Tuesday, June 14, 2011

North Carolina Passes NRRA Compliance Law; Study to Determine if State to Join a Compact

The North Carolina Governor has signed into law Nonadmitted and Reinsurance Reform Act compliance legislation which authorizes a study to determine whether the state will join a tax sharing agreement or compact.

North Carolina is among the latest of states to pass Nonadmitted and Reinsurance Reform Act related implementation legislation. During the session NAPSLO provided draft legislation, offered comments on legislation and met with 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.

North Carolina’s legislation does not authorize the Commissioner to enter into a tax sharing compact or agreement.  Rather, it requires a study committee, in cooperation with the Commissioner, to examine the impact of the state’s entry into a tax compact or agreement, then report its findings and any proposed legislation to the 2012 Regular Session of the 2011 General Assembly.

The legislation also would add a provision to the surplus lines tax section stating that if other states have failed to enter into a tax sharing compact or procedures with North Carolina, the tax collected (at North Carolina's 5% rate) shall be retained by North Carolina. This legislation also expressly provides for exclusive home state taxation and regulation, and incorporates the exempt commercial purchaser exemption.

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