GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

H	3 

HOUSE BILL 606*
Committee Substitute Favorable 5/4/93
Senate Finance Committee Substitute Adopted 7/21/93

Short Title:  Settlement Award/Premium Tax.	(Public)
─────────────────────────────────────── 
Sponsors:
─────────────────────────────────────── 
Referred to: 
─────────────────────────────────────── 

March 29, 1993

A BILL TO BE ENTITLED
AN ACT TO PROVIDE THAT INSURANCE POLICIES OR CONTRACTS THAT ARE ISSUED IN CONNECTION WITH THE FUNDING OF PERIODIC PAYMENTS OF WORKERS' COMPENSATION OR LITIGATION AWARDS OR SETTLEMENTS ARE EXEMPTED FROM THE PREMIUM TAX.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-228.5 reads as rewritten:
"§ 105-228.5.  Taxes measured by gross premiums.
(a)	Every insurance company and every corporation subject to Articles 65 and 66 of Chapter 58 of the General Statutes shall pay to the Commissioner of Insurance, at the time and rates provided in this section, a tax measured by gross premiums from business done in this State during the preceding calendar year, or, for corporations subject to Articles 65 and 66 of Chapter 58 of the General Statutes, a tax measured by gross collections from membership dues, exclusive of receipts from cost plus plans, received by such corporations during the preceding calendar year.
(b)	Gross premiums from business done in this State in the case of life insurance and annuity contracts, including any supplemental contracts thereto providing for disability benefits, accidental death benefits, or other special benefits, shall for the purposes of the taxes levied in this section mean any and all premiums collected in the calendar year (other than for contracts for reinsurance) for policies the premiums on which are paid by or credited to persons, firms or corporations resident in this State, or in the case of group policies for any contracts of insurance covering persons resident within this State, with no deduction for considerations paid for annuity contracts which are subsequently returned except as below specified, and with no other deduction whatsoever except for premiums returned under one or more of the following conditions: premiums refunded on policies rescinded for fraud or other breach of contract; premiums which were paid in advance on life insurance contracts and subsequently refunded to the insured, premium payer, beneficiary or estate; and in the case of group annuity contracts the premiums returned by reason of a change in the composition of the group covered.  Said gross premiums shall be deemed to have been collected for the amounts as provided in the policy contracts for the time in force during the year, whether satisfied by cash payment, notes, loans, automatic premium loans, applied dividend or in any other manner whatsoever, except in the case of premiums waived by any of said companies pursuant to a contract for waiver of premium in case of disability.
(c)	An insurer, in computing its premium taxes, shall pay premium taxes on a premium for the purchase of annuities at the time the contract holder elects to commence annuity benefits, instead of at the time the premium is collected.
(d)	Every insurer, in computing the premium tax, shall exclude from the gross amount of premiums all premiums received from policies or contracts, issued in connection with the funding of a pension, annuity or profit-sharing plan, qualified or exempt under 26 U.S.C. § 401, 403, 404, 408, 457 or 501, or issued in connection with the funding of periodic payments that are excludible from the gross income of the recipient under 26 U.S.C. § 104(a)(1) or 104(a)(2); and the gross amount of all such premiums shall be exempt from the tax levied by this section.
	(e)  Gross premiums from business done in this State in the case of contracts for fire insurance, casualty insurance, and any other type of insurance except life and annuity contracts as specified in subsection (d) of this section, including contracts of insurance required to be carried by the Workers' Compensation Act, shall for the purposes of the taxes levied in this section mean any and all premiums written during the calendar year, or the equivalent thereof in the case of self-insurers under the Workers' Compensation Act, for contracts covering property or risks in this State, other than for contracts of reinsurance, whether such premiums are designated as premiums, deposits, premium deposits, policy fees, membership fees, or assessments.  Gross premiums shall be deemed to have been written for the amounts as provided in the policy contracts, new and renewal, becoming effective during the year irrespective of the time or method of making payment or settlement for such premiums, and with no deduction for dividends whether returned in cash or allowed in payment or reduction of premiums or for additional insurance, and without any other deduction except for return of premiums, deposits, fees or assessments for adjustment of policy rates or for cancellation or surrender of policies.
(f)	In determining the amount of gross premiums from business in this State all gross premiums received in this State, or credited to policies written or procured in this State, or derived from business written in this State shall be deemed to be for contracts covering persons, property or risks resident or located in this State except for such premiums as are properly reported and properly allocated as being received from business done in some other nation, territory, state or states, and except for premiums from policies written in federal areas for persons in military service who pay premiums by assignment of service pay.
(g)	The tax rate to be applied to gross premiums collected on contracts applicable to liabilities under the Workers' Compensation Act shall be two and five-tenths percent (2.5%).  The tax rate to be applied to gross premiums collected on annuities and all other insurance contracts issued by insurers shall be one and eight hundred seventy-five thousandths percent (1.875%) for taxable years beginning on or after January 1, 1991, and before January 1, 1992, and one and nine-tenths percent (1.9%) for taxable years beginning on or after January 1, 1992.  The tax rate to be applied to amounts collected on contracts of insurance applicable to fire and lightning coverage (except marine and automobile policies) shall be one and thirty-three hundredths percent (1.33%) in addition to the above tax.  Twenty-five percent (25%) of the net proceeds of the one and thirty-three hundredths percent (1.33%) tax on amounts collected on contracts of insurance applicable to fire and lightning coverage shall be deposited in the Rural Volunteer Fire Department Fund established in Articles 84 through 88 of Chapter 58 of the General Statutes.  Effective July 1, 1988, the tax rate to be applied to gross premiums and/or gross collections from membership dues, exclusive of receipts from cost plus plans, received by corporations subject to Articles 65 and 66 of Chapter 58 of the General Statutes shall be one-half of one percent (1/2 of 1%).
(h)	The taxes levied in this section are in lieu of all other taxes upon insurance companies and corporations subject to Articles 65 and 66 of Chapter 58 of the General Statutes except:  fees, charges, and licenses under this Article, or as specified in Articles 1 through 64 of Chapter 58 of the General Statutes; taxes imposed by Articles 84 through 88 of Chapter 58 of the General Statutes; taxes imposed by Article 5 of Chapter 105 of the General Statutes; and ad valorem taxes upon real property and personal property owned in this State.
(i)	For the tax levied in this section as measured by gross premiums and/or gross collections from membership dues exclusive of receipts from cost plus plans the president, secretary, or other executive officer of each insurance company and corporation subject to Articles 65 and 66 of Chapter 58 of the General Statutes doing business in this State shall within the first 15 days of March file with the Commissioner of Insurance a full and accurate report of the total gross premiums as above defined or the total gross collections from membership dues exclusive of receipts from cost plus plans collected in this State during the preceding calendar year.  The report shall be in such form and contain such information as the Commissioner of Insurance may specify, and the report shall be verified by the oath of the company official transmitting the same or by some principal officer at the home or head office of the company or association in this country.  At the time of making such report the taxes levied in this section shall be paid to the Commissioner of Insurance.  This section applies as to reports and taxes for any firm, corporation, or association exchanging reciprocal or interinsurance contracts, and those reports and taxes shall be transmitted by their attorneys-in-fact.
(j)	Insurance companies and corporations subject to Articles 65 and 66 of Chapter 58 of the General Statutes that are subject to the tax imposed by this section and that have a premium tax liability of ten thousand dollars ($10,000) or more for business done in North Carolina during the immediately preceding year shall remit three equal quarterly installments with each installment equal to at least thirty-three and one-third percent (33 1/3%) of the premium tax liability incurred in the immediately preceding taxable year.  The quarterly installment payments shall be made on or before April 15, June 15, and October 15 of each taxable year.  The company shall remit the balance by the following March 15 in the same manner provided in this section for annual returns.
	(k)  The Commissioner of Insurance may, by administrative rule, permit an insurance company or a corporation subject to Articles 65 and 66 of Chapter 58 of the General Statutes to pay less than the required estimated payment when the insurer reasonably believes that the total estimated payments made for the current year will exceed the total anticipated tax liability for the year.
(l)	If a company does not meet the installment payment requirement of subsection (j) of this section, the Commissioner of Insurance shall assess a penalty on underpayments that is equal to the interest rate adopted by the Secretary of Revenue under G.S. 105-241.1(i).  Any overpayment shall be credited to the company and applied against the taxes imposed upon the company under this Article.
(m)	This section does not apply to farmers' mutual assessment fire insurance companies or to fraternal orders or societies that do not operate for a profit and do not issue policies on any person except members.
(n)	With respect to the taxes levied in subsection (e) of this section on the equivalent of premiums of self-insurers under the provisions of the Workers' Compensation Act, the reports required in this section shall be transmitted to and the taxes collected by the Commissioner of Insurance as provided in G.S. 97-100(j)."
Sec. 2.  This act is effective for taxable years beginning January 1, 1993.