Organizer and seller of micro-captive insurance program agrees to pay penalties for promoting micro-captive insurance companies

IR-2025-68, June 16, 2025

WASHINGTON — The Internal Revenue Service today announced a settlement with Bruce Molnar, cofounder and majority owner of Alta Holdings, LLC (Alta), U.S. Risk Associates Insurance Company Limited (U.S. Risk), and Newport Re, Inc. (Newport Re). Under the settlement, Molnar paid penalties under I.R.C. § 6700 for promoting micro-captive insurance arrangements during 2005-2012.

Molnar, in his role as an officer of Alta, organized and sold a program using contracts their clients treated as insurance and creating new entities that they treated as captive insurance companies. The United States Tax Court in Syzygy Ins. Co., Inc. v. Commissioner, T.C. Memo. 2019-34, concluded that Alta’s program, facilitated through its related entities U.S. Risk and Newport Re, was not insurance for federal tax purposes. Accordingly, Alta’s client could not properly deduct amounts paid for the purported insurance contracts to its related captive insurance company. Furthermore, the Court held the captive insurance company, Syzygy, was required to recognize the premiums it received as income.

The IRS has issued final regulations on micro-captive listed transactions and transactions of interest and will vigorously pursue managers, advisors and participants in such transactions. The final regulations identify certain micro-captive transactions as listed transactions, a type of reportable transaction, and certain other micro-captive transactions as transactions of interest, another type of reportable transaction.

Abusive tax shelters, including micro-captive insurance arrangements, have been included in many of the IRS’s annual abusive schemes campaign, the “Dirty Dozen.” To report an abusive tax scheme, contact the IRS Lead Development Center.