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IRC 831(b) Micro-Captives: Avoiding IRS Scrutiny, Diversification Requirements, Effective Transaction Structures

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Monday, December 18, 2023

Recorded event now available

or call 1-800-926-7926

This CLE/CPE course will provide tax counsel and advisers with practical tools and guidance to ensure that clients utilizing micro-captive insurance companies are fully compliant with IRC Section 831(b) rules to preserve legitimate tax deduction of premiums. The panel will discuss tax benefits and compliance burdens to micro-captives and offer detailed guidance on structuring micro-captives to be fully compliant with Section 831(b) requirements.


The use of captive insurance companies, particularly Section 831(b) "micro-captives," has come under increased IRS scrutiny. The Service has explicitly recognized micro-captives as a legitimate form of risk protection but has expressed concern that these vehicles are being used more as a wealth transfer device than legitimate insurance. The IRS has even more interest in abusive micro-captive arrangements after the U.S. Tax Court and Sixth Circuit Court of Appeals invalidated IRS Notice 2016-66 and, in response, the IRS issued new proposed regulations in April 2023.

Micro-captives will continue to be used and likely will increase in frequency and the IRS will likely step up its examinations of micro-captive arrangements. An IRS examination of micro-captives "may result in full disallowance of claimed micro-captive insurance deductions, inclusion of income by the captive entity, and imposition of applicable penalties."

Tax counsel and advisers must be aware of the challenging and potential pitfalls of structuring micro-captives.

Listen as our experienced panel discusses recent IRS examination initiatives for micro-captives and offers techniques for utilizing captives to manage and reduce a company's risk of IRS scrutiny.



  1. Recent cases and proposed regulations
  2. Anti-avoidance law
    1. Substance over form
    2. Business purpose
    3. Economic substance
  3. IRS broad enforcement capabilities


The panel will review these and other important questions:

  • Risk shifting and distribution
  • IRS enforcement areas in micro-captives, including excessive premiums and risk definition
  • 831(b) structuring issues and compliance challenges
  • Diversification requirements and tests
  • Response to IRS challenges of 831(b) micro-captive structures


Fine, Alan
Alan J. Fine, CPA, JD

Tax Partner

Mr. Fine specializes in the taxation of insurance companies. He has 24 years of tax experience and has worked closely...  |  Read More

Oveisi, Kevin
Kevin Oveisi

Holtz, Slavett & Drabkin

Mr. Oveisi is a tax attorney with Holtz, Slavett, & Drabkin. Kevin has experience practicing in all aspects of tax...  |  Read More

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Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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