A3005

An Act concerning certain taxes and assessments dedicated to the administrative costs of the Department of Banking and Insurance and amending P.L.1945, c.132 and P.L.1995, c.156.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 13 of P.L.1995, c.156 (C.17:1C-31) is amended to read as follows:

13. Commencing with fiscal year 1999 and in each fiscal year thereafter, the total amount assessable to companies in any fiscal year for all special purpose assessments made pursuant to applicable law as of the effective date of this act, including the special purpose apportionment established by this act, shall not exceed [0.20] 0.25 percent of the combined net written premiums received, as defined in subsection b. of section 2 of this act, by all companies for the previous year.

(cf: P.L.1999, c.143, s.2)

2. Section 2 of P.L.1945, c.132 (C.54:18A-2) is amended to read as follows:

2. (a) The tax specified in subsection (a) of section 1 of this act, except as to life insurance companies and except as to marine insurance as described by chapter 16 of Title 54 of the Revised Statutes, shall, except as hereinafter provided, be 2% upon the taxable premiums collected by such company during the year ending December 31 next preceding on all business of the company in this State, less the amount of taxes on its property, exclusive of taxes on real estate and of taxes payable pursuant to this section, paid in this State by the company pursuant to any law of this State during the said year. Any taxes paid to the treasurer of any firemen's relief association of this State pursuant to R.S.54:18-1 shall be considered a part of the tax payable under this act. An additional tax of 0.1% upon such taxable premiums of such insurers shall also be paid [, which amount shall be dedicated to the Department of Banking and Insurance for payment of administrative costs related to its statutory duties].

(b) Taxable premiums, collected after December 31, 1965 by an insurance company subject to the provisions of subsection (a) hereof under group accident and health insurance policies on residents of this State, and taxable premiums collected under legal insurance policies as defined in section 3 of P.L.1981, c.160 (C.17:46C-3) on residents of this State, shall be subject to tax at the following rates:

As to taxes payable in 1967 1 3/4 %

As to taxes payable in 1968 1 1/2 %

As to taxes payable in 1969 1 1/4 %

As to taxes payable in 1970 through 2008 1%

As to taxes payable in 2009 1.35%

As to taxes payable in 2010 and thereafter 1%

An additional tax of 0.05% upon such taxable premiums of such insurers shall also be paid [, which amount shall be dedicated to the Department of Banking and Insurance for payment of administrative costs related to its statutory duties].

(cf: P.L.2009, c.75, s.1)

3. Section 3 of P.L.1945, c.132 (C.54:18A-3) is amended to read as follows:

3. Amount of tax, life insurance companies; additional tax. (a) The tax specified in subsection (a) of section 1 of this act as to life insurance companies, shall, except as hereinafter provided, be 2% upon the taxable premiums collected by the company during the year ending December 31 next preceding under all policies or contracts of insurance on residents of this State, less the amount of taxes on its property, exclusive of taxes on real estate and of taxes payable pursuant to this section, paid in this State by the company pursuant to any law of this State during the said year. An additional tax of 0.1% upon such taxable premiums of such insurers shall also be paid [, which amount shall be dedicated to the Department of Banking and Insurance for payment of administrative costs related to its statutory duties].

As to taxes payable in 1967 1 3/4%

As to taxes payable in 1968 1 1/2%

As to taxes payable in 1969 1 1/4%

As to taxes payable in 1970 through 2008 1%

As to taxes payable in 2009 1.35%

As to taxes payable in 2010 and thereafter 1%

(cf: P.L.2009, c.75, s.2)

4. This act shall take effect immediately.

STATEMENT

This bill eliminates the current dedication of certain insurance premium taxes to the Department of Banking and Insurance for the payment of administrative costs related to its statutory duties. Instead, the revenue from these taxes would now be retained in the General Fund and an equal amount of revenue would be generated for those administrative costs of the department through an increase in the special purpose assessment charged insurance carriers pursuant to P.L.1995, c.156 (C.17:1C-19 et seq.).

Under sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2, and C.54:18A-3), certain established insurance premium taxes, reported as “FAIR Act Administration” taxes in the FY2011 Budget Recommendation, are dedicated to department administrative costs: a tax of 0.1 percent, upon taxable premiums of insurance carriers, (except those carriers that are marine insurance companies, health maintenance organizations (HMOs), group accident and health insurance companies, and legal insurance companies); and, a tax of 0.05 percent, upon taxable premiums of group accident and health insurance companies and legal insurance companies.

The revenue from the “FAIR Act Administration” taxes currently is collected by the Department of Treasury from the insurers and then transferred to the department for administrative expenses. The amounts so collected effectively reduce the total amount collected through the special purpose assessment established pursuant to P.L.1995, c.156 (C.17:1C-19 et seq.).

The special purpose assessment is charged to all insurers writing most classes of insurance in the State for funding the activities of the Division of Insurance in regulating, monitoring and supervising these carriers. The assessment of each carrier is based on the proportion that its net written premiums for the preceding calendar year bears to the combined net written premiums of all carriers in the preceding year, except that no carrier is currently required to pay an assessment that exceeds 0.20 percent of its net written premium.

The bill would also permit an increase in the maximum amount (“caps”) assessable to companies for the special purpose assessment from the current 0.20 percent to 0.25 percent of combined net written premiums received by all companies for the previous year to ensure adequate industry funding for the department’s administrative costs going forward.

Therefore, pursuant to the changes proposed in this bill, the revenue from the “FAIR Act Administration” taxes would no longer be dedicated to the department’s administrative costs and the special purpose assessment would instead be the source of funding for the administration costs of the department.