State and local tax developments applicable to the insurance industry during 2024 continue many of the trends from recent years. Developments impacting insurers are mostly focused on tax credits, assessment rate changes, and sales tax litigation on totaled automobile claims. Only 13 states are still in session for the year (at this time), so most legislative activity is complete for the year.
Outside of the year’s legislative and judicial activities, remote employee issues continue to be the primary state tax challenge for most employers. Remote or hybrid work arrangements have rapidly become the standard for many industries (including insurers), and employers are often playing catch-up on the associated potential impacts. The geographic dispersion of workers into states where the business entity had no prior operations creates a wide variety of state tax issues for employers to address, such as nexus exposure, payroll withholding, and employee-based credit complications.
Below is a summary of some of the key legislative and judicial developments applicable to insurers through midyear 2024.
Alabama H.B. 346
Creates a nonrefundable tax credit for qualified workforce housing projects and is available against income tax, financial excise tax, and insurance premium tax (including retaliatory tax). The amount of credit will be determined by the Housing Finance Authority as necessary for the financial feasibility of the qualified project, not to exceed $2 million. Enacted, effective 01/01/2025.
Alabama H.B. 358
Creates tax credits for 75% of the eligible expenses (100% for small employers) incurred by an employer in providing childcare for its employees at childcare facilities; and a childcare facility tax credit up to $2,000 per eligible child at the facility. The credits may be claimed against the income tax, financial institution excise tax, insurance premium tax, and public utility license tax. Enacted, effective 01/01/2025.
California A.B. 160 and S.B. 136
The managed care organization provider tax for Medi-Cal taxing Tier II has been increased to $274 per Medi-Cal enrollee for the 2024, 2025, and 2026 calendar years. Previously, the tax amount for that tier was $182.50 for 2024, $187.50 for 2025, and $192.50 for 2026. Enacted, effective 06/29/2024.
Colorado H.B. 1060
Adopts the National Association of Insurance Commissioners (NAIC) model travel insurance provisions (2018) which clarify that travel insurance is classified as inland marine insurance (or health insurance as appropriate), and imposes the premium tax (and applicable fire taxes) on insurance on travel insurance sold to state residents, certain primary certificate holders, or certain blanket travel insurance policyholders, excluding any amount received for travel assistance services or cancellation fee waivers. Enacted, effective 07/18/2024.
Colorado H.B. 1119
Authorizes the Division of Insurance to require premium and surplus lines taxes be filed/paid electronically and authorizes use of a third-party vendor to administer the taxes (likely to be done through the secure web application, OPTins, for premium tax, as the bill discusses use of the NAIC in other states). Enacted, effective for filings after 01/01/2025.
Connecticut H.B. 5190
Restores the historic home rehabilitation credit for premium tax, corporation business tax, unrelated business income tax on nonprofits, air carrier tax, gross earnings tax, railroad tax, cable and satellite TV company tax, and utilities tax. The credit is generally 30% of the rehab expenses but cannot exceed $30,000 per dwelling or $3 million statewide per fiscal year. Enacted, effective 07/01/2024.
Connecticut S.B. 501 (Special Session)
Clarifies that the annual assessment charged to domestic insurers to fund the Connecticut Department of Insurance utilizes gross tax liability as its basis and changes the period that the Connecticut Department of Revenue Services (DRS) uses to determine a domestic insurer’s gross tax liability from the preceding year to the year immediately before the preceding year. Enacted, effective 07/08/2024.
Florida H.B. 7073
The legislation contains a number of tax provisions:
- Updates the IRC conformity date to January 1, 2024 (currently 2023).
- Creates nonrefundable childcare credits available against alcohol, fuel, income and premium tax. The credit is 50% of the startup costs of a childcare facility, with a maximum credit of $250,000 – $1 million depending on the number of employees. The credit is $300 per each eligible childcare per month, with a maximum credit of $50,000 – $1 million depending on the number of employees. The credit for contributions to the facility is up to $3,600 per child, with a maximum credit of $50,000 – $1 million depending on the number of employees.
- Creates a corporate income tax credit for employing individuals who have a disability. The credit is $1 per hour the qualified employee worked during the taxable year, up to $1,000 per employee and $10,000 per employer per year.
- Requires insurance companies to provide a 1.75% discount on residential policies or policies with flood coverage and a discount for any respective fire marshal tax. The discounts apply to policies with coverage for a 12-month period and an effective date on or after October 1, 2024, and no later than September 30, 2025. The policyholder discount is recouped through a premium tax credit and excess credit is refunded.
Enacted, effective 07/01/2024.
Florida / State Farm Mut. Auto. Ins. Co. v. Dep’t of Revenue, Fla. Dist. Ct. App., 1st Dist., No. 1D2021-2793, 01/17/2024
The Florida First District Court of Appeal held that the Department of Revenue was correct in excluding the proration addback per IRC Section 832 for purposes of determining the addback for tax exempt interest. The Department’s position is that IRC §103 and FS §220.13 do not contain any reference to IRC §832, so no deduction is permitted.
Georgia / Malcom v. GEICO Indemnity Co., M.D. Ga., No. 5:20-cv-00165, 06/10/2024
Set final approval to a $5.1 million settlement agreement between GEICO Indemnity Co. and Georgia policyholders, concluding a suit accusing the insurance company of not fully covering the replacement costs of taxes assessed on vehicle purchases. The money will be disbursed among more than 31,000 class members who made claims from April 2014 through December 2019 and weren’t compensated for the state title ad valorem tax (the tax paid when a customer buys a car) for cars that would have been less costly to replace than to repair. Georgia replaced its sales tax on automobiles with the title tax in 2013.
Illinois H.B. 4951
A budget-related tax package bill includes the following provisions (among others):
- Caps corporate income tax net operating loss carryover deductions at $500,000, effective for tax years ending on or after December 31, 2024, and before December 31, 2027.
- Creates income tax credits for up to 15% of the labor expenditures and 10% of certain investments by qualified music production, distribution, and promotion companies, effective beginning with the 2025 tax year.
- Renames the income tax credit for "wages paid to ex-felons" to "wages paid to returning citizens" and effective beginning with tax year 2025, increases the credit from 5% to 15% of the wages paid.
- Creates an income tax credit for 25% of a gift to a permanent endowment fund held by a qualified community foundation, effective for tax years ending on or after December 31, 2025.
Enacted, effective 06/07/2024 and as noted.
Illinois S.B. 1996
Increases the workers' compensation commission operations fund surcharge to 1.092% (previously 1.01%) for the surcharge due in 2024, and each year thereafter. Enacted, effective 06/05/2024.
Kansas H.B. 2465
Creates the Pregnancy Resource Act, which includes nonrefundable income, financial institution and premium tax credits for an amount equal to 70% contributions to an eligible charitable organization. Enacted, effective 07/01/2024.
Kansas H.B. 2787
Amends the provisions pertaining to the Life & Health Insurance Guaranty Fund to NAIC Model Act provisions to include: 1) permit Health Insurance Corporations as member insurers; 2) allocates the Class B assessments pertaining to long-term care to 50% life/annuity and 50% health insurers; and 3) eliminates the $300 cap on Class A assessments. Enacted, effective 04/22/2024.
Kentucky H.B. 8
Creates a 60-day tax amnesty program between October 1 and November 29, 2024. The amnesty applies to all taxes administered by the Department of Revenue (DOR), except for ad valorem taxes (premium tax is included in the amnesty) for tax liabilities occurring for taxable periods ending on or after October 1, 2011, through December 1, 2023. The amnesty is to be administered by a third-party contractor on behalf of the state, but if no third party can be found, the DOR will be required to run the amnesty themselves in 2025. Enacted, effective 04/09/2024.
Note that the amnesty program was line-item vetoed by the governor, but the legislature and Attorney General have deemed the governor’s veto to have no effect as the legislation is not a budget bill. It is unknown at this point if the DOR will support the amnesty program, as they failed to support an identical unfunded amnesty program enacted in 2022.
Massachusetts H.B. 4800
The primary budget bill for the state requires the Department of Revenue (DOR) to establish a 60-day amnesty program before June 30, 2025. The program includes a general waiver of penalties for taxpayers failing to file proper returns during tax years ending prior to December 31, 2024, with a four-year lookback period. The department can determine what types of taxes will be included in the program and the periods it will cover. The department also will have to write rules preventing anyone who uses this amnesty from using another one for ten years. Enacted, effective 08/01/2024 with veto overrides.
Michigan / Nationwide Agribusiness Ins. Co. v. Mich. Dep’t of Treasury, Mich. Ct. App., No. 364790, 06/20/2024
The Michigan Court of Appeals reversed the tax tribunal’s ruling and sided with Nationwide Agribusiness Insurance Co. to permit the insurer and its affiliated groups to file combined insurance tax returns to take advantage of certain tax credits. The court leaned on their recent opinion in Soave v. Dep’t of Treasury, where the court held that members of the same group can and must file combined returns and can share tax credits.
Note that the Department of Treasury (DOT) may appeal this decision to the Michigan Supreme Court.
Michigan / AAA Life Ins. Co. v. Mich. Dep’t of Treasury, Mich. Ct. App., No. 365613, 06/20/2024
The state appeals court held that the insurer was liable for Michigan use tax for mailed advertisements prepared out-of-state. “In order to constitute a taxable use only some level of control is needed,” the Michigan Court of Appeals ruled in an unsigned opinion.
Missouri S.B. 802
Creates a tax credit against income, premium, financial institution and express company gross receipt taxes, for investments into a certified rural fund. The credit is 15% of the investment for the third through sixth anniversary date of investment. Enacted, effective 08/28/2024.
Nebraska L.B. 937
Establishes a number of new credit provisions:
- Creates the Nebraska Shortline Rail Modernization Act, which provides a nonrefundable income, financial institution, or premium tax credit for 50% of qualified maintenance expenses by shortline railroad companies located in the state.
- Creates a nonrefundable income, financial institution, or premium tax credit for the production of qualified mixtures of sustainable aviation fuel. The credit is equal to $0.75 for each gallon of qualified mixtures of sustainable aviation fuel sold or used plus a supplementary amount of $0.01 (up to $0.55) for each percentage that the lifecycle greenhouse gas (GHG) emissions reduction exceeds 50%.
Enacted, effective 07/15/2024.
New Jersey A.B. 4705
Increases the annual assessment on health maintenance organizations from 5% to 6% of net written premiums. This assessment is in addition to the 2.5% health insurance assessment that is applied to health insurance providers, including health maintenance organizations (HMOs). Enacted, effective 06/28/2024 and applicable to all fiscal years beginning after 06/30/2024.
New Jersey S.B. 3432
Creates a tax credit against franchise or premium/retaliatory tax for companies that generate at least 100 full-time jobs under an agreement with the state Economic Development Authority and demonstrate that at least half of their revenue comes from “AI-related activities,” or that at least half of their employees are engaged in those pursuits. The incentive is capped at $500 million statewide and on a per eligible business is the lesser of: 0.1% of the total capital investment multiplied by the number of new full-time jobs; 25% of the eligible business's total capital investment; or $250,000,000. Enacted, effective 07/25/2024.
New Jersey / Lewis v. GEICO, 3d Cir., No. 22-03449, 04/15/2024
The Third Circuit ruled that one of two classes of GEICO customers in New Jersey shouldn’t have been certified by a district court. According to the case opinion, Sherry and David Lewis didn’t have standing to sue GEICO, alleging that the insurer’s condition-adjusted car valuation harmed them, because the company ultimately paid them more than the value of that alleged harm. Ultimately, they couldn’t bring a class action on that theory. However, the lower court properly certified a class of New Jersey GEICO customers over its prior policy of not paying taxes and fees to lessees.
New York A.B. 8808
The 2024-25 budget package includes revisions to insurance tax provisions concerning the life insurance guaranty fund credit to ensure that assessments for not-for-profit member insurers of the Life and Health Insurance Company Guaranty Corporation of New York are comparable to the assessments for for-profit member insurers, taking into account applicable tax credits. Amendments also modernize the calculation of the insurance franchise tax credit applied to for-profit insurers and limits the total statewide credit to $40 million per year and requires the DOI to specify each insurer’s actual credit on the guaranty fund assessment certificate for the year. Enacted, effective 01/01/2024.
Ohio S.B. 175
The gross amount of premiums for bail bonds written by a foreign insurance company included in the annual statement is revised to equal the company's direct written premiums reported on the company's corresponding annual statement of condition (i.e., gross bail bond premiums less any amounts retained by surety bail bond agents, but not less than 6.5% of the gross bail bond premiums received by the insurer's agents). Prior law did not permit any deductions for foreign insurers. Enacted, effective 10/24/2024 and retroactively to premium reported on annual statements filed in 2021 and after.
Note that the legislation permits refunds for overpaid tax that would exceed the normal statute of limitations.
Oklahoma H.B. 3091
Requires all surplus lines tax returns and payments to be made electronically. Enacted, effective 04/29/2024.
Oregon Initiative Petition 2024-17 (IP-17)
The proposed referendum will be included on the November 5, 2024, ballot, and if enacted by the general populace would impose a new 3% minimum tax on corporations with gross sales exceeding $25 million starting in 2025. The new corporate minimum tax would be in addition to the current minimum tax regime, per the petition. Proceeds from the new minimum tax would be earmarked to provide additional rebates to individual taxpayers in Oregon.
Pennsylvania H.B. 2096
Allows surplus lines brokers to charge a surplus lines placement fee (in addition to commission) on personal lines policies of not more than the greater of $150 or 4% of the policy premium. Enacted, effective 07/08/2024.
Tennessee H.B. 1046 and S.B. 1000
Enacts a rural and workforce housing tax credit, which can be claimed against the franchise, excise, and insurance taxes. The law authorizes the Tennessee Housing Development Agency to allocate the credits to owners of a "qualified project." Enacted, effective 07/01/2025.
Texas / Taylor v. Root Ins. Co., 5th Cir., No. 23-50667, 07/24/2024
The U.S. Court of Appeals for the Fifth Circuit held that the auto insurance carrier didn’t have to pay the equivalent of sales tax on a vehicle loss, according to the case opinion. The language in the policy only required Root Insurance Co. to pay applicable sales tax, and there was no tax applicable to the loss as a total-loss settlement isn’t considered a sale under state law.
Vermont S.B. 310
Increases the funding for the fire safety training council to $1.5 million (from $1.2 million), which will be reflected in the assessment charged to insurance companies writing fire, homeowners, multiple peril, allied lines, farm owners multiple peril crop, commercial multiple peril (fire and allied lines), private passenger and commercial auto, and inland marine policies on property and persons situated in Vermont. Enacted, effective 07/01/2024.
How Forvis Mazars Can Help
Consulting with and involving your tax professionals can help you keep current with the above and/or other state tax developments, which can potentially save you money and help you remain in compliance with new filing requirements and tax provisions. In particular, remote employee issues are often complex with hidden nuances. If you have any questions or need assistance, reach out to a professional at Forvis Mazars.