Another Win for the Good Guys
CIC Services, LLC achieved another victory in its continuing efforts to tame IRS abuse and force rogue elements within the Service to comply with the requirements of the law.
“For too long the IRS has behaved as if it was excepted from the basic rules of lawmaking that govern federal administrative agencies as if it had carte blanche to make and enforce laws by fiat without following due process”, said Sean King, General Counsel for CIC Services. “Our 9-0 victory against the IRS in the Supreme Court of the United States proved the IRS to be wrong on that point”.
The Federal District Court’s subsequent decision temporarily forbidding the IRS from enforcing Notice 2016-66 against CIC Services pending the ultimate resolution of its against the IRS really drives home the significance of the Supreme Court’s decision. “This is one of the few times in history that the IRS has been preemptively enjoined from enforcing an illegal regulation”, said King.
In issuing its ruling forbidding enforcement of the notice against CIC Services, the court noted that an injunction against the IRS was justified in part because CIC Services is suffering irreparable harm by virtue of the Notice and is likely to win its case seeking to set aside the Notice on the merits.
“At this moment we believe CIC Services to be the only entity in the country that is exempted from the requirements of IRS Notice 2016-66, which we contend was issued illegally, arbitrarily and capriciously”, said King. “But we are not satisfied with that, and we won’t rest until the court instructs the IRS that it cannot enforce the Notice against any taxpayer or material advisor”. In the meantime, CIC Services expects other material advisors and perhaps even taxpayers to petition other courts for similar relief from the Notice.”
“While CIC Services is exceedingly grateful for the court’s intervention on our behalf, the court’s ruling does not fully recognize that we will continue to suffer irreparable harm so long as the IRS can claim that it has authority to enforce the Notice against taxpayers in general and other advisors in particular, or even to threaten to do so”, said King. “Most clients are referred to us by other advisors—insurance agents, CPAs, risk managers, etc.—essentially all of whom fear being deemed to be a ‘material advisor’ and thereby becoming subject to the onerous requirements of the Notice”, said King. “Consequently, they no longer refer. Until that is fixed and the Notice is tossed in its entirely such that it can’t be enforced against anyone, our business will continue to suffer and too many of our nation’s businesses will be terrorized away purchasing much-needed insurance.”
Captives managed by CIC Services have paid or are in the process of paying an estimated $12 million to $15 million of COVID-19 related claims alone. That number would likely be at least two to three times higher but for the relief that many of its clients obtained via PPP loans.
“Few Fortune 1000 companies were put out of business by COVID-19, but thousands of small and mid-market businesses were”, said Bryan Ridgway, head of CIC Services. “These businesses are the backbone of our nation’s economy, and they are uniquely vulnerable to risks like pandemics since they usually lack the same access to the capital and credit markets as the big boys. When bad things happen, captive insurance can be absolutely essential to keeping small business owners in business and to protect the jobs they offer.”