| Date: | 04/11/2003 |
|---|---|
| Organization: | Massachusetts Department of Revenue |
| Regulatory Authority: | Massachusetts General Laws |
| Official Version: | Published by the Massachusetts Register |
830 CMR: Department of Revenue
830 CMR 63.00: Taxation of Corporations
830 CMR 63.00 is amended by adding the following section:
830 CMR 63.29.1: Credits for Insurance Companies
(a) Statement of Purpose. The purpose of 830 CMR 63.29.1 is to explain the credits available to life insurance companies as provided in M.G.L. c. 63, § 29C and property and casualty insurance companies as provided in M.G.L. c. 63, §§ 29D and 29E. See St. 1998, c. 259.
(b) Outline of Topics. 830 CMR 63.29.1 is organized as:
(1) Statement of Purpose; Outline of Topics; Effective Date
(2) Definitions
(3) Life Insurance Premiums Excise Credit
(4) Net Investment Income Tax Rate Reduction
(5) Property and Casualty Insurance Premiums Excise Credit
(6) Gross Investment Income Tax Rate Reduction
(7) Retaliatory Taxes Credit For Domestic Property and Casualty Insurance Companies
(8) Corporate Restructuring
(c) Effective Date. The provisions of 830 CMR 63.29.1 shall take effect upon promulgation.
For the purposes of 830 CMR 63.29.1, the following terms shall have the following meanings, unless the context requires otherwise:
Commissioner, the Commissioner of Revenue, or the Commissioner's duly authorized representative.
Department, the Department of Revenue.
Domestic Property and Casualty Insurance Company, a property and casualty insurance company organized or domiciled in Massachusetts.
Gross Investment Income Tax, the tax imposed under M.G.L. c. 63, § 22A.
Life Insurance Company, a corporation which satisfies the definition of either a domestic or foreign life insurance company in either M.G.L. c. 175, §§ 19F or 118, and which is subject to the provisions of M.G.L. c. 63.
Life Insurance Premiums Excise, the excise imposed on life insurance companies under M.G.L. c. 63, §§ 20, 22.
Massachusetts Life Insurance Company Community Investment Initiative ("Life Initiative"), an entity or its successor, created by life insurance companies, or the successor to such companies, pursuant to St. 1998, c. 259, § 2.
Massachusetts Property and Casualty Insurance Company Economic Development Initiative ("P&C Initiative"), an entity, or its successor, created by property and casualty insurance companies, or the successor to such companies, pursuant to St. 1998, c. 259, § 3.
Net Investment Income Tax, the tax imposed under M.G.L. c. 63, § 22B.
Property and Casualty Insurance Company, an insurance company which satisfies the definition of either a domestic or foreign insurance company in M.G.L. c. 175, § 1, except life insurance companies as defined in M.G.L. c. 175, § 118, and which is subject to the provisions of M.G.L. c. 63.
Property and Casualty Insurance Premiums Excise, the excise imposed on property and casualty insurance companies under M.G.L. c. 63, §§ 22, 23.
Retaliatory Taxes, those taxes imposed or assessed by and paid to another jurisdiction by any domestic property and casualty insurance company due to the surtax imposed by St. 1969, c. 546, § 18. This term, however, shall not include penalties or interest for late payment of taxes.
Surtax, the tax imposed under St. 1969, c. 546, § 18.
(a) General Rule. A life insurance company subject to the life insurance premiums excise will be allowed an annual credit against such excise if the company invests in the Life Initiative an amount equal to 1.5% of the company's total capital contribution to the Life Initiative in excess of their full proportionate share. For taxable years beginning on or after the fifth year in which a life insurance company contributes to the Life Initiative, the amount of the credit available to a life insurance company shall be equal to 1.5% of the company's total capital contribution to the Life Initiative. The credit is effective for tax years beginning after investments in the Life Initiative reaches $100,000,000 or the tax year 2004, whichever is later.
(b) Full Proportionate Share. A life insurance company's full proportionate share shall mean an investment in the Life Initiative equal to at least the product of:
1. $20,000,000;
2. multiplied by a fraction, the numerator of which shall be the life insurance company's total net investment income tax due and payable for the tax year ending on or before December 31, 1997, and the denominator of which shall be the total net investment income tax due and payable for all life insurance companies doing business in Massachusetts for the tax year ending on or before December 31, 1997.
The Department shall determine each life insurance company's full proportionate share. Such information shall be provided to each life insurance company within 30 days of receipt of written request by such company. Full proportionate share determination requests are to be sent to the Commissioner at the following address:
Massachusetts Department of Revenue
Bureau of Desk Audit, Banking and Insurance Unit
P.O. Box 7052
Boston, MA 02204
(c) Full Proportionate Share Determinations for New Life Insurance Companies. If a life insurance company was not subject to the net investment income tax in the tax year ending on or before December 31, 1997, such company's full proportionate share shall mean an investment in the Life Initiative equal to at least the product of:
1. $20,000,000;
2. multiplied by a fraction, the numerator of which shall be the life insurance company's total net investment income tax due and payable for the taxable year two years prior to the current taxable year, and the denominator of which shall be the total net investment income tax due and payable for all life insurance companies doing business in Massachusetts for the tax year ending on or before December 31, 1997.
A newly formed life insurance company generally must be subject to the net investment income tax for at least two years before becoming eligible to participate in the Life Initiative. Only in the second year can such insurer calculate its full proportionate share.
The full proportionate share of a life insurance company formed after December 31, 1997, as a subsidiary of an existing life insurance company and capitalized from funds of the parent company will be zero, so long as the parent company is a contributing member of the Life Initiative.
The Department shall determine the full proportionate share of a life insurance company formed after December 31, 1997, as provided in 830 CMR 63.29.1(3)(b).
Example. The following example illustrates the provisions of 830 CMR 63.29.1(3)(c).
A newly formed life insurer (ABC) is established in 2001. In 2003, ABC becomes eligible to participate in the Life Initiative, since ABC is then able to calculate its full proportionate share, as follows:
$20,000,000 X ABC's net investment income tax for tax year ending 12/31/2001
Total net investment income tax for all life insurers for tax year
ending 12/31/1997
Any amounts ABC contributes above this amount is eligible for the credit against the premiums excise in 2003 and thereafter.
In general, a life insurance company not subject to tax under G.L. c. 63, § 22A is subject to an annual net investment income tax equal to 14% of its net investment income for the taxable year. M.G.L. c. 63, § 22B. Every such company which has contributed its full proportionate share to the Life Initiative for the current taxable year will be eligible for the following rate reductions:
(a) 12% for tax years beginning on or after the later of January 1, 1999 or the first year in which said company contributes its full proportionate share;
(b) 9.6% for tax years beginning on or after the second year in which said company contributes its full proportionate share;
(c) 7.2% for tax years beginning on or after the third year in which said company contributes its full proportionate share;
(d) 4.8% for tax years beginning on or after the fourth year in which said company contributes its full proportionate share;
(e) 2.4% for tax years beginning on or after the fifth year in which said company contributes its full proportionate share;
(f) No investment income tax shall be imposed for tax years beginning after the fifth year in which said company contributes its full proportionate share.
(a) General Rule. A property and casualty insurance company subject to the property and casualty insurance premiums excise will be allowed an annual credit against such excise if the company invests in the P&C Initiative an amount equal to 1.5% of the company's total capital contribution to the P&C Initiative in excess of its full proportionate share. For taxable years beginning on or after the fifth year in which a property and casualty insurance company contributes to the P&C Initiative, the amount of the credit available to a property and casualty insurance company shall be equal to 1.5% of the company's total capital contribution to the P&C Initiative. The credit is effective for tax years beginning after investments in the P&C Initiative reaches $100,000,000 or the tax year 2004, whichever is later.
(b) Full Proportionate Share. A property and casualty insurance company's full proportionate share shall mean an investment in the P&C Initiative equal to at least the product of:
1. $20,000,000;
2. multiplied by a fraction, the numerator of which shall be the property and casualty insurance company's total gross investment income tax for the tax year ending on or before December 31, 1997, and the denominator of which shall be the total gross investment income tax for all property and casualty insurance companies doing business in Massachusetts for the tax year ending on or before December 31, 1997.
The Department shall determine each property and casualty insurance company's full proportionate share. Such information shall be provided to each property and casualty insurance company within 30 days of receipt of written request by such company. Full proportionate share determination requests are to be sent to the Commissioner at the following address:
Massachusetts Department of Revenue
Bureau of Desk Audit, Banking and Insurance Unit
P.O. Box 7052
Boston, MA 02204
(c) Full Proportionate Share Determinations for New Property and Casualty Insurance Companies. If a property and casualty insurance company was not subject to the gross investment income tax in the tax year ending on or before December 31, 1997, such company's full proportionate share shall mean an investment in the P&C Initiative equal to at least the product of:
1. $20,000,000;
2. multiplied by a fraction, the numerator of which shall be the property and casualty insurance company's total gross investment income tax due and payable for the taxable year two years prior to the current taxable year, and the denominator of which shall be the total gross investment income tax for all property and casualty insurance companies doing business in Massachusetts for the tax year ending on or before December 31, 1997.
A newly formed property and casualty insurance company generally must be subject to the gross investment income tax for at least two years before becoming eligible to participate in the P&C Initiative. Only in the second year can such insurer calculate its full proportionate share.
The full proportionate share of a property and casualty insurance company formed after December 31, 1997 as a subsidiary of an existing property and casualty insurance company and capitalized from funds of the parent company will be zero, so long as the parent company is a contributing member of the P&C Initiative.
The Department shall determine the full proportionate share of a property and casualty insurance company formed after December 31, 1997, as provided in 830 CMR 63.29.1(5)(b).
Example. The following example illustrates the provisions of 830 CMR 63.29.1(5)(c).
A newly formed property and casualty insurer (XYZ) is established in 2001. In 2003, XYZ becomes eligible to participate in the P&C Initiative, since XYZ is then able to calculate its full proportionate share, as follows:
$20,000,000 X XYZ's gross investment income tax for tax year ending 12/31/2001
Total gross investment income tax for all property and casualty
insurers for tax year ending 12/31/1997
Any amounts XYZ contributes above this amount is eligible for the credit against the premiums excise in 2003 and thereafter.
In general, a property and casualty insurance company is subject to an annual gross investment income tax equal to 1% of its gross investment income for the taxable year. G.L. c. 63, § 22A. Every such company which has contributed its full proportionate share to the P&C Initiative for the current taxable year will be eligible for the following rate reductions:
(a) 0.8% for tax years beginning on or after the later of January 1, 1999 or the first year in which said company contributes its full proportionate share;
(b) 0.6% for tax years beginning on or after the second year in which said company contributes its full proportionate share;
(c) 0.4% for tax years beginning on or after the third year in which said company contributes its full proportionate share;
(d) 0.2% for tax years beginning on or after the fourth year in which said company contributes its full proportionate share;
(e) No gross investment income tax shall be imposed for tax years beginning on or after the fifth year in which said company contributes its full proportionate share.
(a) General Rule. A domestic property and casualty insurance company that pays retaliatory taxes will be allowed an annual credit against the property and casualty insurance premiums excise if such company contributes its full proportionate share to the P&C Initiative. Generally, the amount of the credit shall equal the retaliatory taxes payable to other jurisdictions for the preceding taxable year to the extent that such taxes are attributable to the surtax. Such credit is not refundable, and any company seeking the credit must furnish proof of payment of the retaliatory tax to the Commissioner, in the manner in which he may require.
(b) Allowable Credit. Retaliatory taxes credit amounts, in increasing percentages, are:
1. 20% for the tax year beginning on or after the later of January 1, 1999 or the first year in which said company contributes its full proportionate share;
2. 40% for the tax year beginning on or after the later of January 1, 2000 or the second year in which said company contributes its full proportionate share;
3. 60% for the tax year beginning on or after the later of January 1, 2001 or the third year in which said company contributes its full proportionate share;
4. 80% for the tax year beginning on or after the later of January 1, 2002 or the fourth year in which said company contributes its full proportionate share;
5. 100% for the tax year beginning on or after the later of January 1, 2003 or the fifth year in which said company contributes its full proportionate share.
(c) Limitations.
1. General Rule. If the total retaliatory taxes attributable to the surtax payable for the prior tax year for all domestic property and casualty insurance companies doing business in Massachusetts exceed $8,000,000, the amount of each domestic property and casualty insurance company's credit shall be limited to the lesser of the allowable credit or each company's credit share.
2. Credit Share. Credit share shall mean the product of the following:
a. $8,000,000;
b. multiplied by a fraction, the numerator of which shall be the domestic property and casualty insurance company's retaliatory taxes attributable to the surtax which would have been payable for the preceding taxable year, before application of the credit provided by 830 CMR 63.29.1 (5)(a), and the denominator of which shall be the total retaliatory taxes attributable to the surtax which would have been payable for the preceding taxable year, before application of the credit provided by 830 CMR 63.29.1(5)(a) for all domestic property and casualty insurance companies doing business in Massachusetts that have submitted information to the Commissioner as required by 830 CMR 63.29.1(5)(d).
The Commissioner shall report to each domestic property and casualty insurance company its credit share amount by February 15 of each taxable year.
(d) Reporting Requirements. A domestic property and casualty insurance company shall provide to the Commissioner, in such form as the Commissioner may require, the amount of its retaliatory taxes attributable to the surtax and payable for the preceding taxable year, before application of the credit provided by 830 CMR 63.29.1(5)(a), by December 31 of each taxable year.
The provisions in 830 CMR 63.29.1(8) apply to both life insurance companies and property and casualty insurance companies.
(a) Eligibility for Recalculation of Full Proportionate Share. An insurance company that existed on December 31, 1997 but which did not join the Life Initiative or the P&C Initiative, as applicable, prior to the promulgation of 830 CMR 63.29.1 may seek a recalculation of its full proportionate share from the Department if it has undergone a significant corporate restructuring on or after January 1, 1998.
(b) Significant Corporate Restructuring Defined. For purposes of 830 CMR 63.29.1(8), the term significant corporate restructuring shall be defined as follows:
1. an acquisition, divestiture or reorganization by an insurance company, and
2. an increase or decrease in the reserves of said insurance company by twenty-five percent or more during the three year period preceding its application to the Department for recalculation of its full proportionate share.
(c) Full Proportionate Share Recalculation Formula. An insurance company that is eligible for recalculation of its full proportionate share due to significant corporate restructuring shall recalculate its full proportionate share as:
1. $20,000,000;
2. multiplied by a fraction, the numerator of which shall be the amount of the insurance company's applicable Chapter 63 tax for the tax year ending on or before December 31 of the year immediately preceding the insurance company's application to the Department for recalculation, and the denominator of which shall be the aggregate Chapter 63 taxes for all similar insurance companies ( i.e. either life or property and casualty insurers) doing business in Massachusetts for the tax year ending on or before December 31, 1997.
REGULATORY AUTHORITY
830 CMR 63.29.1: M.G.L. c. 14, § 6(l); M.G.L. c. 62C, § 3.
REGULATORY HISTORY
Date of Promulgation: 4/11/03
