Tax Break For Small P-Cs Proposed In Congress

By Steven Brostoff, Washington Editor

NU Online News Service, June 7, 9:56 a.m. EDT, Washington?A legislative provision that would give small property-casualty companies an enhanced federal tax break has been introduced in the House of Representatives.[@@]

The provision, which is one part of a broader tax bill, relates to an existing law which allows certain small p-c companies to elect to be taxed solely on their investment income, as opposed to both their premium and investment income.

Under current law, companies with up to $1.2 million in annual premium income are eligible to make the election.

The provision introduced today by House Ways and Means Committee Chairman Bill Thomas, R-Calif., would increase the limit to $1.89 million. Moreover, that figure would be indexed for inflation.

An almost identical provision appears in similar legislation passed by the Senate in May. Thus, if the House passes its legislation, the new small-company tax rules have a good chance of being enacted into law.

The provision was strongly backed by the Indianapolis-based National Association of Mutual Insurance Companies. David Winston, senior vice president of federal affairs for NAMIC, said the change is very important for small p-c companies.

The existing $1.2 million limit has been in effect since 1986, he noted. Many small companies are coming up against the limit, Mr. Winston said, and will be adversely affected if it is not raised.

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Tax Break For Small P-Cs Proposed In Congress

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