Connecticut ~ Insurance Tax: Surplus Lines and Nonadmitted Insurer Provisions Amended, Total Credit Limits Modified

Connecticut Gov. Dannel Malloy has signed legislation that amends the surplus lines and nonadmitted insurance premium tax laws to conform to the requirements of the federal Nonadmitted and Reinsurance Reform Act (NRRA) of 2010 (P.L. 111-203), and revises the limits on the total amount of insurance premium tax credits that may be claimed. In accordance with the NRRA, the legislation:

— limits the policies subject to the insurance premiums tax;

— modifies how individuals and brokers must pay the insurance premiums tax;

— authorizes the state to enter into an agreement with other states regarding the allocation of insurance premium taxes among the states in cases where the policy covers multiple states; and

— exempts certain commercial purchasers from certain filing requirements.

The changes apply to nonadmitted insurance coverage procured, continued, or renewed on or after July 1, 2011.

With regard to the limit on the amount by which an insurer can reduce its annual insurance premium tax liability through tax credits, the legislation classifies insurance premium tax credits into three types for calendar years starting after 2010:

— Type 1: Digital animation credits

— Type 2: Insurance reinvestment fund credits

— Type 3: All other credits

The legislation then establishes the maximum tax liability that an insurer can offset in calendar years 2011 and 2012 by claiming one or more of these credit types and specifies the order in which the three credit types must be claimed. The maximum reduction in tax liability is either 30%, 55%, or 70%.

Provisions in the legislation dealing with income, sales and use, and other taxes are reported separately. (TAXDAY, 2011/06/22, S.9; TAXDAY, 2011/06/22, S.8; TAXDAY, 2011/06/23, S.5)

Act 11-61 (H.B. 6652), Laws 2011, effective June 21, 2011, applicable as noted

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