NU Online News Service, June 16, 2:08 p.m.EST

WASHINGTON—Legislation has been introduced in the House designedto update a tax break for small property and casualty insurers toprovide for inflation.

The legislation, H.R. 2198, would update the current tax code toaccount for inflation. It was introduced by Rep. Erik Paulsen,R-Minn. and co-sponsors Rep. Joe Donnelly D-Ind. and Aaron SchockR-Ill.

The bill would increase the alternative tax liability limitationfor small p & c insurance companies.

Over 600 companies across the country could be affected withoutthis adjustment, including 85 in Minnesota, 30 in Indiana and 62 inIllinois.

Jimi Grande, senior vice president of federal affairs for theNational Association of Mutual Insurance Companies, says, "Mutualcompanies like these exist solely to serve the insurance needs oftheir policyholders, and especially for these smaller companies,play a vital role in their communities." 

Under the provision, certain small p & c insurers withdirect or net written annual premiums not exceeding $1.2 millionmay elect to be taxed on their net investment incomes.

This provision was enacted in 1986, but has not been adjusted toreflect the last 25 years of inflation.

"This legislation simply corrects a flaw in the tax code,"Grande says, "By not indexing this election threshold to inflation,the current code will make it more and more difficult for thesesmall companies who rely on the alternative option to stay inbusiness and protect their policyholders."