IRS Prevails in 3rd Cir. Micro Captive Case Against Delaware Insurance Department

WILMINGTON, Del. — The Delaware Department of Insurance (DDOI) must comply with an IRS summons seeking information related to a number of micro-captive insurers, a 3rd Circuit U.S. Court of Appeals panel has affirmed, explaining that the documents are not protected under the McCarran-Ferguson Act.

In an April 21 opinion, the appellate panel rejected Delaware’s argument that the summons is blocked by reverse-preemption, ruling that while states have exclusive jurisdiction over the regulation of insurers, the IRS is not barred from taxing insurers.

The panel agreed with the U.S. District Court for the District of Delaware that the tax enforcement …