NAPSLO: No Tax-Sharing Contract Better Than Two Without Uniformity

NU Online News Service, March 5, 11:49 a.m. EST

The longer the debate over the tax-sharing option within the Nonadmitted and Reinsurance Reform Act  rages, the better off the surplus-lines industry is, say legislative-committee leaders of the National Association of Professional Surplus Lines Offices (NAPSLO).

At its midyear Leadership Forum in Scottsdale, Ariz., industry executives on the association’s legislative committee updated membership on the NRRA, saying no tax-sharing agreement is better than a system without uniformity.

“The longer it takes [states] to implement, the longer the 100-percent approach works,” says Brady R. Kelley, NAPSLO executive director.

NAPSLO supports the NRRA’s main intent to require each state to adopt nationwide uniform requirements, forms and procedures for the reporting, payment, collection and allocation of surplus lines premiums taxes. However, although the association is not opposed to tax-sharing, it is the option of the home state—and is not required by NRRA.

The competition among two tax-sharing arrangements (the Nonadmitted Insurance Multistate Agreement and the Surplus Lines Insurance Multistate Compliance Compact) has caused a departure from the NRRA’s intent to streamline processes and provide consistency within the industry, NAPSLO says.

Therefore, no arrangement is superior to two inconsistent ones. Kelley says NAPSLO does not support multiple tax-sharing contracts.

“That is not workable,” he says. “That is anything but uniform.”

The 100-percent approach—where each home state collects 100 percent of the tax on every surplus lines policy—is the “clear, simple approach for our industry,” says James Drinkwater, president of the brokerage division of AmWINS and co-chair of the NAPSLO legislative committee.

David E. Leonard, president of RSUI Group and co-chair with Drinkwater, says NAPSLO has been “pretty effective” in advising states of its opinion until a clear, uniform tax-sharing agreement is reached.

Nebraska recently withdrew from NIMA, Leonard reports, no one has signed a contract with a clearinghouse, and there is no funding to start such an operation.

NIMA, which NAPSLO strongly opposes, is “not the boon states thought it was originally,” says Leonard.

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