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Frequently Asked Questions: Foreign Fire Tax

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Question: What is the Foreign Fire Tax Program?

Answer: The foreign fire tax program as set forth in New York Insurance Law §§ 9104 and 9105 requires foreign and alien insurance companies to pay a 2% tax on premiums written for insurance against loss or damage by fire on property located in the State. Excess line brokers licensed to place insurance business with an unauthorized insurer as set forth in New York Insurance Law § 2118 are required to pay a 3% tax on fire insurance premiums on property located in the State. The tax collected from the insurance companies and brokers by the Department of Financial Services is distributed to fire departments, fire districts, fire department benevolent associations, and the Firemen's Association of the State of New York (FASNY).

Question: How does the Foreign Fire Tax Program work?

Answer: Foreign and alien stock and mutual insurance companies, licensed to write fire insurance in the State, are required to file with the Department of Financial Services a report of fire premiums written, allocated by fire district, and remit payment of the 2% tax. Excess line brokers, licensed to place business in the State are required to file an annual premium tax statement indicating fire premiums by fire district and remit the 3% tax.

Question: Who is designated to receive the fire tax distribution?

Answer: The treasurer or other fiscal officer of the fire department affording fire protection in such city, village, or fire district would be designated to receive the fire tax distribution. If the department or district does not have a treasurer or other fiscal officer, then the fiscal officer of the authorities having jurisdiction or control of the fire department would be designated. The fire tax funds may also be designated in a special act of the New York State Legislature to be received by another person or entity.

Question: Why are street lists important?

Answer: The street lists are important because they determine the fire district code that insurance companies and brokers use to allocate the fire insurance premiums. Streets are assigned to fire district codes by primary area of responsibility and zip codes. It is the responsibility of the fire districts or departments to notify the Department of Financial Services of changes, additions, or deletions to the street listing.

Question: Why does our fire tax distribution increase or decrease from year to year?

Answer: By far, the biggest reason for any change in the distribution received by a fire department from year to year is the amount of fire insurance premiums written by foreign or alien insurance companies in any given fire district. Insurance companies can have cancellations of policies that include a fire portion which if not offset by new customers, will result in less premiums being written and less tax being paid by the company. Other factors include: multi-year policies which are policies where premiums are written all in one year but earned over multiple years; changes in rate structure where a company raises or lowers their premium rates which could affect renewals; an insured becomes self-insured and the tax would no longer need to be paid on their property.

Question: How should fire tax proceeds be distributed?

Answer: The general rule for distribution of fire tax funds for a multi-company fire department is: the foreign fire tax monies distributed should be allocated between and among the fire companies proportional to the number of active members in each fire company. If a department is comprised of both paid and volunteer members, each group would be entitled to fire tax proceeds and monies should be distributed on a pro rata basis.

For further clarification on this issue contact the Office of the State Comptroller, Division of Legal Services, at (518) 474-3444.

Question: What can fire tax funds be used for?

Answer: Except as otherwise provided by a special act, fire tax proceeds may be used for any purpose which the members of the fire department or company determine to be for the use and benefit of the department or company as a whole.

Some examples of how the funds can be used include: department social functions - such as installation dinners, picnics, banquets, holiday parties; appliances, furniture, televisions for the firehouse; dress & parade uniforms, hats, boots, jackets, t-shirts, turn out gear, and equipment for members of the department; offset of costs from life or disability insurance (must be group policies); and office equipment such as computers and fax machines.

If the funds are designated to be received by an exempt or benevolent association created by a special act of the New York State Legislature, the use of the monies is limited to those purposes set forth in the special act.

For further clarification on this issue contact the Office of the State Comptroller, Division of Legal Services, at (518) 474-3444.

Question: Should foreign fire tax funds be maintained separately from all other department funds?

Answer: The Office of the State Comptroller recommends that foreign fire tax funds be accounted for separately and a separate checking or savings account should be set up for the administration of the funds.

Updated 01/23/2014

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