For those paying attention, taxpayers have been using the Administrative Procedure Act (“APA”) as a sword to cut through attacks by the Internal Revenue Service (“IRS”), particularly in relation to conservation easement transactions and micro-captive insurance arrangements. Essentially, taxpayers have successfully fended off a myriad of substantive attacks by wielding the IRS’s seemingly routine failure to comply with notice and comment procedures as required by the APA against it.

The IRS and Treasury Department took notice. In response the agencies seem to be abandoning the once-held stance that compliance with the notice and comment procedures under the APA was not required for certain notices and regulations, in favor of issuing proposed regulations and soliciting public comments. One such notice being Notice 2016-66, identifying so-called micro-captive insurance transactions, and other substantially similar transactions, as transactions of interest. Notice 2016-66 created certain responsibilities for taxpayers involved in the identified transactions.

Download our PDF for the full article.