12B-8.001: Premium Tax; Rate and Computation
PURPOSE AND EFFECT: The purpose of the proposed amendments to Rule 12B-8.001, F.A.C. (Premium Tax; Rate and Computation), is to: (1) update provisions to include self-insurance funds that are subject to the insurance premium tax; (2) provide for salary tax credit exceptions; (3) incorporate information on the Florida Life and Health Insurance Guaranty Association Assessment; (4) incorporate references to Section 624.5092, F.S., and (5) provide technical corrections to update references and to remove obsolete provisions.
SUMMARY: The proposed amendments to Rule 12B-8.001, F.A.C. (Premium Tax; Rate and Computation): (1) include technical corrections, including updating statute references, expiration dates, and references, and removing obsolete language regarding the annuity exemption in effect prior to July 1, 1990; (2) include corporation not for profit self-insurance funds under Section 624.4625, F.S., and Public Housing Authorities Self-Insurance Funds under Section 624.46226, F.S., as entities whose premiums, contributions, and assessments are subject to a 1.6 percent tax; (3) clarify that dividends used to purchase paid-up additions are not an additional gross receipt; (4) incorporate information on the Florida Life and Health Insurance Guaranty Association Assessment, including payments due as a result of Florida Life and Health Insurance Guaranty Association refunds of prior assessments that were used in the computation of credits by an insurer, and the acceleration of Florida Life and Health Insurance Guaranty Association credits when an insurer surrenders its certificate of authority and ceases doing business in Florida; (5) reference Section 624.50921, F.S., for the insurance premium tax credits for assessments paid under Chapter 440, F.S., and the corporate income tax paid under Chapter 220, F.S.; and (6) provide general information on the salary tax credit exceptions.
SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS: No Statement of Estimated Regulatory Cost was prepared.
Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.
SPECIFIC AUTHORITY: 213.06(1), 220.183(6), 288.99(11), 624.5105(6) FS.
LAW IMPLEMENTED: 175.101, 175.1015, 175.121, 175.141, 185.08(3), 185.085, 185.10, 185.12, 213.05, 213.235, 220.183(3), 288.99(11), 624.4621, 624.46226, 624.4625, 624.475, 624.509, 624.5092, 624.50921, 624.510, 624.5105, 624.511, 624.518, 624.519, 624.520(2), 626.7451(11), 627.3512, 627.357(9), 628.6015, 629.5011, 634.131, 634.313(2), 634.415(2) FS.
A HEARING WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW:
DATE AND TIME: June 29, 2009, 10:00 a.m.
PLACE: Room 118, Carlton Building, 501 S. Calhoun Street, Tallahassee, Florida
Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 48 hours before the workshop/meeting by contacting: Larry Green at (850)922-4830. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Robert DuCasse, Tax Law Specialist, Technical Assistance and Dispute Resolution, Department of Revenue, P. O. Box 7443, Tallahassee, Florida 32314-7443, telephone (850)922-4715
THE FULL TEXT OF THE PROPOSED RULE IS:
12B-8.001 Premium Tax; Rate and Computation.
(1) A tax is imposed on insurance premiums or assessments, including membership fees, finance charges, and policy fees and gross deposits received from subscribers to reciprocal or interinsurance agreements, and on annuity premiums or considerations, received during the preceding calendar year. Such tax is imposed no matter whether the insurer possesses a valid Florida certificate of authority
(COA), if the issuing or collecting insurer would have been required to obtain a certificate of authority COA prior to issuing these policies and contracts or collecting premiums on them. The administration, auditing, collection, and enforcement of the insurance premium taxes and assessments are vested in the Department of Revenue, with the exception of taxes under Chapters 175 and 185, F.S., where the Department’s only functions are function is collection and maintenance of a database. “Policies and premiums” respectively mean and include those policies or other contracts or agreements effecting and evidencing insurance, and premiums and other considerations for such policies as described and contemplated by the provisions of Sections 624.509 and 624.510, F.S.; or any other sections subject to the provisions of Section 624.509, F.S. Per-policy fees charged under Section 626.7451(11), F.S., by licensed managing general agents fall under the definition of “premiums” as defined in Section 627.403, F.S., and are subject to premium tax as set forth in Section 624.509, F.S.
(a) A tax at the rate of 1.75 percent of the gross amount of receipts for insurance premiums and assessments shall be applied to the following types of policies:
1. through 6. No change.
7. Insurance issued by a captive or industrial captive insurer under Part V
IV, Chapter 628, F.S.
8. through 9. No change.
(b) Annuity policies or contracts. A tax at the rate of 1 percent shall be applied on the gross receipts on annuity policies or contracts paid by holders thereof in Florida.
1. The premium tax authorized by this section shall not be imposed upon receipts of annuity premiums or considerations paid by holders in this state if the tax savings derived are credited to annuity holders
the holders of this state until July 1, 1990. After July 1, 1990, the premium tax authorized by this section shall not be imposed upon receipts of annuity premiums or considerations paid by holders in this state if the tax savings are credited to.
2. through 3. No change.
(c) No change.
(d) A tax at the rate of 1.6 percent of the gross premiums, contributions, or assessments received by the following shall be applied:
1. through 2. No change.
3. Corporation Not for Profit Self-Insurance Funds under Section 624.4625, F.S.
4. Public Housing Authorities Self-Insurance Funds under Section 624.46226, F.S.
(e) Dividends payable under insurance policies that, at the option of the holders of such policies, are applied to purchase paid-up additions, are not additional gross receipts of the insurer for purposes of the insurance premium tax contained in Section 624.509, F.S.
(2) Installments of tax. An estimated tax shall be filed on April 15, June 15, and October 15 of each year, which shows the estimated amount of tax due for the preceding quarter, except the June 15 installment shall be for the period ending June 30; payment of that estimated amount shall be made at the time the report is filed. No credit for any of the allowable credits may be made against the insurer’s premium tax until the annual premium tax return is filed. Taxpayers may not credit any estimated tax payments against their estimated premium tax. Any estimated payment credits not taken when available cannot be carried forward or carried back. On or before March 1 in each year, an annual return shall be filed showing, by quarters, the gross amount of receipts taxable for the preceding year and the installment payments made during the year. A final payment of tax due for that year shall be made at the time the taxpayer files its his annual return. A 10 percent penalty shall be imposed on any underpayment or late payment due and payable with the annual return. Installments of tax are applicable to taxes imposed by Sections 175.101, 185.08, 252.372, 624.4621, 624.475, 624.509, 624.510, 624.515, 627.357, 628.6015, 629.5011, and 636.066, F.S.
(a) The installment of the estimated premium tax due shall not be less than 90 percent of the amount finally shown to be due in any quarter, as evidenced by the annual report, without deductions for any credits. Effective January 1, 1993, the 90 percent shall be based on the actual tax paid for that year, as evidenced by the annual return, after allowable credits. The 90 percent will be determined by computing the gross tax due for each quarter, direct premiums written times the tax rate, less 25 percent of the allowable credits as evidenced by line 2 of the first page of the annual return filed for that year times 90 percent. However, the taxpayer has the option of paying, in each installment, 27 percent of the amount of annual tax reported, after allowable credits, on his return for the previous year without penalty or interest applying. If a return was not filed for the previous year, the installments must meet the 90 percent requirement. If the tax is not paid in this manner, a 10 percent penalty shall be imposed on each underpayment or late payment of tax due and payable for that quarter. If the installment is based on 27 percent of the amount of the annual tax reported on the return for the preceding year and the installment payment is remitted to the Department after the due date, the installment shall be based on the 90 percent requirement instead of the 27 percent method. Any underpayment or delinquent payment shall be subject to a penalty of 10 percent, and interest
at the rate of 12 percent per year from the due date until paid. The Department of Revenue, by written request as outlined in Rule Chapter 12-13, F.A.C., may eliminate or compromise penalties or interest.
(b) through (c) No change.
(3) Credits Against the Tax.
(a)1. through 2. No change.
3. If a taxpayer is required to amend its corporate income tax liability under Chapter 220, F.S., the taxpayer shall amend its corresponding insurance premium tax return for the tax year in which it claimed, or was entitled to claim the credit provided in Section 624.509(4), F.S., for the corporate income tax paid for that tax year. The taxpayer shall file an amended insurance premium tax return and pay additional tax due, if any, or claim a refund, if any, as provided in Section 624.50921, F.S.
(b) Salaries. Fifteen percent of the amount paid after June 30, 1988, in salaries by the insurer to employees located or based in Florida may be credited against the net tax imposed by Section 624.509, F.S.
1. No change.
2. Employees are those covered under Chapter 443, F.S., Unemployment Compensation, by the insurer taking the credit, a service representative
as defined in Section 626.081, F.S., a supervising or managing general agent as defined in Section 626.091, F.S., and an adjuster or claims investigator, as defined in Section 626.015 626.101, F.S.
3. through 6. No change.
7. Salary Tax Credit Exceptions.
a. Subparagraph 624.509(5)(b)4., F.S., allows an affiliated group of corporations that created a service company within its affiliated group on July 30, 2002, to allocate the salary of each service company employee covered by contracts with affiliated group members to the companies for which the employees perform services. If the service company was not created within the affiliated group on the specific date, July 30, 2002, this alternative tax credit calculation cannot be used.
b. Subparagraph 624.509(5)(a)2., F.S., allowed insurers and their affiliated groups to make an irrevocable election on or before August 1, 2005, to make an alternative salary tax credit calculation based in part upon the 2002 amount of salary tax credit correctly computed under the law. If the insurer and its affiliated group did not make a timely election (on or before August 1, 2005) to use this alternative method, this alternative salary tax credit cannot be used.
c. Unless funding is specifically provided by the Legislature for a specific tax year, the alternative salary tax credit calculation in subparagraph 624.509(5)(b)5., F.S., is not valid.
d. Effective July 1, 2006, paragraph 624.509(6)(b), F.S., provides that, to the extent that the salary tax credit is limited by the 65 percent limitation, the excess of the salary tax credit that was available and exceeded the 65 percent limitation may be transferred to any insurer that is a member of that insurer’s affiliated group if such excess salary tax credit is related to salaries and wages of employees whose place of employment is located within an enterprise zone created pursuant to Chapter 290, F.S. The amount of such excess salary tax credit transferred to all affiliates can not exceed 25 percent of such excess salary tax credit. An affiliated group of corporations that participates in a concurrent common paymaster arrangement as defined in Section 443.1216, F.S., is not eligible to use this provision. Any such transferred credits are subject to the same provisions and limitations set forth in Part IV, Chapter 624, F.S.
(c) Assessments Credited Against the Tax.
1.a. Payments made by an insurance carrier, group self-insurer, or commercial self-insurance fund, for assessments made pursuant to Section 440.51, F.S., shall be allowed as a deduction against the amount of any other tax levied by the state upon the premiums, assessments, or deposits for workers’ compensation insurance on contracts or policies of said insurance carrier, self-insurer, or commercial self-insurance fund.
b. If an insurance carrier, group self-insurer, or commercial self-insurance fund receives a refund of a previously paid assessment under Chapter 440, F.S., for which it claimed a credit on a previously filed insurance premium tax return, the insurance carrier, group self-insurer, or commercial self-insurance fund shall file an amended insurance premium tax return and pay the additional tax, if any, for the year in which the credit was originally claimed pursuant to Section 624.50921, F.S.
2.a. Effective with the tax return filed for the 1997 taxable year, insurers who have paid an assessment to the Florida Life and Health Insurance Guaranty Association (Association
FLHIGA) may claim a credit for part of such assessment as provided for in the Florida Statutes. Any credits not taken or utilized when available cannot be carried forward.
b.(I) When the Association refunds money to an insurer from a previous assessment that was paid by the insurer, and the insurer had claimed credit or partial credit against its insurance premium tax or corporate income tax for that previous payment to the Association, the insurer is required to pay part of that refund to the Department of Revenue pursuant to Section 631.72, F.S.
(II) Example. ABC Insurance Company paid a $300,000 Class B assessment to the Association in 1998. On its 1999 – 2004 insurance premium tax returns, ABC claimed credits of $15,000 ($300,000 X .05) each year for its 1998 payment to the Association. The total credit taken by ABC, based on the 1998 Association assessment, was $90,000 ($15,000 per year for 6 years). In 2005, the Association issued ABC a refund of $30,000 from the 1998 assessment. In accordance with subsection 631.72(3), F.S., a $9,000 payment is due to the Department of Revenue in 2005 from that refund ($30,000 X .05 X 6 years). The $9,000 that is due to the Department of Revenue in 2005 is a repayment of the credits that the insurer had already claimed in tax years 1999 through 2004 against its insurance premium tax or corporate income tax for the $30,000 that was refunded by the Association. For tax years 2005 and thereafter, ABC should only use a payment of $270,000 to the Association for its 1998 assessment when computing its credit for payments to the Association.
c.(I) When an insurer surrenders its certificate of authority and ceases doing business in Florida, all uncredited Association assessments for the current tax year and future tax years may be credited against the insurer’s final insurance premium tax return or final corporate income tax return pursuant to Section 631.72, F.S. Florida Life and Health Insurance Guaranty Association credits do not transfer from an insurer that is merged or acquired out of existence to a surviving insurer.
(II) Example. XYZ Insurance Company paid a $100,000 Class B assessment to the Association in 2004, which results in a credit of $5,000 per year for 2005 through 2024. On its 2005 insurance premium tax return, XYZ Insurance Company only claimed a $3,000 credit for its payment to the Association in 2004 because it had very little direct written premium during calendar year 2005. In 2006, XYZ Insurance Company surrendered its certificate of authority to the Florida Office of Insurance Regulation. On its 2006 final insurance premium tax return or its final corporate income tax return, XYZ Insurance Company may claim a credit of $5,000 for the 2004 payment to the Association and an accelerated credit of $90,000 (total credit of $95,000 for the 2004 payment to the Association).
(d) Community Contribution Tax Credit.
1. through 4. No change.
5. Expiration. With the exception of the carryovers allowed in Section 624.5105(1)
(3)(e), F.S., the provisions of Section 624.5105, F.S., paragraph (3)(d) will expire and be void on June 30, 2015 2005.
(e) No change.
(4) through (9) No change.
Specific Authority 213.06(1), 220.183(6), 288.99(11), 624.5105(6) FS. Law Implemented 175.101, 175.1015, 175.121, 175.141, 185.08(3), 185.085, 185.10, 185.12, 213.05, 213.235, 220.183(3), 288.99(11), 624.4621, 624.46226, 624.4625, 624.475, 624.509, 624.5092, 624.50921, 624.510, 624.5105, 624.511, 624.518, 624.519, 624.520(2), 626.7451(11), 627.3512, 627.357(9), 628.6015, 629.5011, 634.131, 634.313(2), 634.415(2) FS. History–New 2-3-80, Formerly 12B-8.01, Amended 3-25-90, 4-10-91, 2-18-93, 6-16-94, 10-19-94, 1-2-96, 12-9-97, 6-2-98, 4-2-00, 10-15-01, 8-1-02, 6-20-06, ________.