![]() This article examines the possibly far-reaching implications of the federal district court’s March 2022 holding. On remand to district court, CIC Services now has another win - this time with the court invalidating Notice 2016-66, which classifies certain microcaptive arrangements as reportable transactions. Supreme Court victory in which the Court held that the company’s suit was not precluded by the Anti-Injunction Act. The business that brought the lawsuit, CIC Services, an adviser and manager of microcaptive insurance transactions, had previously secured a U.S. The CIC Services 1 decision recently handed down by a federal district court in Tennessee has drawn the attention of those involved in microcaptive insurance transactions, other taxpayers engaged in reportable transactions, and administrative law watchers. In light of its loss in CIC Services, the next steps for the IRS in its fight against abusive microcaptive insurance arrangements might include issuing a new notice to correct the deficiencies the court identified in Notice 2016-66 or promulgating regulations to address unsettled issues involving microcaptive insurance arrangements.The penalties for noncompliance with the disclosure requirements in the notice can be substantial. Although the enforcement of Notice 2016-66 is likely foreclosed in states within the Sixth Circuit, the IRS may continue to attempt to enforce the notice’s requirements for microcaptive insurance arrangements engaged in by taxpayers in other circuits. As of this writing, it is unclear how the IRS will respond to the CIC Services decision. ![]() 2022), in which the Sixth Circuit held that a similar notice involving cash value life insurance trusts was invalid because the IRS did not follow the APA notice-and-comment procedures. In coming to its holding in CIC Services, the district court followed precedent set by the Sixth Circuit in Mann Construction, Inc., 27 F.4th 1138 (6th Cir. ![]() 3/21/22), a federal district court in Tennessee recently declared Notice 2016-66 invalid because the IRS did not follow the notice-and-comment procedures of the Administrative Procedure Act (APA) in promulgating the notice and the agency’s issuance of the notice was arbitrary and capricious.
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