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Senate Bill Report SB 6241, Independently Procured Insurance and Premium Tax (2020)

Summary

Senate Bill Report on SB 6241, as of January 28, 2020, for the Senate Committee on Financial Institutions, Economic Development & Trade, which lists committee activity on 1/30/20. The bill concerns independently procured insurance and applying the state insurance premium tax to such insurance for both in-state and out-of-state risk, by request of Insurance Commissioner, with Senators Liias, Keiser and Das among the sponsors. The summary of the bill states that exempt commercial purchasers are required to file with the OIC a statement of all independently procured insurance annually on the first day of March, and that failure to file a report is a $1,000 fine. It states that all taxes and fees are credited to the state general fund.

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Issuer
Congressional materials
Document type
Report
Date
2020-01-30
Case
2020 01 30 A26428 D211746 Bill Report 6241 Sba Fiet 20

Cite this document

“Senate Bill Report SB 6241, Independently Procured Insurance and Premium Tax (2020).” Original at app.leg.wa.gov, dated 2020-01-30. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2020-01-30-2020-01-30-a26428-d211746-bill-report-6241-sba-fiet-20/, SHA-256 f777f91f8bfba9b0197368d8bf73f70f6edbec02aa072094acb675b614cef72c.

Full text

                             SENATE BILL REPORT
                                   SB 6241

                                      As of January 28, 2020

Title: An act relating to independently procured insurance and applying the state insurance
    premium tax to such insurance for both in-state and out-of-state risk.

Brief Description: Concerning independently procured insurance and applying the state
   insurance premium tax to such insurance for both in-state and out-of-state risk.

Sponsors: Senators Liias, Keiser, Wilson, C., Das and Van De Wege; by request of Insurance
   Commissioner.

Brief History:
   Committee Activity: Financial Institutions, Economic Development & Trade: 1/30/20.

                                      Brief Summary of Bill
          Ÿ Requires exempt commercial purchasers who independently procure
            insurance to file with the Office of the Insurance Commissioner and pay
            tax on its premiums.


SENATE  COMMITTEE                  ON      FINANCIAL          INSTITUTIONS,           ECONOMIC
DEVELOPMENT & TRADE

    Staff: Kellee Gunn (786-7429)

    Background: Insurance Regulation and Taxation in Washington State. An authorized
    insurer, also known as an admitted insurer, is an insurer licensed to do business in the state.
    To be licensed, an insurer must provide certain information such as rates and policies to the
    Office of the Insurance Commissioner (OIC). Unauthorized insurance, such as surplus lines
    insurance, is allowable if registered with the OIC. A surplus lines policy may only be sold if:
             Ÿ a diligent effort has been made to purchase insurance in the authorized market;
             Ÿ the purpose of buying the coverage is not to secure a lower premium rate than
                would be accepted by any authorized insurer; and
             Ÿ the insurance is purchased through a licensed surplus line broker.

    All net premiums collected and received by authorized insurers and surplus lines insurance
    are subject to the insurance premiums tax except for title insurers and fraternal benefit
––––––––––––––––––––––
    This analysis was prepared by non-partisan legislative staff for the use of legislative
    members in their deliberations. This analysis is not a part of the legislation nor does it
    constitute a statement of legislative intent.

Senate Bill Report                              -1-                                          SB 6241
    societies. The insurance premiums tax rate is two percent, except for ocean marine and
    foreign trade who pay 0.95 percent. For property and casualty insurance, if this state is the
    insured's home state, the tax is computed upon the entire premium without regard to whether
    the policy covers risks or exposures in this state. For all other lines of insurance, the tax is
    computed upon the proportion of the premium properly allocable to the risks or exposures
    located in this state.

    Exempt Commercial Purchasers. A person is an exempt commercial purchaser if they
    employ or retain a qualified risk manager to negotiate insurance coverage; have paid
    aggregate commercial property and casualty insurance premiums exceeding $100,000 in the
    previous year; and meet one of the following criteria:
         Ÿ possess a net worth in excess of $20 million;
         Ÿ generate revenues of $50 million;
         Ÿ employ 500 full-time equivalent employees;
         Ÿ are a nonprofit or public entity with at least $30 million in annual budgeted
           expenditures; or
         Ÿ are a municipality in excess of 50,000 people.

    The term exempt commercial purchaser refers to the fact that they are exempt from needing
    to buy insurance on the commercial insurance market and can buy from a surplus line broker
    if certain criteria are met.

    Summary of Bill: Exempt commercial purchasers are required to file with the OIC a
    statement of all independently procured insurance annually on the first day of March. The
    statement must include an aggregate of net premiums and additional information as required
    by the OIC.

    An exempt commercial purchaser must pay a tax on the entire premium for independently
    procured property and casualty insurance, other than workers compensation insurance, that
    covers risk or exposures in the United States and its territories. No tax is due or payable for
    premiums allocable to risks or exposures outside the United States.

    Failure to file a report is a $1,000 fine, and failure to file an annual statement or pay the
    premium tax on independently procured insurance will result in the same penalties and
    interest under current law for delinquent insurers and taxpayers. All taxes and fees are
    credited to the state general fund.

    Independently procured insurance means insurance obtained directly by a qualified exempt
    commercial purchaser from an unauthorized insurer.

    Appropriation: None.

    Fiscal Note: Available.

    Creates Committee/Commission/Task Force that includes Legislative members: No.

    Effective Date: Ninety days after adjournment of session in which bill is passed.



Senate Bill Report                              -2-                                         SB 6241

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