Insurance Taxes The Governor

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Insurance TaxesThe Governors 21st Century Tax
Reform Commission

• Presented by
• Abby Angerman, Intermediate Tax Specialist
• Minnesota Department of Revenue
• October 3, 2008

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Federal Regulation History
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Commerce Clause
• Paul v. Virginia (1869)
• United States v. South-Eastern Underwriters
  Association (1944)
• McCarran-Ferguson Act (1945)
• Equal Protection Clause
• Western Southern Life Insurance Company v.
  State Board of Equalization of California (1981)

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State Insurance History
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• 1868 2 gross premium tax on foreign insurance
  companies
• 1872 domestic companies were included
• 1983 tax administration transferred from
  Department of Commerce to Department of Revenue,
  Insurance Premium Tax Section of the Corporate
  Income Tax Division
• 1986 transferred to Special Taxes Division

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Collaborative Agencies
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Minnesota Department of Commerce
• National Association of Insurance Commissioners
  (NAIC)
• Guaranty Funds (GFA)
• Minnesota Insurance Guaranty Association (MIGA)
• Minnesota Life and Health Insurance Guaranty
  Association (MLHIGA)
• Minnesota Joint Underwriting Association (JUA)

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National Association of Insurance Commissioners
(NAIC)
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Organization of insurance regulators from the 50
  states, DC and five US territories
• Provides forum for development of uniform policy
  when uniformity is appropriate
• All insurance companies file annual statements
  with NAIC

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Guaranty Fund Association (GFA)
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Minnesota Insurance Guaranty Association (MIGA)
• Minnesota Life and Health Insurance Guaranty
  Association (MLHIGA)
• Acts like insurance for insurance
• Every state has one
• Funds paid to the GFA can be used as tax offsets
  at 20 per year over five years

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Joint Underwriting Association (JUA)
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Hard-to-insureds
• Funds paid to the JUA can be used as tax offsets

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Taxes and Surcharges (CY2007)
Insurance Taxes The Governors 21st Century Tax
Reform Commission
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Premium Tax
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Property and Casualty, Title and Risk Retention
  Groups
• 1, 1.26 or 2 of premiums
• Life Insurers
• 2007 1.75 2008 1.625 2009 1.5
• Township Mutual Insurers
• 1

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Retaliation
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Exclusive to Insurance Taxes
• Eye for an eye taxation
• Reciprocal States
• California
• 1,000,000
• 23,500
• Company pays 23,500

• Minnesota
• 1,000,000
• 20,000

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Firefighters Relief Surcharge
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Property and Casualty Insurers
• Fire, lightning and sprinkler-leakage premiums
• Applies to coverage on risks in the cities of
  first class Duluth, Minneapolis and St. Paul

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Certification Reports
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Monies go to different funds
• Police State Aid 2008 62,154,523.68
• Fire State Aid 2008 23,727,396.84
• Firefighters Relief mid-2008 1,798,805.75

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Taxes and Surcharges (CY2007)
Insurance Taxes The Governors 21st Century Tax
Reform Commission
Taxes and Surcharges (CY2007) Breakdown
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Fire Safety Surcharge
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Replaced the fire tax effective 7/1/07
• Property and Casualty Insurers
• Homeowners, commercial fire, commercial
  non-liability multi-peril premiums
• 0.65 surcharge for most
• 0.5 on net fire premiums for some
  mutuals

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Auto Theft Prevention Surcharge
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Auto Insurers
• 50 cents per vehicle for every six months of
  comprehensive auto insurance coverage
• Collected by Revenue
• Administered by Commerce
• Deposited in Auto Theft
• Prevention Account

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Health Care Provider Tax
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• HMOs and other providers
• 1 of premiums
• Paid into Health Care Access Fund

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Unauthorized Insurance Tax
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Any individual, firm or corporation that obtains
  insurance from a foreign company not licensed to
  do business in Minnesota
• 2 of annual premiums

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Surplus Lines Tax
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• Surplus lines agents
• Authorized Insurer
• Unauthorized Insurer
• Eligible Insurer 3
• Ineligible Insurer 2

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Stamping Office
Insurance Taxes The Governors 21st Century Tax
Reform Commission

• HF3149 Omnibus Tax Bill
• Signed May 29, 2008 60A.2085
• Collects information on licensee, policy number,
  insurer information, insured information, etc.

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Insurance TaxesThe Governors 21st Century Tax
Reform Commission

• Any Questions?