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91A.080 License tax on insurance companies.
(1)
(2)
(3)
(4)
(5)
The legislative body of each local government which elects to impose and
collect license fees or taxes upon insurance companies for the privilege of
engaging in the business of insurance may, except as provided in subsection
(10) of this section, enact or change its license fee or rate of tax to be effective
July 1 of each year on a prospective basis only and shall file with the
commissioner of insurance at least one hundred (100) days prior to the
effective date, a copy of all ordinances and amendments which impose a
license fee or tax. No less than eighty-five (85) days prior to the effective date,
the commissioner of insurance shall promptly notify each insurance company
engaged in the business of insurance in the Commonwealth of those local
governments which have elected to impose the license fees or taxes and the
current amount of the license fee or rate of tax.
Any license fee or tax imposed by a local government upon an insurance
company with respect to life insurance policies may be based upon the first
year's premiums, and, if so based, shall be applied to the amount of the
premiums actually collected within each calendar quarter upon the lives of
persons residing within the corporate limits of the local government.
Any license fee or tax imposed by a local government upon any insurance
company with respect to any policy which is not a life insurance policy shall be
based upon the premiums actually collected by the insurance company within
each calendar quarter on risks located within the corporate limits of the local
government on those classes of business which the insurance company is
authorized to transact, less all premiums returned to policyholders. In
determining the amount of license fee or tax to be collected and to be paid to
the local government, the insurance company shall use the tax rate effective on
the first day of the policy term. When an insurance company collects a
premium as a result of a change in the policy during the policy term, the tax
rate used shall be the rate in effect on the effective date of the policy change.
With respect to premiums returned to policyholders, the license fee or tax shall
be returned by the insurance company to the policyholder pro rata on the
unexpired amount of the premium at the same rate at which it was collected
and shall be taken as a credit by the insurance company on its next quarterly
report to the local government.
The Department of Insurance shall, by administrative regulation, provide for a
reasonable collection fee to be retained by the insurance company or its agent
as compensation for collecting the tax, except that the collection fee shall not
be more than fifteen percent (15%) of the fee or tax collected and remitted to
the local government or two percent (2%) of the premiums subject to the tax,
whichever is less. To facilitate computation, collection, and remittance of the
fee or tax and collection fee provided in this section, the fees or taxes set out in
subsection (1), (2), or (3) of this section, together with the collection fee in this
section, may be rounded off to the nearest dollar amount.
Pursuant to KRS 304.3-270, if any other state retaliates against any Kentucky
domiciliary insurer because of the requirements of this section, the
commissioner of insurance shall impose an equal tax upon the premiums
written in this state by insurers domiciled in the other state.
(6)
(7)
(8)
(9)
Accounting and reporting procedures for collection and reporting of the fees or
taxes and the collection fee herein provided shall be determined by
administrative regulations promulgated by the Department of Insurance.
(a) Upon written request of the legislative body of any local government, at
the expense of the requesting local government, which shall be paid in
advance by the local government to the Department of Insurance, the
Department of Insurance shall audit, or cause to be audited by contract
with qualified auditors, the books or records of the insurance companies
or agents subject to the fee or tax to determine whether the fee or tax is
being properly collected and remitted, and the findings of the audit shall
be reported to the local government and the insurance company subject
to the audit. An insurance company may appeal the findings of the audit
conducted under this subsection and any assessment issued pursuant to
the audit findings in accordance with the provisions of KRS 91A.0804(5).
(b) Willful failure to properly collect and remit the fee or tax imposed by a
local government pursuant to the authority granted by this section shall
constitute grounds for the revocation of the license issued to an insurance
company or agent under the provisions of KRS Chapter 304.
(c) If the Department of Insurance finds that an insurance company has
willfully engaged in a pattern of business conduct that fails to properly
collect and remit the fee or tax imposed by a local government pursuant
to the authority granted by this section, the Department of Insurance may
assess the responsible insurance company an appropriate penalty fee no
greater than ten percent (10%) of the additional license fees or taxes
determined to be owed to the local government. The penalty fee shall be
paid to the local government owed the license fee or tax less any
administrative costs of the Department of Insurance in enforcing this
section. Any insurance company or agent held responsible for a penalty
fee may request a hearing with the Department of Insurance to be
conducted pursuant to KRS 304.2-310 to 304.2-370 regarding the finding
of a willful violation and the subsequent penalty fee.
The license fees or taxes provided for by subsections (2) and (3) of this section
shall be due thirty (30) days after the end of each calendar quarter. Annually,
by March 31, each insurance company shall furnish each local government to
which the tax or fee is remitted with a breakdown of all collections in the
preceding calendar year for the following categories of insurance:
(a) Casualty;
(b) Automobile;
(c) Inland marine;
(d) Fire and allied perils;
(e) Health; and
(f) Life.
Any license fee or tax not paid on or before the due date shall bear interest at
the tax interest rate as defined in KRS 131.010(6) from the date due until paid.
Such interest payable to the local government is separate of penalties provided
for in subsection (7) of this section. In addition, the local government may
(10)
(11)
(12)
(13)
(14)
assess a ten percent (10%) penalty for a tax or fee not paid within thirty (30)
days after the due date.
No license fee or tax imposed under this section shall apply to premiums
received on:
(a) Policies of group health insurance provided for state employees under
KRS 18A.225;
(b) Policies insuring employers against liability for personal injuries to their
employees or the death of their employees caused thereby, under the
provisions of KRS Chapter 342;
(c) Health insurance policies issued to individuals;
(d) Policies issued through Kentucky Access created in Subtitle 17B of KRS
Chapter 304;
(e) Policies for high deductible health plans as defined in 26 U.S.C. sec.
223(c)(2); or
(f) Multistate surplus lines, defined as non-admitted insurance as provided in
Title V, Subtitle B, the Non-Admitted and Reinsurance Reform Act of
2010, of the Dodd-Frank Wall Street Reform and Consumer Protection
Act, Pub. L. No. 111-203.
No county may impose the tax authorized by this section upon the premiums
received on policies issued to public service companies which pay ad valorem
taxes.
Insurance companies which pay license fees or taxes pursuant to this section
shall credit city license fees or taxes against the same license fees or taxes
levied by the county, when the license fees or taxes are levied by the county on
or after July 13, 1990. For purposes of this subsection, a consolidated local
government, urban-county government, charter county government, or unified
local government shall be considered a county.
No license fee or tax imposed under this section shall apply to premiums paid
to insurers of municipal bonds, leases, or other debt instruments issued by or
on behalf of a city, county, charter county government, urban-county
government, consolidated local government, special district, nonprofit
corporation, or other political subdivision of the Commonwealth. However, this
exemption shall not apply if the bonds, leases, or other debt instruments are
issued for profit or on behalf of for-profit or private organizations.
A county may impose a license fee or tax covering the entire county or may
limit the application of the fee or tax to the unincorporated portions of the
county.
Effective:June 8, 2011
History: Amended 2011 Ky. Acts ch. 48, sec. 2, effective June 8, 2011. -Amended 2010 Ky. Acts ch. 24, sec. 75, effective July 15, 2010; and ch. 165,
sec. 4, effective July 15, 2010. -- Amended 2008 Ky. Acts ch. 94, sec. 5,
effective July 15, 2008. -- Amended 2005 Ky. Acts ch. 31, sec. 1, effective June
20, 2005; and ch. 144, sec. 14, effective June 20, 2005. -- Amended 2004 Ky.
Acts ch. 28, sec. 1, effective July 13, 2004. -- Amended 2001 Ky. Acts ch. 164,
sec. 5, effective June 21, 2001. -- Amended 2000 Ky. Acts ch. 425, sec. 2,
effective July 14, 2000; and ch. 476, sec. 30, effective July 14, 2000. -Amended 1998 Ky. Acts ch. 82, sec. 14, effective July 15, 1998. -- Amended
1992 Ky. Acts ch. 244, sec. 1, effective July 14, 1992. -- Amended 1990 Ky.
Acts ch. 481, sec. 1, effective July 13, 1990. -- Repealed, reenacted, and
amended 1988 Ky. Acts ch. 334, sec. 1, effective July 15, 1988. -- Amended
1984 Ky. Acts ch. 52, sec. 1, effective July 13, 1984; and ch. 170, sec. 1,
effective January 1, 1985. -- Created 1982 Ky. Acts ch. 434, sec. 13, effective
July 15, 1982.
Legislative Research Commission Note (6/8/2011). 2011 Ky. Acts ch. 48, sec. 5,
provided that the provisions contained in Sections 2, 3, and 4 of that Act "shall
take effect as provided in Article XIII of Section 1 of this Act, upon legislative
enactment of the compact into law by two compacting states, provided the
commission shall become effective for purposes of adopting rules, and creating
the clearinghouse when there are a total of ten compacting states and
contracting states or, alternatively, when there are compacting states and
contracting states representing greater than 40 percent of the surplus lines
insurance premium volume based on records of the percentage of surplus lines
insurance." The Reviser of Statutes has determined that, as of April 8, 2011, two
states had enacted the compact, thereby triggering the initial effective date of
the compact. Since 2011 Ky. Acts ch. 48, did not contain an emergency clause,
this section became effective June 8, 2011, the normal effective date for 2011
legislation.
Legislative Research Commission Note (7/15/2010). 2010 Ky. Acts ch. 165,
sec. 7, provides, "Notwithstanding any other statutory provision to the contrary,
no license fee or tax imposed under KRS 91A.080 shall apply to premiums paid
to insurance companies or surplus lines brokers by non-profit self-insurance
groups whose membership consists of cities, counties, charter county
governments, urban-county governments, consolidated local governments,
school districts, or any other political subdivisions of the Commonwealth." 2010
Ky. Acts ch. 165, sec. 8, states, "Section 7 of this Act is effective for and applies
to the fiscal year beginning July 1, 2010, and ending June 30, 2011, and fiscal
year beginning July 1, 2011, and ending June 30, 2012, and shall expire at the
end of June 30, 2012."
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