Skip to Main Content

Bloomberg Quotes Rachel Partain on Micro-Captive Insurance

August 13, 2019, Bloomberg Law

The IRS’s legal battle against one of its “dirty dozen” tax scams is still young, but early victories for the agency have some wondering if a large-scale settlement is on the horizon.

. . .

There were rumblings that the IRS was working on a settlement initiative as far back as two years ago but that initiative never materialized, said Rachel L. Partain, a member of Caplin & Drysdale, Chartered.

Past global initiatives, resulting from the IRS’s crackdown on tax shelters popular in the 1990s—like the 2004 “Son of Boss” settlement program—could provide clues to how the agency might craft a future micro-captive settlement deal.

But Partain said she suspects such a program has been delayed because micro-captives are so “factually specific.”

The IRS in its 2018 “Dirty Dozen” list identified the many ways in which micro-captive structures can fall short of a proper insurance arrangement. It notes transactions where “coverages may insure implausible risks, fail to match genuine business needs, or duplicate the taxpayer’s commercial coverages” as just a few that raise alarms. The arrangements also made the agency’s 2019 list of top tax scams.

For the the cases currently docketed at the Tax Court, it is likely attorneys in the IRS Office of Chief Counsel will push taxpayers toward individual settlements specific to their facts, Partain said.

Even so, she said a global settlement could be possible, despite the challenges. In theory, the IRS “could try to draw distinctions such as, ‘If you have 3 of the following 5 facts, then you get a 20% penalty; if you have less, then you get a 10% penalty,’ and then they can use whichever facts they have determined to be more problematic,” she said.

. . .

“Ultimately, I’m optimistic that a taxpayer will win,” Partain said. “But I think it’s going to take a while for that to happen.”

For the full article, please visit Bloomberg Law’s website (subscription required).


About Caplin & Drysdale
Celebrating our 55th Anniversary in 2019, Caplin & Drysdale continues to be a leading provider of legal services to corporations, individuals, and nonprofits throughout the United States and around the world. We are also privileged to serve as legal advisors to accounting firms, financial institutions, law firms, and other professional services organizations.

The firm's reputation over the years has earned us the trust and respect of clients, industry peers, and government agencies. Moreover, clients rely on our broad knowledge of the law and our keen insights into their business concerns and personal interests. Our lawyers' strong tactical and problem-solving skills -- combined with substantial experience handling a variety of complex, high stakes, matters in a boutique environment -- make us one the nation's most distinctive law firms.

With offices in New York City and Washington, D.C., Caplin & Drysdale's core practice areas include:
For more information, please visit us at
Washington, DC Office:
One Thomas Circle NW
Suite 1100
Washington, DC 20005
New York, NY Office:
600 Lexington Avenue
21st Floor
New York, NY 10022


This communication does not provide legal advice, nor does it create an attorney-client relationship with you or any other reader. If you require legal guidance in any specific situation, you should engage a qualified lawyer for that purpose. Prior results do not guarantee a similar outcome.

Attorney Advertising
It is possible that under the laws, rules, or regulations of certain jurisdictions, this may be construed as an advertisement or solicitation.
©2021 Caplin & Drysdale, Chartered
All Rights Reserved.

Related Professionals

Related Practice Area(s)