The Connecticut Governor signed into law a bill on Tuesday that authorizes the Commissioner of Revenue Services and/or the Insurance Commissioner to enter into a tax sharing agreement or compact.
Connecticut is the 34th state to enact Nonadmitted and Reinsurance Reform Act (NRRA) related implementation legislation. During the session NAPSLO provided draft legislation, offered comments on legislation, and spoke with insurance department officials.
The NRRA mandates that beginning July 21, 2011 the insured's home state will be the only state with jurisdiction over surplus lines transactions and the only state that can require a tax be paid by the broker. As a result states are working to bring their laws into compliance.
Connecticut's bill (HB6652) as amended, authorizes the Commissioner of Revenue Services and/or the Insurance Commissioner to enter into a tax sharing agreement or compact including, but not limited to, NIMA.
The agreement/compact may provide for the application of the premium tax rate(s) for surplus lines and independently procured insurance of each state where there are insured risks, a standardized allocation formula and for taxes to be allocated to Connecticut when it is the home state and the other state where insured risks are located has not entered into the agreement/compact.
The agreement/compact may also provide for certain enumerated requirements and procedures that appear to be based on NIMA. The agreement/compact would control over any conflicting statutory provisions. The bill would require premium tax payments to Connecticut when it is the home state to be based on 100% of the entire premium basis and applying Connecticut's 4% tax rate, though as noted this requirement would not apply if there is a conflicting tax agreement/compact provision. Premium tax payments would need to be made quarterly (again subject to any agreement/compact).
The changes to the premium tax provisions would apply to insurance "that is procured, continued or renewed on or after July 1, 2011." This bill also incorporates the NRRA's exempt commercial purchaser (ECP) exemption.