act bar law suits seeking to restrain the Government’s ability to assess and collect tax. The Sixth Circuit Court of Appeals agreed – holding that while the IRS “ not have a great history of complying with APA procedures, having claimed for several decades that their rules and regulations are exempt from those requirements,” the Court still does not have subject matter jurisdiction over suits seeking to enjoin the assessment or collection of taxes.

The original suit, filed by CIC Services, Inc., sought to enjoin the IRS from enforcing the disclosure requirements under Notice 216-66. After the District Court held that it didn’t have subject matter jurisdiction in […]

1804, 2019

Tax Court Issues section 831(b) Ruling in Syzygy Insurance

By |April 18th, 2019|alliantNational Blog, Resource Library|0 Comments

On April 10th, The Tax Court issued its latest opinion involving micro-captives. In mostly finding for the IRS, the Court maintains the analytical framework set forth in its opinions in Avrahami (2017) and Reserve Mechanical (2018). It also provides a window into what happens when the IRS invalidates the 831(b) election.

The Court found that Syzygy, a Delaware captive insurance company, failed to establish that it was an insurance company for tax purposes on the grounds that it failed to properly distribute risk and that the arrangement was not “insurance in the commonly accepted sense.”

In its analysis of Syzygy’s risk distribution, the Court relied on Avrahami and Reserve, focusing on aspects of the risk pool.  The insured entities in this case have 400 employees and operate in six different locations. Interestingly, the Court, however, did not analyze whether there were a sufficient number of independent risk exposure units to establish risk […]

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