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Hub unit fails to overturn $6.6 million microcaptive tax penalty - Business Insurance Skip to content Register for free Search Search Log In Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2026 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2026 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2026 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2026 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Hub unit fails to overturn $6.6 million microcaptive tax penalty by Richard Sine Agents and Brokers Hub International Sep 29, 2026 A Hub International subsidiary has lost its bid to overturn a $6.6 million IRS fraud penalty tied to its use of a microcaptive insurance arrangement, after a federal judge rejected its claim that its right to a trial was unfairly burdened. The decision, in HDH Group, Inc. v. United States of America , was issued Monday by the U.S. District Court for the Western District of Pennsylvania. A microcaptive is a small, affiliated insurance company that a business sets up to insure risks it can’t easily cover through the standard market. The arrangement can carry tax benefits, but the IRS has long treated many microcaptives as vehicles for disguised tax shelters. The IRS audited HDH’s captive program in 2015 and, in 2023, assessed $6.6 million in penalties against the company for tax years 2013 through 2018 under a statute that punishes people who organize or sell interests in abusive tax shelters. HDH paid roughly $989,000, the minimum 15% required to challenge the penalty in court, and sued for a refund, arguing the assessment violated its Seventh Amendment right to a jury trial. Judge William S. Stickman IV had already rejected that argument once, last September, but agreed to revisit it after the U.S. Supreme Court ruled in a related case, FCC v. AT&T . In that case, handed down in June, the Court upheld an earlier decision on when agencies can impose fines without a jury. HDH also argued for the first time that requiring it to prepay 15% of the penalty before suing improperly burdened its right to a jury trial. Judge Stickman rejected both arguments again. He found the statute doesn’t deny HDH a jury since it allows a full “de novo” trial in district court. “The IRS’s fact findings have been rendered irrelevant by HDH’s filing of this action, and they have no bearing on these proceedings,” the judge wrote. On the prepayment question, the judge reasoned that 18th-century common law often required a defendant to post security before trial, making the 15% prepayment rule a reasonable modern analog. “The critical question,” he wrote, “is whether a member of the generation that framed and ratified the Seventh Amendment would view the requirement that HDH pay fifteen percent of the amount the IRS claims it owes as effectively depriving HDH of its right to a jury trial. The answer to this question is no.” The judge denied HDH’s motions to dismiss the government’s counterclaim and for summary judgment, setting the case on a course for a jury trial. 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