Senate Bill S7561

                                BILL NUMBER:S7561

TITLE OF BILL:
An act
to amend the insurance law, in relation to obligations for certain
taxes

PURPOSE OR GENERAL IDEA OF BILL:
The bill provides that certain
captive insurance companies no longer in the business of insurance as
of December 31, 2011 shall be treated as admitted insurance carriers
for the purpose of taxation, as long as they are not considered to be
overcapitalized captive insurance companies as defined in subdivision
11 of section 2 of the tax law.

SUMMARY OF SPECIFIC PROVISIONS:
Section 1 adds a new section 7013 to
the insurance law to provide that certain captive insurance companies
created pursuant to the insurance law and no longer in the business
of insurance as of December 31, 2011, shall be treated as admitted
insurance carriers for the purpose of taxation, as long as they are
not considered to be overcapitalized captive insurance companies as
that term is defined in subdivision 11 of section 2 of the tax law.
Section 2 provides for an immediate effective date.

JUSTIFICATION:
              

Since its enactment in 1997, the captive insurance
article in the insurance law has fostered the development of numerous
captive insurance companies in New York. Some of these carriers were
found to be overcapitalized (more assets within these companies than
were necessary to pay claims). This issue was address in 2009 tax law
amendments by limiting the tax benefits provided to these entities.
Many of the other captive insurance companies licensed in New York
since 1997, however, were not overcapitalized and operated as
legitimate insurance companies accepting risk, establishing
appropriate premiums and paying claims out of the proceeds of these
companies. For a variety of reasons, these companies are now being
considered to either not be legitimate risk transfer vehicles
(notwithstanding the licensing by the former Insurance Department and
the payment of premium taxes and section 332 assessments to support
the operation of the department) or otherwise not to be entitled to
the same tax treatment of other admitted insurance carriers. This new
section would clarify that these captives (which are now no longer in
operation in the state) would not be subject to new and different
interpretations of the tax and insurance
laws as well as retroactive taxation by the state.

PRIOR LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS:
The objective of this legislation is that such
tax liabilities were not due and owing by the affected captive
insurance companies, assuming they are not overcapitalized captives
and therefore subject to the aforementioned provision of tax law, with
no revenue to the state expected.


Therefore, there is no negative fiscal impact to the state. The
application of the legislation to discontinued captives assures that
this is a closed group and no captive still operating will be covered
by this legislation.

EFFECTIVE DATE:
Immediately.