The return of Donald Trump to the White House in January, coupled with a Republican-controlled Congress, is poised to create a favorable environment for small and mid-sized businesses, particularly those utilizing 831(b) micro captive plans. These businesses could see significant advantages from a series of expected tax cuts and pro-business policies.

Under Trump’s administration, tax reform is expected to focus on reducing corporate tax rates and extending his 2017 tax cuts, which are set to expire in 2025. With the potential for clearer regulations and a reduced IRS presence, small and mid-size businesses using 831(b)s stand to benefit from both tax relief and regulatory clarity.

Dustin Carlson, president of SRA 831(b) Admin, the largest 831(b) plan administrator in the country, emphasized the importance of these changes. “The potential for lower corporate tax rates combined with a more business-friendly regulatory environment under the Trump administration will make 831(b) micro captive plans an attractive option for small business owners,” Carlson said. “This is a great opportunity for businesses to use the 831(b) tax code to better manage their risks while enjoying substantial tax benefits.”

The 831(b) Advantage

An 831(b) micro captive plan is a small insurance company formed by a business to cover its own risks. The key feature is that they can elect to be taxed on premiums that fall below $2.8 million per year (as of 2024), offering a tax-efficient alternative to traditional commercial insurance. This makes 831(b) Plans an attractive option for small and mid-sized businesses that want more control over their insurance needs while benefiting from tax savings.

With Trump’s tax cuts expected to persist, businesses utilizing 831(b) micro captive plans could see enhanced savings. The extension of the 2017 tax cuts, which reduced corporate tax rates and allowed for increased deductions for businesses, is expected to bolster the appeal of these structures. If tax rates continue to decrease, businesses could find additional financial benefits from retaining more capital in their operations.

Carlson believes the time is now for 831(b) owners to advocate for further reforms that provide greater certainty and clarity. “Under a GOP majority, there is an opportunity to solidify the 831(b) Plan as a standard business practice, much like 401k plans,” he noted. “A clearer regulatory framework would make it easier for businesses to utilize these structures with confidence.”

Deregulation and Small Business Empowerment

Trump’s broader economic policies — especially his emphasis on deregulation and decentralization of power — are expected to benefit small businesses, which have historically been burdened by complex and costly regulations. For small and mid-size business owners who choose to establish micro captives, deregulation could reduce the administrative overhead of running these structures, making them even more appealing.

In addition to deregulation, the Trump administration’s expected focus on reducing IRS enforcement could make it easier for small businesses to operate micro captives with less risk of audits or penalties. This shift, if realized, would be particularly beneficial for businesses with 831(b)s, which have been a focal point of IRS scrutiny in recent years.

What Could Change with a Trump Presidency?

While much of the attention on Trump’s return centers around his tax policies, small business owners are also keenly watching his approach to IRS enforcement and regulation. Under Trump, there is a strong possibility that businesses will face fewer audits, particularly with the anticipated reduction in IRS funding. Under this new regulatory climate, companies will be able to use the 831(b) tax code established in the 1980s when America faced a hardened insurance market, much like today, as it was intended when Congress enacted it.

According to Carlson, “Trump’s administration has shown a commitment to reducing bureaucratic overreach, and this could extend to IRS audits of small captives. If funding for the IRS is reduced, it might allow small businesses to operate their captives with less interference.”

The Outlook for 2025 and Beyond

While the immediate impact of Trump’s presidency on 831(b) micro captives remains to be seen, the broader economic context could provide significant tailwinds for small and mid-sized business owners. As the 2017 tax cuts expiration approaches, Republican legislators are likely to push for extensions or further reductions in corporate tax rates. This could make 831(b) even more attractive as a tax-efficient method of risk management.

Additionally, changes in inflation and interest rates could also affect the captive insurance landscape. If inflation rises under Trump’s policies, businesses may seek out captives as a way to mitigate costs and increase financial efficiency. Higher interest rates could make captives more valuable, as they enable businesses to invest their premiums in higher-yielding assets.

Final Thoughts

As Trump prepares to return to the White House, small business owners who use or are considering 831(b) micro captive plans have reason to be optimistic. With a pro-business tax environment, reduced regulatory burdens, and potential for clearer regulations, small businesses could see substantial benefits. For those in the captive insurance space, these developments could help establish micro-captives as a standard risk financing tool for small and mid-sized businesses.

“Small businesses are the backbone of the American economy, and with the right policies in place, they’ll have more tools at their disposal to manage risks and optimize their operations,” said Carlson. “The future for 831(b) Plans is bright, and we expect to see growing adoption and sophistication in their use.”