Court Ruling in SRA’s Lawsuit Against the IRS

In April 2026, a federal court struck down the IRS’s “listed transaction” designation for 831(b) Plans. SRA funded this lawsuit and joined as a co-plaintiff, and the court ruled in our favor on the issue that created the most damage to the industry.

Here is what happened. In January 2025, the IRS finalized a rule that created two tiers of reporting requirements for businesses that participate in 831(b) Plans. The first tier, “transactions of interest,” required businesses to file disclosure forms with the IRS. The second tier, “listed transactions,” went much further. It placed 831(b) Plans in the same regulatory category as known tax shelters and attached a reputational stigma that discouraged legitimate business owners and their advisors from participating in 831(b) Plans at all. SRA believed this rule overstepped the IRS’s authority and was causing real harm to businesses like yours that use these plans for genuine risk protection. 

Judge Rosenthal of the U.S. District Court found the IRS did not have sufficient evidence to support labeling 831(b) transactions as presumptively abusive. The court declared the listed transaction regulation unlawful and vacated it, effective May 1, 2026. The transaction of interest designation, which carries lighter reporting requirements and lower penalties, was upheld. 

For 831(b) Plan specifically, this means the most punitive regulatory classification has been removed. The transaction of interest designation that remains is effectively the same reporting framework that has been in place since the IRS issued Notice 2016-66 in 2016. SRA has complied with that notice for the past ten years, and we will continue to handle compliance on your behalf as part of our administration. Our 831(b) Plans continue to operate as they always have.

SRA brought this case because we believe small and mid-sized business owners who use 831(b) Plans to protect against real risks deserve to be treated fairly by their government. If you have questions about the ruling, please reach out to us and read the full news release here.