The Office of General Counsel issued the following opinion on October 31, 2005 representing the position of the New York State Insurance Department.

Re: New York Taxation of Insurers.

Questions Presented:

1. Does New York impose a corporation income tax on insurance companies?

2. If a tax is imposed, what is the rate?

3. Does the retaliatory tax imposed by New York on Nebraska insurance companies include the Nebraska corporation income tax in its computation as well as the premium tax?


1. New York does not impose a "corporation income tax" on insurance corporations; rather, they are subject to a corporate franchise tax.

2. The imposition of the New York corporate franchise tax on insurance corporations operates as follows: For tax years beginning January 1, 2003, the taxation of non-life insurers differs from that of life insurers in that non-life companies are now subject only to a premium-based tax. Life insurers remain subject to both a premium-based tax and an income/capital/payroll based tax, but in no event pay an amount of tax in excess of 2.0% of life premiums. The maximum tax rate imposed on non-life premiums is 1.75% for accident and health premiums and 2.0% for all other non-life premiums.

3. Yes, New York would consider both the Nebraska corporation income tax and the Nebraska premium tax in determining whether to impose the retaliatory tax.


This inquiry is prompted by a Nebraska corporation income tax return that has been filed by a New York domiciled insurance company and the fact that the inquirer has learned that the New York Tax law has been amended with respect to the taxation of non-life insurers.

The inquirer notes that the state of Nebraska imposes a net income tax on corporations ("Corporate Income Tax"). This tax applies to both foreign and domestic insurance companies. Nebraska also imposes on foreign and domestic insurers a tax on premiums received ("Premium Tax"). Insurers are allowed a credit against the Corporate Income Tax for any Premium Tax paid. The practical effect of this credit is that in most instances insurers have a zero Corporate Income Tax liability.

A Nebraska tax statute, Neb. Rev. Stat. § 77-2734.02(2) (1995), provides that a foreign insurance company is subject to taxation at the lesser of the Nebraska Corporate Income Tax rate or the rate imposed in its state of domicile if the retaliatory tax imposed by its state of domicile on Nebraska insurance companies would include a tax based on the Corporate Income Tax.

The inquirer's department is currently reviewing the above-referenced Corporate Income Tax return, and the insurer in question is invoking the benefit of the above-quoted statute, claiming that New York State imposes no corporate income tax on non-life insurance companies.


Taxes are imposed upon insurers by the State of New York pursuant to Article 33 of the New York Tax Law [N. Y. Tax Law §§ 1500 - 1520 (McKinney 2000 & Supp. 2005)]. Recent legislation (Part G3, Ch. 62, L. 2003) significantly amended the tax regime of non-life insurers. As indicated by the below-quoted section 1502-a of N.Y. Tax Law, non-life insurers are now subject only to a premium-based tax. The newly added provision of the law provides, in pertinent part, as follows:

§ 1502-a. Tax on non-life insurance corporations. In lieu of the tax imposed by section fifteen hundred one of this article, every domestic insurance corporation, every foreign insurance corporation and every alien insurance corporation, other than such corporations transacting the business of life insurance, (1) authorized to transact business in this state under a certificate of authority from the superintendent of insurance or (2) which is a risk retention group ... , shall, for the privilege of exercising corporate franchises or for carrying on business in a corporate or organized capacity within this state, and in addition to any other taxes imposed for such privilege, pay a tax on all gross direct premiums, less return premiums thereon, written on risks located or resident in this state. The tax imposed by this section shall be computed in the manner set forth in subdivision (a) of section fifteen hundred ten of this article as such subdivision applied to taxable years beginning before January first, two thousand three, except that the rate of tax imposed by this section shall be one and seventy-five hundredths percent on all gross direct premiums, less return premiums thereon, for accident and health insurance contracts, and two percent on all other such premiums. All the other provisions in section fifteen hundred ten of this article, other than subdivision (b) of such section, shall apply to the tax imposed by this section. In no event shall the tax imposed under this section be less than two hundred fifty dollars.

N.Y. Tax Law § 1502-a (McKinney Supp. 2005).

Under the current New York Tax Law, for tax years beginning on or after January 1, 2003, non-life insurance corporations are subject only to a franchise tax based on premiums. The tax rate is 2.0% except for accident and health premiums, which are taxed at the rate of 1.5%. I note that life insurance corporations remain subject to the tax regime described in this Office's letter to the inquirer dated November 21, 2000.1 The amount of Franchise tax imposed on a life insurance corporation is capped, however. Under N.Y. Ins. Law § 1505, the maximum tax imposed may not exceed 2.0% of premium.

With regard to the retaliatory tax imposed under the New York Insurance Law, Section 1112 of the N.Y. Ins. Law (McKinney Supp. 2005) provides, in pertinent part, as follows:

(a)(1) If, by the laws, or the action of any public official, of any other state, any insurer organized or domiciled in this state, or its duly authorized agents, shall be, required to deposit securities in such other state to protect policyholders or for any other purpose, or shall be required to pay taxes, fines, penalties, fees for licenses or certificates of authority or any other sum for the privilege of doing business in such other state, or shall be subjected to any restrictions, obligations, conditions or penalties, imposed for such privilege, and such requirements are greater than those required of similar insurers organized or domiciled in such other state by the laws of this state for the privilege of doing business herein, then all similar insurers organized or domiciled in such other state and their duly authorized agents in this state shall make like deposits for like purposes with the superintendent, and pay him for taxes, fines, penalties, fees for licenses or certificates of authority or for any other requirement for the privilege of doing business in this state, an amount determined in the manner prescribed by such other state, and shall be subjected to such greater requirements imposed by such other state upon similar insurers of this state and their duly authorized agents.

Under N.Y. Ins. Law § 1112, a retaliatory tax is imposed on an insurance company domiciled outside of New York State when that company's home state imposes taxes (and fees, penalties and fines) against New York insurers that are higher than those imposed upon that company by New York. Not all taxes imposed upon New York insurers by other states will trigger retaliation. Rather, only those taxes levied for the privilege of doing an insurance business will trigger retaliation. Please note that in connection with this inquiry, both the Corporate Income Tax and the Premium Tax are treated by the New York Insurance Department as taxes that would be taken into consideration for calculating any retaliatory tax.

For further information you may contact Supervising Attorney Michael Campanelli at the New York City office.

1   It is impossible to categorically state the “effective” rate of taxation for life insurance corporations.   Only after the tax liability for a given company has been finally determined will it be possible to calculate the rate, relative to income, at which the tax was imposed.  This is because the tax imposed on life insurance corporations is a combination of a premium tax and a basic franchise tax.  The basic franchise tax component of the tax is the sum of (1) a tax computed on whichever of the following bases produces the greatest amount of tax: (i) entire net income, (ii)  business and investment capital, or (iii) net income and compensation paid; and (2) a subsidiary capital tax imposed on the value of subsidiary capital allocated to New York State.    In any event, as noted in the accompanying text, the total franchise tax imposed cannot exceed 2% of premiums.  See N.Y. Tax Law §§ 1501, 1502, 1505, and 1510 (McKinney 2000 and Supp. 2005).