The United States Tax Court issued a recent February 1, 2024 memorandum decision dealing with a medical urgent care clinic business’s captive insurance planning, in which the Tax Court in its conclusion stated:
“Although the Swift captives displayed some attributes of insurance companies, they failed to operate as insurance companies and their premiums were nonsense. We therefore conclude that the Swift captives did not provide insurance in the commonly accepted sense.”
Swift v. Comm’r, T.C. Memo 2024-13 at *44 (emphasis added). Click here for a copy of this Tax Court decision.
Two brief points:
One. This microcaptive insurance tax planning failed. Judicial opinions pointedly catch my eye when a court includes strong wording that is not typical in most opinions; in this case “nonsense”. In my view, these intentionally, heavy-hitting opinion references reflect an added kick from the court. A coup de grâce.
Two. This Tax Court opinion references multiple excerpts from the taxpayer’s captive planning attorney, such as the attorney’s statement during the planning stages that the captive premiums would be untaxed and could be used “to purchase [additional] clinics, or just land, leased to [Clinic].” Id. at *7. In what I believe in law practice today is a continuing overwrought emphasis on overplayed sales of tax planning techniques, the idea that these sales-flavored attorney communications may likely surface to become material evidence in tax controversy cases should give pause to every attorney in these situations.
James M. Kane Legal Blog 