• The Kings River Captive Insurance Case
  • September 7, 2017
  • A petition was recently filed in U.S. Tax Court by Kings River Commodities, LLC (Kings River)1 challenging the denial of deductions related to insurance premiums, among other items. The premiums were paid to an insurance company that made an election to be taxed on its investment income (as opposed to all of its taxable income) under Section 831(b) (referred to as a “micro-captive” by the Service in its discussion of 2017 abusive tax shelters).2 According to the Petition, Kings River is a non-traditional feed supply company that sells poultry and dairy cattle feed. The feed is non-traditional because Kings River “acquires excess products such as nuts, crackers, cookies, fruit, and yogurt from businesses and then reprocesses that product into feed.” The use of a micro-captive is implicated in the Petition, which provides that Congress “encourages the use of small captive insurance companies through Section 831(b).”<sup>3</sup>