The Internal Revenue Service said Monday it is offering limited settlements as partial relief to certain taxpayers under audit for participating in so-called micro-captive insurance transactions, a structure the IRS says can allow for tax avoidance and evasion.

Micro-captive schemes have been consistently listed on the agency’s “Dirty Dozen” list of tax scams, along with foreign tax evasion schemes involving trusts, and others.

The IRS is offering settlements to certain taxpayers under audit for using these entities in the wake of several wins in U.S. Tax Court cases, it stated in a notice released Monday.

The impacted taxpayers who are eligible for settlement relief from the audit will get letters from the IRS. These taxpayers have had exams ongoing for at least a year.

In such a transaction, the taxpayer or taxable entity sets up through its own direct or indirect ownership its own “captive” insurance company through a contract treated as an insurance contract, and claims deductions as premiums paid.

The captive itself could enter into a risk pooling agreement combining with the risks of other entities, in a reinsurance agreement.

One of the sticking points is identifying the good captives from the bad, and it hinges on what is actual insurance and what is not, a difficult assessment to make in some cases.

Although the Treasury Department and the IRS have pinpointed the so-called abusive transactions primarily designed as tax evasion practices, the groups said in a 2016 notice they lack “sufficient information to identify which § 831(b) arrangements should be identified specifically as a tax avoidance transaction” and requested comments for possible guidance on the matter.

Legally, businesses can, under section 831(b) of the Internal Revenue Code, create these or other captive insurance companies to protect against certain risks. However, the bad-faith, tax-evading structures are distinguished by their lack of a true insurance, or risk ceding, element.

The micro-captive structures are deemed abusive of the tax code when “promoters, accountants or wealth planners persuade owners of closely held entities to participate in schemes that lack many of the attributes of genuine insurance,” the IRS stated.

The IRS said it is looking into possibly expanding eligibility to those who have unresolved years under IRS appeals. However, taxpayers with pending docketed years under counsel’s jurisdiction are not eligible.

The IRS is pondering whether the settlement initiative should be expanded. However, it will continue to pursue those it sees as abusing these transactions and to defend its position in court.

IRS Commissioner Chuck Rettig said Monday in a statement that the agency encourages advisors of taxpayers under exam as well as the individuals themselves to take a hard look at their cases and “carefully review the settlement offer, which we believe is the best option for them given recent court cases. We will continue to vigorously pursue these and other similar abusive transactions going forward.”