Thursday, June 16, 2011

New Hampshire Approves NRRA Bill Allowing Commissioner to Join Tax Sharing System

The New Hampshire Governor has signed Nonadmitted and Reinsurance Reform Act (NRRA) compliance legislation that would give discretion for the Commissioner to participate in a tax sharing system for premium taxes on multistate risks.

New Hampshire is the 32nd state to enact NRRA related implementation legislation and during the session NAPSLO provided draft legislation, offered comments, and talked with representatives of the Department of Insurance.

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.

New Hampshire bill is mainly a premium tax bill and it provides broad discretion for the Commissioner to participate in a tax sharing system for premium taxes on multi-state risks. There is  authorization for the Commissioner to use the allocation schedule included in such a system, which suggests the Commissioner could use a different allocation schedule than other participating states.

On placements involving multistate risks, the bill requires surplus lines brokers and insureds to apply the tax rates of each state where there are risks outside of New Hampshire and authorizes New Hampshire to retain all taxes not paid to other states. Brokers and insureds apparently would be required to allocate and calculate tax for each state applying each state's own tax rate, even if the state does not participate in the new tax sharing system.

The bill contains the NRRA's definition of "Home State" (minus the definitions related to affiliated groups) but does not otherwise use the term in the operative statutory text and the bill would adopt the NRRA's uniform insurer eligibility standards (the bill presumes any alternative nationwide uniform eligibility requirements would be part of the tax sharing agreement). The bill also would allow a New Hampshire domestic insurer to be designated as a surplus lines insurer.

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