The U.S. Internal Revenue Service (IRS) has released Notice 2025-24 on 11 April 2025, announcing that it will waive penalties for participants and material advisors of reportable micro-captive insurance transactions if disclosure statements are filed by 31 July 2025.

This follows after the Treasury Department and the IRS issued the final regulations published in the Federal Register on 14 January 2025. These regulations classify certain micro-captive insurance transactions as “listed transactions” and “transactions of interest.”

The final regulations also mention that material advisors and participants in these transactions must file disclosures with the IRS and face penalties for non-compliance.

These regulations impact both participants and material advisors, ensuring businesses follow legitimate tax practices while penalising those who exploit the system.

Participants in these reportable transactions had to file disclosure statements with the IRS Office of Tax Shelter Analysis (OTSA) by 15 April 2025. Material advisors were required to submit their disclosure statements to OTSA by 30 April 2025.

The Notice extends the deadline for complying with the final regulations for the captive insurance industry and waives penalties until 31 July 2025, to address challenges with disclosure statements during tax return filing and support tax administration.

Participants were tasked with reviewing up to ten years of records to assess disclosure requirements during the peak of the US tax season.

The waiver doesn’t cover penalties for failing to file a disclosure statement with the OTSA when submitting one for a reportable transaction. Additionally, the Notice informs taxpayers about the 15 April deadline to request a tax return extension for more time to file related disclosures.