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Section 2: Financial Terms
a. One hundred percent (100%) of any deductions claimed for captive insurance premiums will be disallowed for
all open tax years.
b. Any captive-related expenses claimed on the insured’s or the captive’s returns, including, but not limited to, fees
paid to captive managers for formation or maintenance of a captive, will be disallowed in full.
c. The captive will not be required to recognized taxable income for received premiums, and taxpayers will be
treated as satisfying any withholding obligations under sections 1442 and 1461 arising from purported
premiums paid to, or for the benefit of, the captive.
d. An accuracy-related penalty under I.R.C. § 6662(a) on all tax due in the 2020 Resolution will be asserted at a
reduced rate of 15%, including but not limited to taxes owed under the deemed transactions or liquidating
distributions described in the Appendix.
i. The penalty will be reduced by 5% for taxpayers that have not previously participated in any other
reportable transaction. Taxpayers must sign the declaration provided.
ii. The penalty will be reduced by 5% for taxpayers that relied on advice from an independent tax
professional. The independent tax professional must sign the declaration provided.
iii. Taxpayers that submit valid reportable transaction and independent advisor. declarations will have the
accuracy-related penalty under I.R.C. § 6662(a) reduced to 5%.
e. Taxpayers must file gift tax returns and pay gift tax, absorb credit, or both for any transfer of value to the
shareholders of the captive, before the IRS will execute a Closing Agreement.
f. If none of the parties to the micro-captive transaction disclosed the transaction as required by Notice 2016-66,
as modified by Notice 2017-08, one penalty under I.R.C. § 6707A, Penalty for Failure to Include Reportable
Transaction Information with Return at the rate applicable to natural personas under I.R.C § 6707A(b)(3) (i.e.,
$5,000). Taxpayers will not seek rescission of the penalty under I.R.C § 6707A(d).
g. Additions to tax for failure to file or pay tax under I.R.C. § 6651 and failure to pay estimated income tax under
I.R.C. §§ 6654 and 6655 may apply. No other penalty will be imposed.
h. Taxpayers agree that they are responsible for their own costs and fees in participating in this 2020 Resolution;
I.R.C. § 7430 does not apply to this 2020 Resolution.
i. The captive (1) must have already liquidated, (2) will be required to liquidate within 90 days of electing to
participate in this 2020 Resolution, or (3) will be deemed to distribute qualified dividends to, and receive capital
contributions from, its shareholders, as described in the Appendix. Foreign captives not liquidating or already
liquidated must also decide whether to conduct an F Reorganization as described in the Appendix. Please fill in
the box(es) below.
To participate in this 2020 Resolution, please initial page 1 and sign and date page 2 of this Attachment 1, and mail this
Attachment 1 to the IRS listed contact reverenced in the cover letter. Your signature will be considered a non-binding
consent to participate in this 2020 Resolution; formal agreement to be memorialized subsequently with a Closing
Agreement, as described above. By signing this Attachment 1, the person named below certifies that he/she has legal
authority to execute this election on behalf of the insured. In addition, by signing this form, taxpayer(s) waive their right
to participate in discussions between IRS Appeals and personnel from other IRS functions, such as Examination or
Counsel, that may take place in connection with the 2020 Micro-Captive Insurance Resolution.
________
______________________________ _______________________________________
Print Name and Title Insured Name
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______________________________ _______________________________________
Signature Date
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