P-C Insurer Tax Bill Passed By U.S. Senate

Washington

A tax reform long sought by the National Association of Mutual Insurance Companies has taken a major step forward.

The U.S. Senate has advanced legislation that would raise the limit under which small property-casualty companies may elect to be taxed solely on their level of taxable investment income.

Moreover, the proposed new limit which is $1.89 million in premium, up from the current $1.2 million would be indexed for inflation.

The increase is contained in broader tax and trade legislation. David Winston, senior vice president with the Indianapolis-based NAMIC, noted that the same provision also appears in the House version of the legislation, which is still pending.

He said that if the House approves the legislation, which is still problematic at this writing, there is a good chance that the tax reform NAMIC seeks will be in a final bill.

“NAMIC is very pleased with this development,” Mr. Winston said. “It is the result of a lobbying both in Washington and at the grass-roots level.”

He noted that there has been a lot of consolidation among farm mutual companies, and many consolidated companies are coming up against the current $1.2 million limit.

These companies, Mr. Winston said, will be adversely affected without an increase. He added that the current $1.2 million limit has been in effect since 1986.

The legislation advanced by the Senate also contains a modest change in the tax exemption rules relating to small p-c companies recently enacted into law.

Under the new law, a small p-c carrier is tax-exempt if its gross receipts do not exceed $600,000 and more than 50 percent of its receipts are from insurance premiums.

The Senate bill would require that a p-c company derive more than 60 percent of its gross receipts from insurance premiums to claim the tax exemption.

Reproduced from National Underwriter Edition, May 14, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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P-C Insurer Tax Bill Passed By U.S. Senate

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