The third-party observation, prepared by attorneys of Womble, Carlyle, Sandridge & Rice, supports the litigation now pending in the US District Court for Eastern District of Tennessee.
CIC Services, a captive manager, filed the lawsuit against the IRS and the US Treasury. The 1 May deadline for micro captives to report to the IRS is rapidly approaching.
Thomas Adams, president and CEO of the NCCIA, said the brief argues that Notice 2016-66, which requires micro captives to provide substantial reports on their activity to the IRS, imposes a heavy burden on the public with little or no benefit to the IRS.
The notice, if not enjoined, will cause irreparable harm to the captive insurance industry and its stakeholders, as well as causing damage to the economic and regulatory interests of North Carolina, according to the brief.
Tennessee Judge Travis McDonough has already conducted a hearing and a ruling is expected soon.
The IRS has argued that Congress has given it the authority to issue this kind of notice.
The US government has also argued the lawsuit is barred by the Anti-Injunction Act, which precludes actions against the government seeking to bar the assessment and collection of taxes.
Adams noted that an appeal from either party to the US Court of Appeals for the Sixth Circuit is likely, whatever the result.
He added: “The North Carolina Captive Insurance Association is committed to the responsible growth of captives not only in our domicile but throughout the US. We see the filing of this friend of the court brief as yet another example of that on going effort and for North Carolina to be seen as a leader among domiciles.”