2019 SALT Developments for Insurers
While state and local tax developments for 2019 were concentrated on Wayfair-type nexus standards and ongoing state responses to the federal provisions of the Tax Cuts and Jobs Act, there were a few other items of note for the year. While the primary developments do not significantly affect the insurance industry, some of these other items have potential impacts on insurers. Continuing the trend from recent years, most developments pertaining to insurers are focused on industry assessments, fees and income/excise tax provisions related to insurance companies. Here are some highlights from 2019.
- Iowa, Nevada and Vermont passed legislation to authorize “domestic surplus lines insurance companies.” Insurers electing to be treated as such are subject to regulation and tax as if they were an unauthorized surplus lines insurer domiciled in another state.
- Arkansas, North Carolina, Rhode Island, Texas and Virginia passed legislation to treat travel insurance as inland marine insurance and impose the premium tax on such coverage sold to residents, certain primary certificate holders or certain blanket travel insurance policyholders, excluding any amount received for travel assistance services or cancellation fee waivers.
- California and Kansas passed unclaimed property tax provisions related to policies with death benefits, which include the requirement to identify deceased insureds via semi-annual comparisons to the Social Security Administration’s Master Death File and submit unclaimed benefits accordingly.
- Arkansas, Iowa, Kentucky, Nevada and North Dakota updated their life and health guaranty fund provisions to conform to NAIC model statutes, which generally include health maintenance organizations as member insurers and split assessments pertaining to long-term care insolvencies 50-50 between life/annuity and health insurers.
- Arkansas is reducing the salary credit against the accident and health insurance premium tax for tax years 2021, 2022 and 2023, when the maximum offset against will be 50 percent of the annual liability.
- California has revised the tax on health care service plans and managed care organizations to increase the tax per Medicaid enrollee, reduce the tax per non-Medicaid enrollee and end the premium/income tax exemption for plans that don’t serve Medicaid patients.
- Delaware has established the Health Insurance Individual Market Stabilization Reinsurance Program and Fund, which will be funded in part by a 2.75 percent annual assessment on entities that provide health insurance in Delaware.
- Florida announced its temporary corporate income tax rate reduction from 5.5 to 4.458 percent for tax years beginning January 1, 2019, through December 31, 2021.
- Illinois issued regulations supporting its requirements on determination of unitary group apportionment for mixed groups that include insurance companies with noninsurance affiliates.
- Mississippi revised its provisions related to Windstorm Underwriting Association assessments to cover weather events.
- Nevada doubled its fraud fees imposed on insurers.
- North Carolina announced that a disguised-sale determination or a transaction that would result in the technical termination of a partnership for federal income tax purposes would result in the department of revenue not recognizing a credit allocation as valid for state tax purposes.
- North Dakota established an individual health reinsurance pool. The pool will be funded by quarterly assessments on health insurers, which would be eligible for premium tax offset.
- Oregon imposed the new Commercial Activity Tax, effective January 1, 2020. All insurers are generally subject to the new tax, which is imposed at a unitary group level on Oregon gross receipts (including premium) at a rate of $250 plus 0.57 percent of taxable receipts in excess of $1 million. There are very few exclusions to the tax and a single deduction for 35 percent of labor costs or COGS.
- South Carolina revised assessment provisions for the South Carolina Medical Malpractice Liability Joint Underwriting Association (renamed the South Carolina Medical Malpractice Association effective January 1, 2020) and added additional assessments to reduce its operating deficit.
- West Virginia repealed the premium tax imposed on annuities, effective January 1, 2021.
To learn more about these developments and how they could affect your organization or for assistance with any of these new provisions, contact your BKD Trusted Advisor™ or submit the Contact Us form below.