Relates to obligations for certain taxes by captive insurance companies.
TITLE OF BILL: An act to amend the insurance law, in relation to obligations for certain taxes
PURPOSE OR GENERAL IDEA OF BILL: The bill provides that certain captive insurance companies no longer in the business of insurance as of December 31, 2011 shall be treated as admitted insurance carriers for the purpose of taxation, as long as they are not considered to be overcapitalized captive insurance companies as defined in subdivision 11 of section 2 of the tax law.
SUMMARY OF SPECIFIC PROVISIONS: Section 1 adds a new section 7013 to the insurance law to provide that certain captive insurance companies created pursuant to the insurance law and no longer in the business of insurance as of December 31, 2011, shall be treated as admitted insurance carriers for the purpose of taxation, as long as they are not considered to be overcapitalized captive insurance companies as that term is defined in subdivision 11 of section 2 of the tax law. Section 2 provides for an immediate effective date.
JUSTIFICATION: Since its enactment in 1997, the captive insurance article in the insurance law has fostered the development of numerous captive insurance companies in New York. Some of these carriers were found to be overcapitalized (more assets within these companies than were necessary to pay claims). This issue was address in 2009 tax law amendments by limiting the tax benefits provided to these entities. Many of the other captive insurance companies licensed in New York since 1997, however, were not overcapitalized and operated as legitimate insurance companies accepting risk, establishing appropriate premiums and paying claims out of the proceeds of these companies. For a variety of reasons, these companies are now being considered to either not be legitimate risk transfer vehicles (notwithstanding the licensing by the former Insurance Department and the payment of premium taxes and section 332 assessments to support the operation of the department) or otherwise not to be entitled to the same tax treatment of other admitted insurance carriers. This new section would clarify that these captives (which are now no longer in operation in the state) would not be subject to new and different interpretations of the tax and insurance laws as well as retroactive taxation by the state.
PRIOR LEGISLATIVE HISTORY: New bill.
FISCAL IMPLICATIONS: The objective of this legislation is that such tax liabilities were not due and owing by the affected captive insurance companies, assuming they are not overcapitalized captives and therefore subject to the aforementioned provision of tax law, with no revenue to the state expected.
Therefore, there is no negative fiscal impact to the state. The application of the legislation to discontinued captives assures that this is a closed group and no captive still operating will be covered by this legislation.
EFFECTIVE DATE: Immediately.
STATE OF NEW YORK ________________________________________________________________________ S. 7561 A. 10531 S E N A T E - A S S E M B L Y June 4, 2012 ___________IN SENATE -- Introduced by Sen. McDONALD -- read twice and ordered printed, and when printed to be committed to the Committee on Insur- ance IN ASSEMBLY -- Introduced by COMMITTEE ON RULES -- (at request of M. of A. Canestrari) -- read once and referred to the Committee on Insurance AN ACT to amend the insurance law, in relation to obligations for certain taxes THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The insurance law is amended by adding a new section 7013 to read as follows: S 7013. OBLIGATIONS FOR CERTAIN TAXES. CAPTIVE INSURANCE COMPANIES, NOT INCLUDING OVERCAPITALIZED CAPTIVE INSURANCE COMPANIES AS DEFINED IN SUBDIVISION ELEVEN OF SECTION TWO OF THE TAX LAW, LICENSED PURSUANT TO THE PROVISIONS OF THIS ARTICLE AND OPERATING UNDER THIS ARTICLE OR THE APPLICABLE PROVISIONS OF THIS CHAPTER ON OR AFTER THE EFFECTIVE DATE OF THIS ARTICLE AND CEASING TO OPERATE UNDER SUCH LICENSE AS OF DECEMBER THIRTY-FIRST, TWO THOUSAND ELEVEN SHALL BE CONSIDERED AND TREATED FOR TAX PURPOSES AS AN ADMITTED LICENSED INSURER AND ALL PREMIUMS PAID TO SUCH CAPTIVE INSURANCE COMPANIES SHALL BE DEDUCTIBLE IN FULL BY AFFIL- IATED ENTITIES SUBJECT TO TAX UNDER ARTICLE NINE-A OF THE TAX LAW. THE SUPERINTENDENT SHALL CERTIFY TO THE COMMISSIONER OF TAXATION AND FINANCE THAT EACH CAPTIVE INSURER WHICH HAS BEEN SO LICENSED AND UNDER THE JURISDICTION OF THE DEPARTMENT OF FINANCIAL SERVICES WAS OPERATING AS A DULY LICENSED INSURER DURING THIS PERIOD, INCLUDING HAVING PAID ALL ASSESSMENTS AND EXAMINATION FEES, AND ALL PREMIUM AND FRANCHISE TAXES. S 2. This act shall take effect immediately.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD16083-02-2