BILL REQ. #:  S-1425.1 

Read first time 02/07/2007.   Referred to Committee on Financial Institutions & Insurance.

     AN ACT Relating to retaliatory tax relief on insurance premium taxes; and amending RCW 48.18.170, 48.18.180, and 48.02.190.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 48.18.170 and 1947 c 79 s .18.17 are each amended to read as follows:
     "Premium" as used in this code means all sums charged, received, or deposited as consideration for an insurance contract or the continuance thereof. "Premium" does not include a regulatory assessment imposed by RCW 48.02.190, except as otherwise provided in this section. Any assessment, or any "membership," "policy," "survey," "inspection," "service" or similar fee or charge made by the insurer in consideration for an insurance contract is deemed part of the premium.

Sec. 2   RCW 48.18.180 and 1994 c 203 s 2 are each amended to read as follows:
     (1) The premium stated in the policy shall be inclusive of all fees, charges, premiums, or other consideration charged for the insurance or for the procurement thereof.
     (2) No insurer or its officer, employee, agent, solicitor, or other representative shall charge or receive any fee, compensation, or consideration for insurance which is not included in the premium specified in the policy.
     (3) Each violation of this section is a gross misdemeanor.
     (4) This section does not apply to:
     (a) A fee paid to a broker by an insured as provided in RCW 48.17.270; or
     (b) A regulatory assessment imposed by RCW 48.02.190.

Sec. 3   RCW 48.02.190 and 2004 c 260 s 22 are each amended to read as follows:
     (1) As used in this section:
     (a) "Organization" means every insurer, as defined in RCW 48.01.050, having a certificate of authority to do business in this state and every health care service contractor or (([self-funded])) self-funded multiple employer welfare arrangement registered to do business in this state. "Class one" organizations shall consist of all insurers as defined in RCW 48.01.050. "Class two" organizations shall consist of all organizations registered under provisions of chapter 48.44 RCW. "Class three" organizations shall consist of self-funded multiple employer welfare arrangements as defined in RCW 48.125.010.
     (b)(i) "Receipts" means (A) net direct premiums consisting of direct gross premiums, as defined in RCW 48.18.170, paid for insurance written or renewed upon risks or property resident, situated, or to be performed in this state, less return premiums and premiums on policies not taken, dividends paid or credited to policyholders on direct business, and premiums received from policies or contracts issued in connection with qualified plans as defined in RCW 48.14.021, and (B) prepayments to health care service contractors as set forth in RCW 48.44.010(3) or participant contributions to self-funded multiple employer welfare arrangements as defined in RCW 48.125.010 less experience rating credits, dividends, prepayments returned to subscribers, and payments for contracts not taken.
     (ii) Participant contributions, under chapter 48.125 RCW, used to determine the receipts in this state under this section shall be determined in the same manner as premiums taxable in this state are determined under RCW 48.14.090.
     (c) "Regulatory assessment" means the fees imposed by this section.
     (2) The annual cost of operating the office of insurance commissioner shall be determined by legislative appropriation. A pro rata share of the cost shall be charged to all organizations as a regulatory assessment. Each class of organization shall contribute a sufficient ((in fees)) amount to the insurance commissioner's regulatory account to pay the reasonable costs, including overhead, of regulating that class of organization.
     (3) ((Fees charged)) The regulatory assessment shall be calculated separately for each class of organization. The ((fee charged)) assessment collected from each organization shall be that portion of the cost of operating the insurance commissioner's office, for that class of organization, for the ensuing fiscal year that is represented by the organization's portion of the receipts collected or received by all organizations within that class on business in this state during the previous calendar year((: PROVIDED, That)). However, the ((fee shall)) assessment must not exceed one-eighth of one percent of receipts((: PROVIDED FURTHER, That)) and the minimum ((fee)) assessment shall be one thousand dollars.
     (4) The commissioner shall annually, on or before June 1, calculate and bill each organization for the amount of ((its fee)) the regulatory assessment. ((Fees)) The assessment shall be due and payable no later than June 15 of each year((: PROVIDED, That)). However, if the necessary financial records are not available or if the amount of the legislative appropriation is not determined in time to carry out such calculations and bill such ((fees)) assessments within the time specified, the commissioner may use the ((fee)) assessment factors for the prior year as the basis for the ((fees)) assessment and, if necessary, the commissioner may impose supplemental fees to fully and properly charge the organizations. The penalties for failure to pay fees and assessments when due shall be the same as the penalties for failure to pay taxes pursuant to RCW 48.14.060. The ((fees)) assessment required by this section ((are)) is in addition to all other taxes and fees now imposed or that may be subsequently imposed.
     (5) All moneys collected shall be deposited in the insurance commissioner's regulatory account in the state treasury which is hereby created.
     (6) Unexpended funds in the insurance commissioner's regulatory account at the close of a fiscal year shall be carried forward in the insurance commissioner's regulatory account to the succeeding fiscal year and shall be used to reduce future ((fees)) assessments. During the 2003-2005 fiscal biennium, the legislature may transfer from the insurance commissioner's regulatory account to the state general fund such amounts as reflect excess fund balance in the account.
     (7)(a) Each insurer may annually collect assessments remitted in preceding years by means of a policyholder surcharge on premiums charged for all kinds of insurance. The surcharge shall be at a uniform rate reasonably calculated to collect the assessment remitted by the insurer.
     (b) If an insurer fails to collect the entire amount of the assessment in the first year under this section, it may repeat the surcharge procedure provided for in this subsection (7) in succeeding years until the assessment is fully collected or a de minimis amount remains uncollected. Any such de minimis amount may be collected as provided in (d) of this subsection.
     (c) The amount and nature of any surcharge shall be separately stated on either a billing or policy declaration sent to an insured. The surcharge must not be considered a premium for any purpose, including the premium tax or agents' commissions.
     (d) An insurer may elect not to collect the surcharge from its insured. In such a case, the insurer may recoup the assessment through its rates, if the following requirements are met:
     (i) The insurer remits the amount of surcharge not collected by election under this subsection; and
     (ii) The surcharge is not considered a premium for any purpose, including the premium tax or agents' commission.