The 831(b) Institute Launches Advocating for Clarity from the IRS

Miami, Oklahoma – June 28, 2023 – On National Insurance Awareness Day, the 831(b) Institute is launching across the U.S. The 831(b) Institute was formed to bring the business community together and give them a voice around what true risk mitigation and insurance coverage means to small and medium-sized businesses. Insurance is an essential part of owning a business, but often complicated rules and lack of proper guidance from the Internal Revenue Service (IRS) result in confusion and misconceptions. Our country is built on entrepreneurial spirit, and microcaptive insurance helps protect the livelihoods of America’s entrepreneurs.
Microcaptives, also known as 831(b) plans, can serve as an excellent insurance option for small business owners. Essentially, microcaptives allow for self-reliance, independence, and flexibility for businesses. However, these plans are scrutinized unfairly by the IRS. Instead of creating guidelines that allow for microcaptive plans to be fairly regulated, the IRS is attempting to push forward harmful regulation that will make microcaptives less effective.
Nate Reznicek, an advisor for the Institute, is the President and Principal Consultant at Captive. Insure. From firsthand experience, Reznicek is able to see the positive impact that these microcaptives have on small to medium-sized businesses.
“The inability of the IRS to create clear regulatory standards for microcaptives is harmful to good faith business owners looking to have an insurance plan in place that allows them to participate in the risk and premium of their insurance programs in the same manner as large enterprises – on this includes the ability to help to cover unpredictable expenses and potentially catastrophic events,” says Reznicek. “As long as the establishment of a microcaptive follows the 4-pillar test of risk transfer, risk distribution, fortuitous risk, and common notions of insurance (as determined by the appropriate state/domicile regulatory authority), business owners should be able to pursue the plan that is best for them without having to fear the IRS.”
Another advisor of the 831(b) Institute, Chief Robert Burkybile shares his perspective.
“When microcaptives are established and maintained correctly, they not only adhere to legal standards, but they can also make an impact throughout whole communities. “There are some providers of microcaptives that are domiciled in the Modoc Nation, meaning that the fees paid towards their plans help to provide resources to our community,” said Robert Burkybile, Chief of Modoc Nation in Oklahoma. “These financial resources allow us to invest in areas such as language revitalization, higher education, home improvement, childcare, and more. Without Modoc Nation’s involvement in the facilitation of captives, these opportunities may not be available.”
On July 19, the IRS will be holding a public hearing on the proposed regulations for microcaptives. Many individuals, businesses, and associations shared the importance of microcaptives during the IRS comment period that ended June 12. The 831(b) Institute will continue to advocate for microcaptives as the hearing approaches.