The New Jersey Governor has signed into law Nonadmitted and Reinsurance Reform Act (NRRA) compliance legislation that would authorize the state to collect 100% of the tax on U.S. premiums and allows the state to join a compact or tax sharing agreement.
New Jersey is among the latest states to enact NRRA related implementation legislation. During the session NAPSLO provided draft legislation and offered comments.
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 bringing their laws into compliance.
New Jersey SB 2390 authorizes New Jersey to collect 100% of the tax on U.S. premiums for a surplus lines or independently procured insurance policy when New Jersey is the home state of the insured. It also authorizes the Commissioner to enter into, modify and terminate one or more tax sharing agreements or compacts.
The bill provides that in determining whether to enter into a compact or tax sharing agreement, the Insurance Commissioner must consider: efficiencies to be achieved; the amount of revenue to be generated through participation; and any other material factor. In addition, a decision by the Commissioner to enter into a tax sharing arrangement is subject to nullification by the Joint Budget Oversight Committee
The bill defines home state per the NRRA, however limits the imposition of nonadmitted insurance premium tax to U.S. premium. The bill does not incorporate the NRRA's exempt commercial purchaser (ECP) exemption or insurer eligibility requirements.