Florida Federal Jury Rules in Favor of RMC Group in Captive Dispute Against IRS
Florida Federal Jury Rules in Favor of RMC Group in Captive Dispute Against IRS
In a landmark decision, a Florida federal jury has ruled in favor of RMC Group, owned by Raymond Ankner, in a captive dispute against the Internal Revenue Service (IRS). The jury cleared RMC Group from penalties under Internal Revenue Code Section 6700, which governs the promotion of abusive tax shelters.
The IRS had accused RMC’s captives of not being real insurance companies and making false statements in connection with illegitimate insurance plans. This led to Ankner being fined almost US$4 million by the IRS for their promotion of micro-captive arrangements between 2010 and 2016.
US district judge John Steele ruled in February that a jury should decide whether Ankner knowingly lied to clients about illegal tax deductions in connection with captive insurance arrangements. The IRS alleged that Ankner and his companies created, sold, and managed a plan to avoid federal income taxes by using illegal deductions for supposed insurance premiums related to micro-captive insurance programs.
Ankner argued that the federal government based its case on its own interpretations of statements and that he and his businesses followed IRS guidance. Under micro-captive insurance transactions, companies set up small, in-house insurers that are taxed only on investment income, excluding payments received under the insurance contract from taxable income.
Matthew Reddington, attorney for RMC Group, commented on the verdict, stating, “The jury understood that captive insurance is a complicated area and one in which IRS guidance has been scarce.” RMC Group is the first captive manager to prevail against the IRS in court on this issue, marking a significant development in the ongoing dialogue surrounding compliance in the management of captive insurance companies.
Ankner expressed his satisfaction with the jury’s decision, stating, “The jury’s decision has validated our commitment to ethical business practices and regulatory compliance. This victory not only vindicates our position but also reinforces the importance of clarity and collaboration in regulatory frameworks.”
The ruling in favor of RMC Group highlights the complexities and challenges faced by businesses in navigating the regulatory landscape, particularly in the realm of captive insurance. This case sets a precedent for future disputes and underscores the importance of adherence to regulatory guidelines in the financial industry.
