The IRS’s New Micro-Captive Disclosure Rules

Apr 17

The IRS just issued a new notice that could impact some farmers and ranchers, especially those using a lesser-known financial tool called a micro-captive insurance company.

If your operation has formed a micro-captive to help manage the rising cost of property and casualty insurance, you’re not alone. These companies have gained popularity in agriculture over the past few years, and for good reason. In an industry where a single hailstorm, market drop, or equipment breakdown can turn a good year into a bad one, micro-captives offer a way to take control of risk.

But now, the IRS is paying closer attention, and they’ve added new paperwork to prove everything is above board.

So, What Exactly is a Micro-Captive?

Think of it this way: instead of buying all your insurance from a third-party provider, your farm sets up its own insurance company to cover certain risks. That’s a micro-captive.

It’s still a real insurance company, just one that you own and operate for your own business. If set up properly, it can:

Help you save for future losses.
Offer coverage for things traditional insurance might not.
Provide potential tax benefits.

It’s a way to take control of risk management, but it has to be done the right way.

Why is the IRS Involved?

Let’s be clear, micro-captives aren’t illegal. They can be a smart part of a long-term business strategy. But the IRS has seen some businesses misuse the structure for tax avoidance. Because of that, they’ve increased regulations and are now requiring more disclosures, even from companies doing things by the book.

What’s Changing?

On January 14, 2025, the IRS finalized a rule that requires certain taxpayers with ties to a micro-captive to file a detailed disclosure form by April 30, 2025.

You might need to file if:

You own or control at least 20% of a micro-captive.
You’ve loaned money to or from the captive.
You’ve received payouts over certain dollar amounts.
You’ve entered into any other reportable transaction involving the captive.

Even if your micro-captive is fully compliant, failing to report can result in penalties. This isn’t about catching bad actors; it's about transparency.

The Good News: You Have More Time

The IRS recently issued Notice 2025-24, which gives taxpayers an extra 90 days to file the required report. That moves the deadline from April 30 to July 29, 2025.

This is a relief, but it’s not a reason to wait. If you’re unsure whether this applies to your farm, it’s time to find out.

What Should You Do Now?

If your farm or ranch has a micro-captive, or if you think it might be part of your overall risk strategy, check in with your tax professional now. These new requirements are separate from past filings and shouldn’t be overlooked.

We believe in building tools and strategies that help producers stay ahead, not stuck in regulatory quicksand. Micro-captives can still be a valuable piece of your business, but only when handled with care and compliance.

Amanda Holder

I am a dedicated professional who values faith, family, and hard work above all. With a strong foundation in Christian beliefs, I bring a deep sense of integrity and compassion to everything I do. I am passionate about supporting farmers across the nation, helping them navigate their financials and ensuring their businesses thrive. Through trusted partnerships and a hands-on approach, I work tirelessly to provide practical solutions that allow farmers to focus on what they do best—growing and cultivating land and animals.

When not working, I enjoy spending time with my family and friends, fostering meaningful relationships and prioritizing those closest to me. I believe in the importance of balancing professional commitments with personal values, striving to make a positive impact both in my work and within my community.