IRS Extends Time for Reporting “Micro-Captive” Transactions

In Notice 2016-66, the Treasury and IRS identified certain transactions involving small captive insurance companies as a “transaction of interest.”  See our Alert dated November 17, 2016, entitled “Section 831(b) “Micro-Captive” Transactions Now a Transaction of Interest.” That notice provided rules regarding the time for providing disclosure of the transaction of interest described in that guidance.

Specifically, in accordance with Notice 2016-66 and the relevant Income Tax Regulations, Form 8886 must be attached to a taxpayer’s tax return or information return, including amended returns, for each tax year for which the taxpayer participates in the transaction of interest.  In the case of the initial year filing of Form 8886, an exact copy of the form is to be sent to the Office of Tax Shelter Analysis (“OTSA”) when the tax return is filed.  As provided in Notice 2016-66, for prior tax years for which the period of limitations for assessment of tax is open, taxpayers had until January 30, 2017 to file the required disclosure with OTSA.  That date has been extended.

Pursuant to Notice 2017-8, the January 30, 2017 due date has now been extended to May 1, 2017.