IRS Notice 2016-66 identifies certain captives that make an annual 831(b) election to be “transactions of interest.” Taxpayers who meet the criteria under the Notice will have to make a disclosure to the IRS in order to avoid civil non-reporting penalties. Having to file a disclosure does not, per se, automatically cause an IRS exam on the merits of your captive, it is merely another reporting requirement that you may have to meet. Somerset does think that such disclosure could increase the likelihood of an IRS exam at some time in the future. Captive owners need to understand what this Notice means to you, your affiliates, and your captive.
Please reach out to your Somerset advisor/contact to have a conversation about this disclosure requirement and what it might mean to you