South Carolina recently issued Bulletin 2012-08 to outline national regulatory changes that have affected the placement of nonadmitted insurance in the state following passage of the Nonadmitted and Reinsurance Reform Act and updating state law.
In 2012 South Carolina passed Act No. 283, which was retroactive to January 1, 2012, and it amended state law to implement the definitions from the NRRA; authorized the director or his designee to enter into an agreement for the allocation of taxes; and established a blended tax rate of 6% for the collection of broker premium taxes. In addition when South Carolina is the home state, 100% of the premium taxes for policies written by insurers not licensed in this state is due.
The blended rate of 6% combines the current state broker tax rate of 4% with the existing municipal tax rate of 2% for a single 6% rate. The Act further states that a municipality may not impose any additional license fee or tax based upon a percentage of the premium.
A key provision in the Bulletin regards premium tax payments. Brokers are required to pay the blended tax rate of 6% to the state via the online surplus lines tax application and file any required reports on the business transacted with the South Carolina Department of Insurance. Prior to this Bulletin, payments were sent to various agencies. Now Brokers will not have to submit tax forms to the Municipal Association of South Carolina or file forms with multiple places or pay taxes to multiple locations., simplifying tax payments greatly and placing South Carolina in the fully home state tax rule column.
During the payment period for the fourth quarter of 2012, which is January 1, 2013 through January 31, 2013, brokers will pay the 4% portion of the blended tax rate for all business reported during the fourth quarter. Brokers will also pay the 2% portion of the blended tax rate for ALL business reported for calendar year 2012 to the Department of Insurance via the online surplus lines premium tax application.
As Act No. 283 is effective retroactive to January 1, 2012, this procedure is required to collect the 2% portion of the blended tax rate which has not been reported to the Department of Insurance. Beginning, January 1, 2013, brokers will pay the blended tax rate of 6% quarterly on all submissions and endorsements reported to the department via the online surplus lines premium tax application.