- General Information (G.S. 105-228.5 and 105-228.8)
North Carolina levies several types of insurance premium tax upon insurers, both domestic and foreign, for the privilege of engaging in insurance business. Foreign insurers are subject to retaliatory provisions.
- Insurance Companies Subject to the
Tax (G.S. 105-228.3)
Article 65 corporations (hospital, medical, and dental service corporations), insurers and self-insurers are subject to various types of insurance premium tax.
- Tax Basis (G.S. 105-228.5)
The tax imposed on an insurer shall be measured by gross premiums from business done in this State during the calendar year. Finance charges are included in gross premiums.
- Types of Tax and Charges (G.S. 105-228.5,
58-84-1 and 58-6-25)
There are several types of insurance premium tax applied, according to the type of insurance company and the type of insurance written. Gross and Retaliatory Premium Tax, Additional Statewide Fire and Lightning Tax, and Additional Local Fire and Lightning Tax are types of insurance premium tax reported. Tax rates, according to the type of insurance written, apply to each type of tax. Printed returns are generated from a computer program provided by the NC Department of Revenue. Printed returns and the completed diskette provided by the Department must be submitted. Other sources of the computer program, if used, must obtain prior approval.
Insurers, Article 65 corporations, health maintenance organizations, and self-insurers are required to pay an Insurance Regulatory Charge in addition to all other fees and taxes. For insurers and self-insurers, the Insurance Regulatory Charge is a percentage of the gross premium tax liability, exclusive of any additional taxes imposed by G.S. 105-228.8, any credits allowed under G.S. 105-228.5A or G.S. 97-133(a), and any other credits allowed under Chapter 105 of the General Statutes, for the taxable year. For Article 65 corporations and health maintenance organizations, the Insurance Regulatory Charge is a percentage of a presumed tax liability for the year calculated as if the corporation or organization were an insurer providing health insurance. The same exclusions apply for Article 65 corporations and health maintenance organizations that apply for insurers and self-insurers.
- Tax Rates and Charges (G.S. 105-228.5 and
Tax rates and charges are as follows:
Workers' Compensation 2.50% Other insurance contracts 1.90% Additional Statewide Fire and Lightning (excluding auto and marine) 1.33% Additional Local Fire and Lightning .50% Article 65 Corporations .50% Insurance Regulatory Charge (2001) 6.50%*
*Subject to change each year and is established by the General Assembly based on a proposed percentage rate submitted by the NC Department of Insurance sufficient to defray the estimated cost of the operations of the NC Department of Insurance for each upcoming fiscal year.
- Retaliatory Provisions (G.S. 105-228.8)
When the laws of any other state impose, or would impose, any premium taxes, upon North Carolina companies doing business in the other state that are, on an aggregate basis, in excess of the premium taxes directly imposed upon similar companies by the statutes of this State, the Secretary of Revenue shall impose the same premium taxes, on an aggregate basis, upon the companies chartered in the other state doing business or seeking to do business in North Carolina. Retaliatory tax is reported and paid with the annual Gross Premium Tax return. Special purpose obligations or assessments based on premiums imposed in connection with particular kinds of insurance, the special purpose regulatory charge and dedicated special purpose taxes based on premiums are excluded from retaliatory computations. Seventy-five percent (75%) of the Additional Statewide Fire and Lightning tax is included in the retaliatory computations.
- Installment Payments (G.S. 105-228.5(f))
Insurers, Article 65 corporations and self-insurers that have a premium tax liability, not including the additional local fire and lightning tax, of ten thousand dollars or more for business done in North Carolina during the immediately preceding year must remit three equal installments with each installment equal to at least thirty-three and one-third percent (33 1/3%) of the premium tax liability incurred in the immediately preceding taxable year. Any insurer, corporation, self-insurer, or organization required to make premium tax installments, must also make installment payments of the Insurance Regulatory Charge. Each installment of the Insurance Regulatory Charge must be at least thirty-three and one-third percent (33 1/3%)of the Regulatory Charge for the immediately preceding taxable year. The installment payments are due on or before April 15, June 15 and October 15 of each taxable year. The balance of tax due is remitted by the following March 15 along with the annual tax return. The Secretary of Revenue may permit an Insurance company to pay less than the required installment amount when the insurer reasonably believes that the total estimated payments made for the current year will exceed the total anticipated tax liability for the year. An underpayment of an installment payment shall bear interest.
- Due Dates (G.S. 105-228.5(e))
Annual returns along with payment of tax are due on or before March 15 of each year. Installment returns (if required) along with payment of tax are due on or before April 15, June 15, and October 15 of each year.
- Electronic Funds Transfer (EFT) Requirement
(G.S. 105-241 and 105-236(lb))
Insurance companies paying premium tax of $240,000 or more in a fiscal year are required to remit this tax by EFT beginning with payments made in the following calendar year. Insurance companies will be notified by the Department if required to make EFT payments. Payments received in the wrong form are subject to a penalty equal to 5 percent of the tax. For additional information on EFT, refer to the subject, "Payments of Tax by EFT" under "General Administration."
- Exempt Insurance Companies (G.S. 105-228.5(g))
The insurance premium tax requirements do not apply to farmers' mutual assessment fire insurance companies, to fraternal orders or societies that do not operate for a profit and do not issue policies on any person except members or to health maintenance organizations. Effective January 1, 2003, health maintenance organizations will be subject to insurance premium tax.
- Exclusions (G.S. 105-228.5)
The following premiums may be excluded when computing a taxable premium base:
- Premiums properly reported and properly allocated as being
received from business done in some other nation, territory,
state, or states.
- Premiums from policies written in federal areas for persons
in military service who pay premiums by assignment of service
- Premiums from policies or contracts issued in connection
with the funding of a pension, annuity, or profit-sharing
plan qualified or exempt un section 401, 403, 404, 408, 457
or 501 of the IRS Code.
- Premiums or considerations received from annuities, as defined
in G.S. 58-7-15.
- Funds or considerations received in connection with funding
agreements, as defined in G.S. 58-7-16.
- Medicaid or Medicare premiums, to the extent federal law
prohibits their taxation.
- Premiums properly reported and properly allocated as being received from business done in some other nation, territory, state, or states.
- Tax Credits (G.S. 105-228.5A, 97-29.1, 105-129.16B,
Article 3A of Chapter 105)
- Guaranty Assessment Credits
North Carolina Guaranty Association assessments paid by insurers may be used as a credit against premium tax. The credit is 20% per year for a period of five years beginning with the year after payment of the assessment. Applies to all insurance Guaranty Association and Life and Accident and Health Insurance Guaranty Association assessments paid. The credit may not exceed the premium tax liability for the year. Self-Insured Guaranty Association assessments paid may be applied as a 100% credit for the year in which it is paid.
- Supplemental Workers' Compensation Credits
Supplemental workers' compensation benefits paid to NC residents may be applied as a credit.
- Tax Incentive Credits
Tax credits provided under Article 3A are allowed to be taken against gross premiums tax. The Article 3A credits are the tax incentives for new and expanding businesses. These various credits can be taken against the gross premiums tax effective for taxable years beginning on or after January 1, 1999.
- Tax Credit for Low-income Housing
Effective for taxable years beginning on or after January 1, 2001, for buildings placed in service on or after that date, the tax credit for low-income housing may be taken against gross premium tax. See "Credit for Low-income Housing" in the "Credits" section for further information about this credit.
- Guaranty Assessment Credits
- Insurance Tax Administered by Department
of Insurance (G.S. 105-228.9)
Surplus lines tax, tax on risk retention groups not chartered in the State, and tax on persons procuring insurance directly with an unlicensed insurer are still administered by the NC Department of Insurance. Licensing and filing fees of insurers are also administered by the NC Department of Insurance along with the financial reporting requirements for insurers.
- No Additional Local Taxes (G.S. 105-228.10)
No county, city, or town shall be allowed to impose any additional tax, license, or fee, other than ad valorem taxes, upon any insurance company or association paying the fees and taxes levied under the insurance premium tax statutes.
- Exemption From Franchise or Corporate Income
Tax (G.S. 105-228.5(a))
An Insurer or Article 65 corporation that is subject to the insurance premium tax is not required to file or pay franchise or corporate income tax.