Calif. Retroactive WC Tax Gets Review
Californias Office of Administrative Law has agreed to review the states decision to retroactively charge insurers a "premium tax" on millions of dollars in workers' comp policy deductibles reimbursed to them by employers for claims paid since 1997.
The Washington-based American Insurance Association filed the request for review, estimating that the retroactive taxes back to 1987 could potentially cost insurers more than $100 million.
"We asked the OAL to look at the notice and decide whether it should have been a regulation and if it should have followed the Administrative Procedures Act," said Nicole Mahrt, director, public affairs, with the AIA Sacramento office. "Weve gotten a notice of acceptance from the OAL, which means they have agreed to look at the issue. We think this is a good first step." The OAL, she said, could instead have issued a "summary determination, which would mean they wouldnt further examine the issue."
The next step, she said, is that the OAL will issue a public notice in the California Regulatory Notice register, which will trigger the start of a 30-day period for "people to submit comments on our request." The public notice will also trigger a 45-day period for the insurance department to respond, she said. The OAL will make a ruling following comments and the departments response.
"The ruling means they could say the notice should have been a regulation and should have gone though the Administrative Procedures Act," she said. "This means the department could potentially have to go through the normal rule-making process, which would stay it for a while."
Insurance company taxes are due on April 1. "We have a sense that most companies are not going to pay the taxes," she said. Insurers that don't, she said, will be issued a "deficiency notice" by the insurance department, and will then protest to the Board of Equalization. "We have also hired counsel and we will work with the Board of Equalization protesting those deficiency notices," Ms. Mahrt noted.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 1, 2002. Copyright 2002 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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