North Carolina extending captive insurer tax holiday
North Carolina extending captive insurer tax holiday | Insurance Business America
Insurance News
North Carolina extending captive insurer tax holiday
New law signed earlier in July
Insurance News
By
Grant Funtila
North Carolina will extend the premium tax exemption it gives to captive insurance companies that remain in the state. It will also offer risk retention groups a 1.85% premium tax, according to a new state law signed by Gov. Roy Cooper earlier in July.
In addition, the state will provide an exemption from premium taxes that would be imposed during the year the redomestication occurs to captive insurers operating outside of North Carolina that receive approval from the state’s insurance commissioner to redomesticate and domicile in the state. According to the law’s text, the tax holiday provision will remain in place until Jan. 1, 2026.
The new law also states that the law sets up a 1.85% premium tax rate for risk retention groups. Previously, risk retention groups were subject to the same 5% tax rate that surplus lines insurers face. Purchasing groups that pay premiums will continue to be taxed under the old system, setting tax rates based on “similar coverage from a similar insurance source by other insureds,” according to state statute.
The state’s insurance department and Senator Benton G. Sawrey, the law’s primary sponsor, refused to give further comments regarding the new law.
North Carolina is the third-largest domicile for captive insurers in the United States, only behind Vermont and Utah, according to an April release from the state’s insurance department. North Carolina has had more than 1,500 entities in the decade since passing laws allowing captive carriers.
“North Carolina’s competitive premium tax rates and laws provide us with a lot of discretion in the regulation of captive insurers, which helps us remain attractive to captive owners and captive managers alike,” Insurance Commissioner Mike Causey said in the April statement. “Laws drafted over the years designed to meet insurance needs of North Carolina businesses have had a positive economic impact, attracting new businesses to our state.”
The state also changed its rules to make underinsured motorist coverage mandatory for private automobile policies.
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