In a pending case before the US Tax Court that involved a Section 831(b)-electing client of Oxford Risk Management Group, the IRS has conceded all captive insurance-related taxes and penalties that it had previously assessed against the client.
“The IRS conceded everything before the taxpayer could win a ruling against the Service on the merits, so this case establishes no precedent. But regardless, this is a total victory for the taxpayer and a great example for other taxpayers to follow”, said Sean King, General Counsel for CIC Services, LLC. “When the IRS tries to extort settlements from entirely legitimate captive insurance companies, those taxpayers with the guts to resist will be rewarded.”
For over a decade the IRS has run a terror campaign that indiscriminately and arbitrarily attacked Section 831(b)-electing captive insurance companies in an attempt to damage a legitimate and Congressionally-endorsed industry that it dislikes. CIC Services has long insisted that this reign of terror would soon end as the tax court begins ruling in favor of taxpayers.
“The IRS has really stepped up its attacks since 2016, and it is now clear why. The IRS knows that it is going to lose in tax court and that those losses will establish precedent adverse to the Service’s bogus legal Arguments”, said King. “It wants to force as many settlements as possible before then.”
The IRS’s concession of all disputed taxes and penalties in the Puglisi Farms case is a rather obvious effort by the IRS to postpone its day of reckoning. “There’s no way the IRS would have settled this case at a total loss unless even it was convinced that its arguments were losers and it wanted to avoid arming taxpayers with favorable precedent”, said King. Which begs the question: Why did the IRS send this taxpayer through the wringer and waste so much of the government’s resources trying to extort a settlement from what was an entirely legitimate captive? “The IRS’s whining that it is hampered by insufficient resources really starts to look silly when they so frequently waste resources on cases like this one”.
CIC Services has long contended that the IRS’s refusal to issue guidance, its indiscriminate promoter investigations, and its arbitrary attacks on essentially all Section 831(b)-electing captives, were nothing more than rogue attempts to subvert the will of Congress as memorialized in Section 831(b) by intentionally spreading FUD and terrorizing captive industry participants. “The Service knows that it’s soon going to start losing many tax court cases, and it’s simply trying to do as much damage to the industry as possible via its FUD campaign before that happens”, said King.
But this concession from the IRS shows that honest taxpayers with the will to fight can resist and win. “Fresh off our own Supreme Court victory against the IRS, we can say confidently that the courts are the taxpayers’ friends. No honest taxpayer with a legitimate captive should succumb to the IRS’s extortion but instead should, as Oxford’s client did, demand its day in court.”
Congratulations again to Oxford and its client, Puglisi Egg Farms, for resisting IRS lawlessness and winning.