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TAXATION

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REVISIONS TO THE NEW YORK TAX LAW REGARDING CAPTIVE INSURERS

Insurance companies are taxed under Article 33 of the New York Tax Law. Chapter 389 of the Laws of 1997 amended various sections of that Article (and added new Section 1502-b) to impose a premium tax (referred to as a “franchise tax” under New York law) on captive insurance companies. These and other tax law provisions were subsequently amended by Chapters 62 and 188 of the laws of 2003; Chapter 57 of the Laws of 2009; and Chapter 59 of the Laws of 2014. The tax on captive insurers is set forth in Section 1502-b. Captives are not subject to any other taxes under Article 33 of the New York Tax Law.

IMPORTANT NOTE

Notwithstanding the foregoing, if premium income makes up 50% or less of a captive insurer’s gross receipts for any taxable year, then the captive insurer will be deemed a “combinable captive insurance company” and will be required to file a combined return with its closest controlling stockholder.  In such cases, the captive’s income will be subject to taxation under the provisions of either Article 9-A or Article 32 of the New York Tax Law, and not Article 33.

SUMMARY TABLE OF TAXES ON CAPTIVE INSURERS UNDER SECTION 1502-b OF THE NEW YORK TAX LAW

Taxes are levied on all premiums written unless such premiums are taxed in another jurisdiction.

TYPE OF BUSINESS PREMIUMS SECTION 1502-b TAX RATE

Direct Business

$0-$20 million

.4%

 

$20-$40 million

.3%

 

$40-$60 million

.2%

 

Greater Than $60 million

.075%

Reinsurance Assumed

$0-$20 million

.225%

 

$20-$40 million

.15%

 

$40-$60 million

.05%

 

Greater Than $60 million

.025%

Updated 12/29/2015

 

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