Due to the significant tax incentives afforded properly designed and operated insurance companies, the IRS is increasingly concerned many owners may have a primary tax savings, not risk management business objective, in forming small closely help captives. It is expected the IRS examiners will start to use the newly codified economic substance test and related penalties in audits of captives they feel are not designed and operated correctly or for the right business reasons. Click here to view the IRS website and form guidance on this new codified test.