| Washington State House of Representatives Office of Program Research |
BILL ANALYSIS |
| Insurance, Financial Services & Consumer Protection Committee | |
HB 2593
This analysis was prepared by non-partisan legislative staff for the use of legislative members in
their deliberations. This analysis is not a part of the legislation nor does it constitute a
statement of legislative intent.
Brief Description: Reporting insurance premiums for tax purposes.
Sponsors: Representative Kirby; by request of Insurance Commissioner.
Brief Summary of Bill |
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Hearing Date: 1/15/08
Staff: Jon Hedegard (786-7127).
Background:
The Office of the Insurance Commissioner (OIC) regulates the business of insurance in the State
of Washington. Insurers are required to file financial reports with the OIC to assist in rate and
solvency regulation. Each March, insurers file annual statements reporting their financial
conditions, transactions, and affairs for the previous year to the OIC. The statement forms are in
the general form and context as approved by the National Association of Insurance
Commissioners. As part of its annual statement, an insurer must file a statement of premiums
that are collected or received on a form prescribed by the OIC. In every statement of premiums,
the reporting of premiums for tax purposes must be on a written basis or on a paid-for basis
consistent with the basis required by the annual statement.
The OIC also collects taxes on insurance premiums. The premium tax is a receipts tax that is
similar to the business and occupation tax. This tax is levied against an insurer's premium
volume at a rate of 2 percent. Insurers must pay the tax on or before March 1 of each year. All
premiums written, procured, or receive in Washington are deemed taxable except for those
premiums that are properly allocated or apportioned and reported as taxable in another state or
states.
"Written premium" is the amount that an insurer charges in return for coverage. Generally,
property casualty polices have the term of a year. Rates rarely change within the term of a policy.
If a policy term extends over a calendar year into another calendar year but the amount is paid in
the first year, it is counted in the first year.
"Paid-for premium" is the amount that an insurer receives in return for coverage. The reporting
of this sum is more likely to arise in situations where the contract is a life, health, or disability
policy. The contracts may be for an extended period of years or month-to-month. The premium
amounts can change over time. If coverage extends over a calendar year into another calendar
year, it is possible that part or the entire premium may be earned in the first year.
Summary of Bill:
The reporting of premiums for tax purposes must be consistent with the basis required by the
annual statement, whether it is on a written or a paid for basis.
Appropriation: None.
Fiscal Note: Requested on January 11, 2008.
Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.