Since August of 2024 the Domicile has taken an active role in fighting efforts by the IRS to use the rulemaking process to artificially and improperly control the use of the IRC 831 (b) election.  The Domicile lent its assistance to lawmakers, supported associations active in the captive industry and actively published Op-eds to curtail the IRS’s improper activity.  Despite everyone’s best efforts the IRS published the attached regulations promulgated not by the federal legislature, but through its internal rulemaking process.

            Almost immediately the captive community reacted. On January 10, 2025, Ryan, LLC, a Dallas, Texas based consulting firm file suit against the IRS in the United States District Court for the Northen District of Texas. Ryan asserted, that the IRS Rule…violates the Administrative Procedure Act, which prohibits agency actions that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” as well as those that are “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” 5 U.S.C. § 706(2)(A), (C).

            This is not the first time the IRS has tried such a maneuver. In 2016 it used the same rulemaking process to impose stringent self-reporting requirements on companies making the 831 (b) election. Five years later a consulting firm out of Tennessee succeeding in having the United States Supreme Court strike down, in its entirety, the IRS efforts to circumvent the law through the rulemaking process, see CIC Services, LLC v. Internal Revenue Service.    The captive industry is optimistic that this latest IRS effort will be meet the same fate as its 2016 effort.