State Insurance Premium And Other Insurance Taxes Insurance premium Tax

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Premiums collected by assurance companies keep been subject to nation taxation within the United States since at smallest the mid-Nineteenth Century (see Section 12.01[1]). An assurance fee charge is a sort about gross receipts or tax tax; it is not based on top of profits or earnings, including is not affected by the cost about ceded reinsurance or additional expenditures, about an insurance agent (see Section 12.01[3]). Premium taxes or their equivalent may be imposed on top of the insurer, assurance producer or policyholder, depending on top of whether assurance is sold by a licensed insurance agent or through the non-admitted assurance market (see Section 12.02).

The fee charge is a very significant origin about income intended the states. In 2008, the total lot about fee taxes received by all states including the District about Columbia was approximately $15.7 billion according to a survey about nation government charge collections including accounted intended approximately 2 percent about all nation revenues.    For comparison purposes the corporate income charge is approximately 6.5 percent about all nation revenues but it covers all corporate income revenues intended the states (see Section 12.05[3]). Further, unlike the corporate income charge which is relatively volatile, the fee charge is stable providing similar yields on top of a year-to-year basis.

The different forms about fee charge ─ including the liability intended its payment ─ mirror nation assurance regulation, which has as its linchpin within all states a form about the Unauthorized Insurers Model Act promulgated by the National Association about Insurance Commissioners (the “NAIC”). The Unauthorized Insurers Model Act requires all insurers to obtain a certificate about authority before transacting the business about assurance within a state, subject to several exceptions including the transaction about surplus lines assurance by qualified non-admitted assurance companies including direct procurement about assurance by an insured. If premiums are waged to a licensed or admitted insurer, fee charge is imposed on top of the licensed insurer. If premiums are waged to a non-admitted insurance agent whose assurance policies are placed within a nation through a surplus lines marketer on top of a surplus lines basis, the charge is imposed on top of the surplus line broker. And, if premiums are waged to a non-admitted insurance agent whose policies are directly placed with a policyholder who procures the insurance, the charge is imposed on top of the policyholder. (State assurance fee charge base including rates are discussed within Section 12.02.)

Generally, there is no federal or nation constitutional prohibition to a state’s fee charge whether levied on top of an admitted insurer, or on top of a non-admitted insurance agent within connection with either a surplus line placement or a direct placement about insurance. The usual constitutional limits on top of the powers about states are not present within the case about “business about insurance” activities covered by the McCarran-Ferguson Act, including especially with respect to the activities about non-admitted insurers. Some about the the majority significant limitations on top of the states’ police including taxing powers are based on top of the prohibition about nation interference with interstate commerce under the Commerce Clause about the United States Constitution. Consequently, when a state’s order about a business enterprise is unfettered by the Commerce Clause, its powers are subject only to the more deferential Due Process including Equal Protection Clause concepts about “arbitrariness,” which invalidate nation law only where it is not rationally or substantially, respectively, related to a legitimate nation purpose. Once an insurance agent is found to keep the minimal contacts with a nation that support in personam jurisdiction, the majority courts keep found that states keep authority to control including to charge the insurance agent including that the lot about necessary contacts required intended nation order including taxation are substantially the same. (Constitutional issues are discussed within Sections 12.09[4], 12.09[5] including 12.12.)

Although the fee charge can be quite simple, complexities arise when an insurance agent is issuing assurance policies within multiple states. For example, to ensure that its domestic insurers do not pay a higher rate about fee charge to a second nation than the second state’s domiciliary insurers pay to the first state, the first nation may impose a retaliatory charge on top of premiums received by the second state’s domiciliary insurers intended assurance policies sold within the first nation (see Section 12.09). Another layer about complexity is created by an insurance agent covering risks that keep contacts within more than only nation so that insurers, producers including even insureds are potentially subject to fee tax, surplus line charge or direct placement charge within each about the states where the risk has contacts. Other complexities are created because about the variations among states as to the types about credits, deductions, including offsets that reduce the lot or rate about fee charge (see Section 12.03) as well as the ability about local governments to charge assurance premiums (see Section 12.07). Premium charge is usually a substitute intended corporate income tax, but some states charge the income about insurers within addition to taxing assurance premiums usually providing a deduction from the income charge liability intended fee taxes waged including vice-versa (see Section 12.01[6]). In addition to the fee charge levied by states, there is a federal tax charge on top of premiums waged to foreign insurers including reinsurers by United States persons (see Section 12.13).

Brian Casey is a Partner within the Corporate including Regulatory Insurance Practice Group about the Atlanta place of work about Locke Lord Bissell & Liddell LLP. Mr. Casey’s primary practice focus is on top of life assurance settlements, mergers including acquisitions including the multi-state order about assurance companies, assurance agencies, third party administrators, including additional business services firms. He also represents assurance clients within the areas about warranty, privacy, reinsurance, corporate finance including venture capital, including e-commerce. Mr. Casey is a nationally recognized speaker including regularly addresses some about the the majority respected organizations within the United States on top of issues regarding multi-state assurance order including trends affecting the assurance industry. In addition to general assurance matters, Mr. Casey’s speaking knowledge encompasses an array about varied topics including assurance taxation, life settlements including secondary life assurance products, life assurance market, seclusion including security (Gramm-Leach-Bliley Act / HIPAA / Do-Not-Call / Do-Not-Spam / Data Security Breach), e-commerce, including electronic signatures including records, including extended warranties including service contracts. Mr. Casey graduated from Auburn University (B.S.B.A. Accounting, summa cum laude, 1984); The Ohio State University College about Law (J.D., 1987) including Emory University (Master about Laws within Taxation, 1992).

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