Trump issued an executive order in April asking the Treasury to review new tax rules issued on or after 1 January 2016 that “impose an undue financial burden on US taxpayers, add undue complexity to the Federal tax laws, or exceed the statutory authority of the Internal Revenue Service (IRS)”.
SIIA claimed in its request to the Treasury that IRS Notice 2016-66 meets “several of the criteria” outlined in the president’s definition of regulatory burdens.
Notice 2016-66 labelled most captives that take the 831(b) election as “transactions of interest” and required them to provide extensive reporting for the past 10 years by 1 May of this year.
SIIA’s members argued that the notice placed a significant burden on the captive insurance industry.
The average cost for a captive to complete its notice reporting was $9,257, compared to a typical range of $1,000 to $4,000 to file a federal tax return, according to SIIA.
The overall cost of notice compliance by SIIA members alone totalled more than $22 million.
SIIA said it “continues to believe that more specific and tailored actions could easily be taken to collect the information desired by the IRS in a manner which mitigates the burden imposed by the notice, especially considering a substantial portion of the information is already in the tax return or financials attached to that return”.
Trump’s order requested an interim report within 60 days of issuance, which means it should be delivered soon, and a final report no later than September identifying actions of the IRS and Treasury that impose financial burdens, undue complexity, or which exceed their authority.
A lawsuit attempting to kill off Notice 2016-66 ahead of the 1 May deadline was dismissed in the Eastern District of Tennessee, with the judge ruling that it was barred by the Anti-Injunction Act, which precludes actions against the government seeking to block the assessment and collection of taxes.