Montana CSI Notes 2011 Taxes Due April 1

The Montana Commissioner of Securities & Insurance has issued an advisory memorandum notifying surplus lines agents that surplus lines tax payments for calendar year 2011 surplus lines filings are due or must be postmarked by April 1, 2012 and that tax payments may be sent in after March 2, 2012.

The memo noted that all agents are required to file a statement with the Office of the Commissioner of Securities and Insurance, Montana State Auditor (CSI), even if no premiums have been written in Montana. A zero-premium filing form can be obtained at http://sao.mt.gov/SurplusLines/pdf/zero%20payment%20form.pdf.

The CSI said that surplus lines agents have until March 2, 2012, to electronically file outstanding 2011 surplus lines filings. Paper surplus lines filings must be postmarked by March 2, 2012, to be entered in the 2011 tax statement. For those paper filings postmarked by March 2,2012, please allow two weeks (March 16, 2012) for the CSI to enter those polices into the CSI database and then agents will be able to view or print the 2011 surplus lines filings. All agents should review their 2011 tax statement for accuracy, which may be obtained at https://svc.mt.gov/csi/surplus/login.aspx.

If errors are noted and corrections need to be made to your statement, please contact Pam Daugherty at (406) 444-9751 or by email at pdaugherty@mt.gov. If an extension from the April 1, 2012, tax payment deadline is needed agents should contact Tim Morris at 406-444-4489 or tmorris@mt.gov. If additional time is needed to correct the agent's statement, an extension will be given until the errors are corrected. The CSI said it would not assess a late payment penalty when the CSI has been notified of an error.

Surplus Lines Law Group Spring Meeting Set For April 26-27 in Las Vegas

The Surplus Lines Law Group spring meeting is set for April 26-27, 2012 at the Westin Casuarina in Las Vegas and registration materials are available on the Nevada Surplus Lines Association website.

A link to the hotel for hotel reservations is also on the site. The group rate for the conference is available until April 25, 2012, subject to availability.

The meeting is sponsored by the Nevada Surplus Lines Association (NSLA) and the Insurance Licensing Services of America (ILSA).

Wyoming to Apply State Tax Rate to Gross Premium of Multi-State Policies Through June

The Wyoming Insurance Department has announced that for all multi-state policies, where Wyoming is the home state, with effective dates July 21, 2011 through June 30, 2012, the entire gross premium will be taxed at the Wyoming tax rate of 3 percent.

The announcement was made to provide updated guidance regarding the filing of multi-state policies under the provisions of the Nonadmitted and Reinsurance Reform Act (NRRA). This additional guidance was necessary because the NIMA clearinghouse will not be operational before July 1, 2012.

Effective July 1, 2012, the NIMA premium tax allocation formula will be applied to all multi-state policy transactions. The affidavit at the department website may be used to report both single and multi-state transactions to the Wyoming Insurance Department. The 2011 Surplus Lines annual statement and tax payment is due March 1, 2012. Implementation of the quarterly reporting and tax payment procedures are being deferred until the NIMA Clearinghouse is operational.

South Dakota Confirms Change in Effective Date of the NIMA Provision

In a discussion this week with the South Dakota Division of Insurance, Insurance Director Merle Scheiber confirmed the deferral of the effective date of the Nonadmitted Insurance Multi-State Agreement (NIMA) and confirmed guidance to surplus lines insurance producers concerning the requirements for reporting, payment, collection and allocation of taxes for multi-state policies for which South Dakota is the home state.

Until further notice, the tax allocation provisions of NIMA will not apply, and the taxes due under a multi-state policy should be remitted entirely to South Dakota when it is the home state of the insured. The Department confirmed, when South Dakota is the home state of the insured, the taxes due under the multi-state policy shall be calculated on the gross premium of the policy at South Dakota’s tax rate.

Surplus lines premium and related taxes should not be allocated or calculated using the other states’ rates for portions of a multi-state risk outside of South Dakota until further instructions are provided by the South Dakota Division of Insurance.

Montana Agrees to Apply Its Own Tax Rate on Multi-State Surplus Lines Policies

As part of a decision amending surplus lines regulations, the Montana Commissioner of Securities and Insurance has agreed that producers should charge Montana's tax rate on multi-state surplus lines policies where Montana is the home state of the insured.

During the review of the proposed regulations, NAPSLO had urged the state to interpret the regulations so that when Montana is the home state on a risk, the entire gross premium – regardless of whether a multistate risk is covered – be taxed at the Montana rate, rather than using the tax rate of each state involved in the transaction on that portion of the risk.

The department agreed with NAPSLO’s position to “continue to tax at 100% of the premium where Montana is the home state until such time as it is participating in a tax sharing system with other states."

The decision formally notes that “the entire premium (gross premium) will be taxed at the Montana tax rate in 33-2-705, MCA, regardless of whether the coverage includes risks or exposures partially located or to be performed in another state.”

Nebraska Withdraws from NIMA

The Nebraska Department of Insurance notified the Governance Committee of the Nonadmitted Insurance Multistate Agreement (NIMA) that it is withdrawing as a participatory state from NIMA effective March 5, 2012.

In a notice from the department, Nebraska said while a clearinghouse to be established under NIMA could collect and allocate surplus lines premiums taxes, the time frame offered to surplus lines brokers  and insureds independently procuring nonadmitted insurance to report all such business transacted during a designated quarter directly conflicted with Nebraska statutory provisions. As a result, the department said that all quarterly surplus lines filings and tax payments shall be filed with the department.

Nebraska was among 11 states (plus Puerto Rico) that had signed onto NIMA as a way to report, collect, allocate and distribute surplus lines tax revenues following the passage of the Nonadmitted and Reinsurance Reform Act (NRRA). Because of delays in establishing the clearinghouse, a number of the NIMA states have recently issued bulletins and clarifying guidance regarding the reporting and payment of taxes. All of the bulletins and clarifying guidance can found on the NAPSLO blog as they are released.

Florida Issues Bulletin with Further Filing Guidance on Florida Multi-State Policies

The Florida Surplus Lines Service Office (FLSLO) issued Bulletin 2012-01 on January 4, 2012, to provide updated guidance regarding the filing of multi-state policies under the provisions of the Nonadmitted and Reinsurance Reform Act (NRRA).

This additional guidance was necessary as a result of recent amendments to NIMA, and because the NIMA clearinghouse will not be operational before July 1, 2012.

Therefore, until further notice, Florida surplus lines agents and Independently Procured Coverage filers should resume filing Florida home state policies with the FLSLO.

The FLSLO’s January 4, 2012 bulletin can be found on the FLSLO website.

Texas Stamping Office Issues Bulletin on Individual State Premium Reporting

The Surplus Lines Stamping Office of Texas issued a bulletin on December 28 noting that even though Texas has not joined an agreement or compact with other states to allocate premium taxes on multi-state policies, the Texas Comptroller of Public Accounts and the Texas Department of Insurance are requiring reporting of allocation of premium for each state covered under the policy, by individual state name, when Texas is the home state on a multi-state policy. This is effective with policies reported to the Stamping Office 01/01/12 and after.

For EFS users filing programmatically, the stamping office said this change is available in version 2.1, as previously notified as referenced in the Programmers Technical Reference Supplement Guide.

The bulletin notes that the change will occur automatically for those EFS users filing by web entry. The Breakdown of States Summary / Other States / Exempt Premium form has been modified to allow entry of individual states and their associated premium for those of you still filing by paper. Please remember that the premium for each individual state must total to the premium entered for the Breakdown of States Summary.

Refer to bulletins SO 2011-11 and SO 2011-12 for detailed information previously provided regarding the reporting of the breakdown of states premium.