Current through Register 1518, March 29, 2024
(1)
Statement of Purpose; Outline of Topics; Effective
Date.
(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 April 11,
2003.
(2)
Definitions. 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
and 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 and 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.
(3)
Life Insurance Premiums Excise Credit.
(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).
$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
(4)
Net Investment Income Tax
Rate Reduction. 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.
(5)
Property and Casualty
Insurance Premiums Excise Credit
(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.
(6)
Gross Investment Income Tax
Rate Reduction. 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.
(7)
Retaliatory Taxes Credit For
Domestic Property and Casualty Insurance Companies.
(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.
(8)
Corporate Restructuring. 830 CMR 63.29.1(8) applies 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 April 11, 2003 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 25% 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
31st 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.