§ 105-228.5. Taxes measured by gross premiums. - North Carolina Statutes

§ 105‑228.5.  Taxesmeasured by gross premiums.

(a)        Tax Levied. – A taxis levied in this section on insurers, Article 65 corporations, healthmaintenance organizations, and self‑insurers. An insurer, healthmaintenance organization, or Article 65 corporation that is subject to the taxlevied by this section is not subject to franchise or income taxes imposed byArticles 3 and 4, respectively, of this Chapter.

(b)        Tax Base. –

(1)        Insurers. – The taximposed by this section on an insurer or a health maintenance organizationshall be measured by gross premiums from business done in this State during thepreceding calendar year.

(2)        (Repealed fortaxable years beginning on or after January 1, 2008) Additional Local Fireand Lightning Rate. – The additional tax imposed by subdivision (d)(4) of thissection shall be measured by gross premiums from business done in firedistricts in this State during the preceding calendar year. For the purpose ofthis section, the term "fire district" has the meaning provided in G.S.58‑84‑5.

(3)        Article 65Corporations. – The tax imposed by this section on an Article 65 corporationshall be measured by gross collections from membership dues, exclusive ofreceipts from cost plus plans, received by the corporation during the precedingcalendar year.

(4)        Self‑insurers.– The tax imposed by this section on a self‑insurer shall be measured bythe gross premiums that would be charged against the same or most similarindustry or business, taken from the manual insurance rate then in force inthis State, applied to the self‑insurer's payroll for the previouscalendar year as determined under Article 2 of Chapter 97 of the GeneralStatutes modified by the self‑insurer's approved experience modifier.

(b1)      Calculation of TaxBase. – In determining the amount of gross premiums from business in thisState, all gross premiums received in this State, credited to policies writtenor procured in this State, or derived from business written in this State shallbe deemed to be for contracts covering persons, property, or risks resident orlocated in this State unless one of the following applies:

(1)        The premiums areproperly reported and properly allocated as being received from business donein some other nation, territory, state, or states.

(2)        The premiums arefrom policies written in federal areas for persons in military service who paypremiums by assignment of service pay.

Gross premiums from businessdone in this State in the case of life insurance contracts, includingsupplemental contracts providing for disability benefits, accidental deathbenefits, or other special benefits that are not annuities, means all premiumscollected in the calendar year, other than for contracts of reinsurance, forpolicies the premiums on which are paid by or credited to persons, firms, orcorporations resident in this State, or in the case of group policies, forcontracts of insurance covering persons resident within this State. The onlydeductions allowed shall be for premiums refunded on policies rescinded for fraudor other breach of contract and premiums that were paid in advance on lifeinsurance contracts and subsequently refunded to the insured, premium payer,beneficiary or estate. Gross premiums shall be deemed to have been collectedfor the amounts as provided in the policy contracts for the time in forceduring the year, whether satisfied by cash payment, notes, loans, automaticpremium loans, applied dividend, or by any other means except waiver ofpremiums by companies under a contract for waiver of premium in case ofdisability.

Gross premiums from businessdone in this State for all other health care plans and contracts of insurance,including contracts of insurance required to be carried by the Workers'Compensation Act, means all premiums written during the calendar year, or theequivalent thereof in the case of self‑insurers under the Workers'Compensation Act, for contracts covering property or risks in this State, otherthan for contracts of reinsurance, whether the premiums are designated aspremiums, deposits, premium deposits, policy fees, membership fees, orassessments. Gross premiums shall be deemed to have been written for theamounts as provided in the policy contracts, new and renewal, becomingeffective during the year irrespective of the time or method of making paymentor settlement for the premiums, and with no deduction for dividends whetherreturned in cash or allowed in payment or reduction of premiums or foradditional insurance, and without any other deduction except for return of premiums,deposits, fees, or assessments for adjustment of policy rates or forcancellation or surrender of policies.

(c)        Exclusions. – Everyinsurer, in computing the premium tax, shall exclude all of the following fromthe gross amount of premiums, and the gross amount of excluded premiums isexempt from the tax imposed by this section:

(1)        All premiumsreceived on or after July 1, 1973, from policies or contracts issued inconnection with the funding of a pension, annuity, or profit‑sharing planqualified or exempt under section 401, 403, 404, 408, 457 or 501 of the Code asdefined in G.S. 105‑228.90.

(2)        Premiums orconsiderations received from annuities, as defined in G.S. 58‑7‑15.

(3)        Funds orconsiderations received in connection with funding agreements, as defined inG.S. 58‑7‑16.

(4)        The followingpremiums, to the extent federal law prohibits their taxation under thisArticle:

a.         Federal EmployeesHealth Benefits Plan premiums.

b.         Medicaid or Medicarepremiums.

(d)        (See Editor'snote) Tax Rates; Disposition. –

(1)        Workers'Compensation. – The tax rate to be applied to gross premiums, or the equivalentthereof in the case of self‑insurers, on contracts applicable toliabilities under the Workers' Compensation Act is two and five‑tenthspercent (2.5%). The net proceeds shall be credited to the General Fund.

(2)        Other InsuranceContracts. – The tax rate to be applied to gross premiums on all other taxablecontracts issued by insurers or health maintenance organizations and to beapplied to gross premiums and gross collections from membership dues, exclusiveof receipts from cost plus plans, received by Article 65 corporations is oneand nine‑tenths percent (1.9%). The net proceeds shall be credited to theGeneral Fund.

(3)        (Effective fortaxable years beginning before January 1, 2008)  Additional Statewide Fireand Lightning Rate. – An additional tax at the rate of one and thirty‑threehundredths percent (1.33%) applies to gross premiums on insurance contractsapplicable to fire and lightning coverage, except marine and automobilecontracts. The tax is a percentage of the gross premiums from the contracts,determined in accordance with the table in this subdivision. Twenty‑fivepercent (25%) of the net proceeds of this additional tax shall be deposited inthe Volunteer Fire Department Fund established in Article 87 of Chapter 58 ofthe General Statutes. The remaining net proceeds shall be credited to theGeneral Fund.

Typeof Insurance Contract                                      TaxablePercentage

Fire Loss                                                                            100%

Commercial Multiple Peril

Nonliability portion                                                       100%

Liability portion                                                                 0%

Homeowners                                                                        50%

Farm Owners                                                                       30%.

(3)        (Effective fortaxable years beginning on or after January 1, 2008) Additional Rate onProperty Coverage Contracts. – An additional tax at the rate of seventy‑fourhundredths percent (0.74%) applies to gross premiums on insurance contracts forproperty coverage. The tax is imposed on ten percent (10%) of the grosspremiums from insurance contracts for automobile physical damage coverage andon one hundred percent (100%) of the gross premiums from all other contractsfor property coverage. Thirty percent (30%) of the net proceeds of thisadditional tax must be credited to the Volunteer Fire Department Fundestablished in Article 87 of Chapter 58 of the General Statutes. Twenty‑fivepercent (25%) of the net proceeds must be credited to the Department ofInsurance for disbursement pursuant to G.S. 58‑84‑25. The remainingnet proceeds must be credited to the General Fund.

Thefollowing definitions apply in this subdivision:

a.         Automobile physicaldamage. – The following lines of business identified by the NAIC: privatepassenger automobile physical damage and commercial automobile physical damage.

b.         Property coverage. –The following lines of business identified by the NAIC: fire, farm ownersmultiple peril, homeowners multiple peril, nonliability portion of commercialmultiple peril, ocean marine, inland marine, earthquake, private passengerautomobile physical damage, commercial automobile physical damage, aircraft,and boiler and machinery. The term also includes insurance contracts for winddamage.

c.         NAIC. – NationalAssociation of Insurance Commissioners.

(4)        (Repealed fortaxable years beginning on or after January 1, 2008) Additional Local Fireand Lightning Rate. – An additional tax shall be applied to gross premiums oncontracts of insurance applicable to fire and lightning coverage within firedistricts at the rate of one‑half of one percent (½ of 1%). The netproceeds shall be credited to the Department of Insurance for disbursementpursuant to G.S. 58‑84‑25.

(5)        Repealed by SessionLaws 2003‑284, s. 43.1, effective for taxable years beginning on or afterJanuary 1, 2004.

(6)        Repealed by SessionLaws 2005‑276, s. 38.4(a), effective for taxable years beginning on orafter January 1, 2007.

(e)        (Effective fortaxable years beginning before January 1, 2008)  Report and Payment. – Eachtaxpayer doing business in this State shall, within the first 15 days of March,file with the Secretary of Revenue a full and accurate report of the totalgross premiums as defined in this section, the payroll and other informationrequired by the Secretary in the case of a self‑insurer, or the totalgross collections from membership dues exclusive of receipts from cost plusplans collected in this State during the preceding calendar year. The taxesimposed by this section shall be remitted to the Secretary with the report.

In the case of an insurerliable for the additional local fire and lightning tax, the report shallinclude the information required under G.S. 58‑84‑1.

(e)        (Effective fortaxable years beginning on or after January 1, 2008) Report and Payment. – Eachtaxpayer doing business in this State shall, within the first 15 days of March,file with the Secretary of Revenue a full and accurate report of the totalgross premiums as defined in this section, the payroll and other informationrequired by the Secretary in the case of a self‑insurer, or the totalgross collections from membership dues exclusive of receipts from cost plusplans collected in this State during the preceding calendar year. The taxesimposed by this section shall be remitted to the Secretary with the report.

(f)         (Effective fortaxable years beginning before January 1, 2008) Installment PaymentsRequired. – Taxpayers that are subject to the tax imposed by this section andhave a premium tax liability, not including the additional local fire andlightning tax, of ten thousand dollars ($10,000) or more for business done inNorth Carolina during the immediately preceding year shall remit three equalquarterly installments with each installment equal to at least thirty‑threeand one‑third percent (33 1/3%) of the premium tax liability incurred inthe immediately preceding taxable year. The quarterly installment paymentsshall be made on or before April 15, June 15, and October 15 of each taxableyear. The company shall remit the balance by the following March 15 in the samemanner provided in this section for annual returns.

The Secretary of Revenue maypermit an insurance company to pay less than the required estimated paymentwhen the insurer reasonably believes that the total estimated payments made forthe current year will exceed the total anticipated tax liability for the year.

An underpayment of aninstallment payment required by this subsection shall bear interest at the rateestablished under G.S. 105‑241.1(i). Any overpayment shall bear interestas provided in G.S. 105‑266(b) and, together with the interest, shall becredited to the company and applied against the taxes imposed upon the companyunder this Article.

(f)         (Effective fortaxable years beginning on or after January 1, 2008) Installment PaymentsRequired. – Taxpayers that are subject to the tax imposed by this section andhave a premium tax liability of ten thousand dollars ($10,000) or more forbusiness done in North Carolina during the immediately preceding year shallremit three equal quarterly installments with each installment equal to atleast thirty‑three and one‑third percent (33 1/3%) of the premiumtax liability incurred in the immediately preceding taxable year. The quarterlyinstallment payments shall be made on or before April 15, June 15, and October15 of each taxable year. The company shall remit the balance by the followingMarch 15 in the same manner provided in this section for annual returns.

The Secretary may permit aninsurance company to pay less than the required estimated payment when theinsurer reasonably believes that the total estimated payments made for thecurrent year will exceed the total anticipated tax liability for the year.

An underpayment or anoverpayment of an installment payment required by this subsection accruesinterest in accordance with G.S. 105‑241.21. An overpayment of tax shallbe credited to the company and applied against the taxes imposed upon thecompany under this Article.

(g)        Exemptions. – Thissection does not apply to farmers' mutual assessment fire insurance companiesor to fraternal orders or societies that do not operate for a profit and do notissue policies on any person except members. (1945, c. 752, s. 2; 1947, c. 501, s. 8; 1951, c. 643,s. 8; 1955, c. 1313, s. 5; 1957, c. 1340, s. 12; 1959, c. 1211; 1961, c. 783;1963, c. 1096; 1969, c. 1221; 1973, cc. 142, 1019; 1975, c. 143; c. 559, s. 8;1979, c. 714, s. 2; 1983, c. 713, s. 81; 1985, c. 119, s. 3; c. 719, ss. 1, 2;1985 (Reg. Sess., 1986), c. 1031, ss. 1‑5; 1987, c. 709, s. 2; c. 814, s.2; 1989 (Reg. Sess., 1990), c. 814, s. 27; 1991, c. 689, s. 297; 1993 (Reg.Sess., 1994), c. 600, s. 4; 1995, c. 360, s. 1(d); 1995 (Reg. Sess., 1996), c.747, s. 2; 1998‑98, s. 17; 2001‑424, s. 34.22(a), (d), (e); 2001‑487,s. 69(a); 2001‑489, s. 2(a)‑(d), (f), (g); 2003‑284, s. 43.1;2005‑276, s. 38.4(a); 2005‑435, s. 57(a); 2006‑196, ss. 1‑5;2007‑250, s. 1; 2007‑491, s. 23.)