Wednesday, July 18, 2012

South Carolina Gov. Signs NRRA Legislation

On June 29, Governor Nikki Haley of South Carolina signed Senate Bill 1419  into effect, bringing the number of states to implement NRRA legislation up to 49. The new law incorporates most NRRA terms and authorizes the Director of the Department of Insurance to collect and retain surplus lines tax on 100 percent of the premium of risks in which South Carolina is the home state. While NAPSLO recommended South Carolina more clearly utilize the home state definition throughout the legislation, it does include the home state definition consistent with the NRRA. It also authorizes the Director to participate in a clearinghouse arrangement with other states, subject to approval by South Carolina’s General Assembly; however, we are not aware of any specific plans for South Carolina at this time.

In the event a state for whom South Carolina has potentially collected premium taxes is not a member of the Compact, South Carolina will retain its tax at a 6% rate. Therefore, South Carolina becomes the 35th state to implement the home state tax approach now representing near 75% of nationwide premium.

Taxes due shall be remitted to the Department no later than thirty days after March 31st, June 30th, September 30th and December 31st of each year.  The 6% tax rate is a blended rate accounting for state and municipal taxes. The Department will continue to be responsible for submitting a portion of the collected tax to the appropriate municipality on an annual basis.

South Carolina did not accept NAPSLO’s recommendation to fully incorporate the insurer eligibility provisions of the NRRA. Instead, the bill provides that, at the request of a licensed resident broker, the Director may approve certain nonadmitted insurers as eligible surplus lines insurers to write business on risks located in South Carolina that one or more South Carolina licensed insurers have declined to write. It also allows the Director to require additional documents to maintain the insurers' status as an eligible surplus lines insurer.

With South Carolina’s law,  Michigan and Washington, D.C. are the only jurisdictions who have not  yet introduced NRRA legislation to clarify the national NRRA landscape. We have no word yet on when we might see legislative action in those states, but the continued growth in home-state taxation continues to be positive and beneficial for surplus lines brokers.

Comprehensive information on 2012 legislation in South Carolina and other states is available on NAPSLO’s website, in addition to a number of NRRA resources.

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