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More Clouds on the Horizon for Micro Captives and Syndicated Conservation Easements, as the IRS unveils the Newly-Established Office of Promoter

By Anthony P. Daddino on April 20, 2021

Yesterday, the Internal Revenue Service announced the establishment of the IRS Office of Promoter Investigations. The new office will further expand on the efforts of the Promoter Investigations Coordinator that began last summer and will continue to focus on micro captives and syndicated conservation easements.

In announcing the new office, IRS Commissioner Chuck Rettig said:  "By establishing the Office of Promoter Investigations, we are continuing our increased focus on promoters of abusive tax avoidance transactions, which we have demonstrated over the last year.  This office will coordinate efforts across multiple business divisions to address abusive syndicated conservation easements and abusive micro-captive insurance arrangements, as well as other transactions."

The new office will be led by Lois Deitrich, a 20-year veteran of the IRS.  Deitrich previously served as the director of the southwest area of SB/SE's Field Examination, where she was responsible for overseeing SB/SE field operation for abusive transaction investigations.  While housed in the Small Business/Self Employed division of IRS Examination, the Office of Promoter Investigations will work on agency-wide compliance issues, including coordination of promoter activities with promoter teams in other business divisions, including Large Business & International, Tax Exempt/Government Entities, the Office of Fraud Enforcement, and Criminal Investigations.  Deitrich will serve as the principal advisor and consultant to IRS division commissioners and deputy commissioners on issues involving promoters of allegedly abusive transactions. The Office of Promoter Investigations will also develop strategic plans, programs and policy.

While this new enforcement initiative is directed at so-called promoters, the impact will almost certainly be felt by taxpayers that participate in the transactions of interest.   The IRS has successfully used promoter investigations to secure clients lists that spawned hundreds of taxpayer audits.    

This is the second IRS announcement in just two weeks involving micro captives.  On April 9, the IRS publicly urged participants in allegedly abusive micro captive insurance arrangements to exit these transactions as soon as possible.   While the IRS has long expressed its dislike for these transactions, the IRS’ recent efforts seem frantic.    One theory, espoused in my prior Blog Post, is that the IRS is worried – worried that meritorious micro captive arrangements are working their way through the judicial system that are poised to breathe new life back into this cottage industry and invigorate taxpayers embroiled in IRS disputes over their risk-management planning.  

If you have any questions about micro captives, syndicated conservation easements, or any other tax-related topic, please do not hesitate to contact me at (214) 749-2464 or adaddino@meadowscollier.com.