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Municipal Taxes

Municipal Taxes. OVERVIEW. Municipal Taxes. WHY? Municipalities impose taxes in order to generate revenue to provide services to their citizens (i.e. fire and police pension funds)

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Municipal Taxes

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  1. Municipal Taxes OVERVIEW

  2. Municipal Taxes WHY? Municipalities impose taxes in order to generate revenue to provide services to their citizens (i.e. fire and police pension funds) Fourteen states allow some form of taxation or licensing of the insurance industry by all, or almost all, municipalities

  3. Municipal Taxes States with municipal licenses and taxes • Alabama P&C and Life • Delaware P&C and Life • Florida P&C • Georgia P&C and Life • Illinois P&C (Fire) • Kentucky P&C and Life

  4. Municipal Taxes States with Municipal Taxes (cont.) • Louisiana P&C and Life • New Jersey P&C (Fire) • New York P&C (Fire) • North Carolina P&C (Fire) • South Carolina P&C and Life

  5. Municipal Taxes What makes them so difficult? • Not an easy Annual Statement download • Location, location, location • Difficult to get accurate information – who inputs this information • Timing between period close and filing dates (Kentucky) • Breakout of lines of business by city

  6. Municipal Taxes Most difficult states All states with cities that administer fire taxes – P&C companies required to calculate a fire percentage to certain lines of business Florida New database requirements and annual letter asking “why has premium changed so much?” (accuracy)

  7. Municipal Taxes • Kentucky Lines of business with different tax rates Timing – Quarterly due 30 days after quarter end City versus county taxes tax rates • Illinois Not a calendar year – July 1 to June 30

  8. Municipal Taxes Recent Activity Kentucky Cities taking legal action over misdirecting premium – different tax rates in each city causing over/under payment of taxes County judge sends notices threatening legal action – all premium being allocated by insurance companies to one city in county and none to the county

  9. Municipal Taxes Recent Activity Kentucky HB 524 Starting 1/1/2009 insurers that include local premium taxes as part of the policyholder premium charge required to separately state the amount of tax charged and the name of the taxing jurisdiction on the renewal certificate

  10. Municipal Taxes Recent Activity Kentucky HB 524 Starting 1/1/2009 insurers that issue and renew more than 2,000 policies in the preceding year must use a verified electronic risk location system to identify correct local taxing districts – penalties will be incurred if unable to comply

  11. Municipal Taxes Recent Activity Kentucky City of Hurstbourne Sent letters to all residents requesting they provide information on which insurance company provides their coverage – filed a “consumer complaint” with the Dept of Ins. to obtain municipal coding

  12. Municipal Taxes Florida Rule 12B-8.0016 New database – all companies required to follow new database rules for location of premium Effective 3/17/08 – insurance companies may register and create user name and password to download address/jurisdiction database files

  13. Municipal Taxes Florida Rule 12B-8.0016 Database is required to be used for calendar year 2009 to report premiums

  14. Municipal Taxes Florida Naples v North Naples Cities litigating against each other to obtain their “fair share” of premium tax revenue. Has been in the court system for three years now and no end in sight

  15. Municipal Taxes South Carolina Municipal Association of South Carolina requires insurance companies to include agent produced written premium from unincorporated (non-taxed) jurisdictions in the municipality where the agent is located Important – “unincorporated” = non-taxed

  16. Municipal Taxes From a practitioner standpoint municipal taxes will always be about volume and accuracy Once a return has been filed in a city, that city expects to see a return every year (and will hound you until you pay in each and every year – low value-added)

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