HB1444: relative to the rate of the insurance premium tax.

HB 1444-FN-A - AS INTRODUCED

2016 SESSION

16-2343

09/10

HOUSE BILL 1444-FN-A

AN ACT relative to the rate of the insurance premium tax.

SPONSORS: Rep. Almy, Graf. 13; Rep. Wallner, Merr. 10; Rep. Rosenwald, Hills. 30; Rep. Hatch, Coos 6; Rep. R. Walsh, Hills. 11; Sen. Feltes, Dist 15

COMMITTEE: Commerce and Consumer Affairs

ANALYSIS

This bill increases the rate of the insurance premium tax.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

16-2343

09/10

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Sixteen

AN ACT relative to the rate of the insurance premium tax.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Insurance Premium Tax. RSA 400-A:32, I(a) is repealed and reenacted to read as follows:

(a) Every insurer shall pay to the insurance commissioner a tax upon such net premiums, for lines of business written, as set forth in the report filed pursuant to RSA 400-A:31, I, less estimated payments made in accordance with RSA 400-A:32, II, as follows: a tax of 2 percent for all lines of business written pursuant to RSA 401:1, including, but not limited to, insurers licensed pursuant to RSA 420-A, RSA 420-B, and RSA 420-F, and written pursuant to RSA 416-A and RSA 401:1-a, I and II.

2 Effective Date. This act shall take effect July 1, 2016.

LBAO 16-2343

11/12/15

HB 1444-FN-A- FISCAL NOTE

AN ACT relative to the rate of the insurance premiums tax.

FISCAL IMPACT:

The New Hampshire Insurance Department and Department of Revenue Administration state this bill, as introduced, will increase insurance premium tax revenue and decrease business profits tax revenue by indeterminable amounts in FY 2017 and in each year thereafter. There will be no fiscal impact on state expenditures or on county or local revenue and expenditures.

METHODOLOGY:

The Insurance Department states insurance companies are subject to both the premium tax pursuant to RSA 400-A:32 and the retaliatory tax pursuant to RSA 400-A:35. A change in the insurance premium tax rate impacts the retaliatory tax rate calculation. The retaliatory tax rate is based on the tax rate in the insurance companies’ state of domicile. In accordance with RSA 400-A:32, II(b), insurers are required to make a payment on or before March 15th equal to 100 percent of the previous year’s tax paid. This bill proposes to increase the insurance premium tax rate on property & casualty and life insurance from 1.25% to 2% effective on July 1, 2016. The Department indicates, due to the retaliatory tax, the change would only impact companies that are domiciled in states with a premium tax rate less than 2%. The Department based its estimates on the following assumptions:

For calendar year 2016, the premiums are written evenly over the year.

For the projected calendar year 2016 premiums written, conservative growth rates were applied to the calender year 2014 premiums written, which is the most recent information available.

Assumes premiums written for calendar years 2017 through 2019 will be level.

There would be no change in companies’ state of domicile.

FY 2017

FY 2018

FY 2019

FY 2020

Premiums Written

$1,692,705,894

$1,692,705,894

$1,692,705,894

$1,692,705,894

Current tax rate of 1.25%

Premium Tax Liability

$21,158,823

$21,158,823

$21,158,823

$21,158,823

Retaliatory Tax

$2,189,197

$2,189,197

$2,189,197

$2,189,197

Total Premium Tax

$23,348,020

$23,348,020

$23,348,020

$23,348,020

Proposed tax rate of 2%

Premium Tax Liability

$27,506,469

$33,854,117

$33,854,117

$33,854,117

Retaliatory Tax

$1,094,598

$0

$0

$0

Total Premium Tax

$28,601,067

$33,854,117

$33,854,117

$33,854,117

Impact of increase from 1.25% to 2%

Increase in tax liability

$5,253,047

$10,506,097

$10,506,097

$10,506,097

Prepayment for the following year

$5,253,047

$10,506,097

$10,506,097

$10,506,097

Total increase in revenue on a cash/budgetary basis

$10,506,094

$21,012,194

$21,012,194

$21,012,194

The Department of Revenue Administration states the insurance premium tax paid is allowed as a credit against the business profits tax (BPT) pursuant to RSA 400-A. This bill increases the insurance premium tax on certain insurance premiums and the Department assumes the credit taken against the BPT will also increase resulting in less BPT revenue. The Department states it does not have data on insurance transactions subject to the insurance premium tax under RSA 416-A or RSA 401:1-a and has no way of determining the credit amount taxpayers would use against the BPT.