Bills › 90th General Assembly
Relating to the taxation of captive companies, and including effective date provisions
Sponsored by the House Ways and Means (successor To Hsb 535) (companion To Sf 2397 By Committee on Ways and Means) Committee
Where it is now
- Done: IntroducedJanuary 23, 2024
- Done: SubcommitteeFebruary 8, 2024
- Done: House committeeFebruary 28, 2024
- Done: Passes the HouseMarch 19, 202494–0
- Skipped: Senate committeeSkipped
- Done: Passes the SenateApril 9, 202446–0
- Done: To the GovernorApril 19, 2024
- Done: Signed into lawApril 19, 2024
Signed into law What’s a funnel?
What’s in it
AI summary Captive insurance companies would pay different tax rates based on how much reinsurance premium they collect. The new rules change the tax percentages for different levels of income, including a new, lower tax rate for companies that collect more than $60 million.1
Read the official explanation
This bill relates to the calculation of the amount of reinsurance tax (tax) due from a captive company. The bill changes the amount of tax due from a captive company on the first $20 million of assumed reinsurance premiums from two-tenths of 1 percent to two hundred thousandths of 1 percent; the amount of tax due on the $20 million of assumed reinsurance premiums written after the first $20 million of assumed reinsurance premiums are written from one-eighth of 1 percent to one hundred twenty-five thousandths of 1 percent; and the amount of tax due on each dollar of assumed reinsurance premiums written after the first $40 million of assumed reinsurance premiums from 5 percent on each dollar to forty-five thousandths of 1 percent. The bill creates a new tier of reinsurance tax due on each dollar of assumed reinsurance premiums after the first $60 million of assumed reinsurance premiums in the amount of twenty thousandths of 1 percent of each dollar. The bill takes effect upon enactment.
Why it matters. Captive insurance companies would pay different tax rates on their assumed reinsurance premiums based on the total amount of premiums they write. These changes may decrease future tax revenue to the Captive Insurance Regulatory and Supervision Fund.2
Fiscal note
Can’t be estimated Compare with other bills
AI summary This bill changes the amount of reinsurance tax that captive insurance companies must pay on certain premiums. Because there is currently no market for captive insurance in the state, the fiscal impact to the state cannot be determined. The bill may decrease future tax revenue to the Captive Insurance Regulatory and Supervision Fund.4
Read the fiscal note
Description
House File 2636 relates to the taxation of captive companies. The Bill amends the amount of reinsurance tax due from a captive company on assumed reinsurance premiums written. The Bill takes effect upon enactment.
Background
2023 Iowa Acts, Senate File 549 (Captive Insurance Act), allowed for the formation of captive insurance companies and protected cell captive companies, established tax rates for captive insurance premiums, established requirements for the operation of captive insurance companies and protected cell captive companies, and created the Captive Insurance Regulatory and Supervision Fund.
Captive insurance companies are a form of self-insurance in which the insurance provider is owned entirely by the insurance holder. Captive insurance companies often work with traditional companies and may be an option for businesses to manage risks by underwriting their own insurance rather than paying premiums to a third-party insurer. Current and proposed reinsurance tax rates due from captive companies on assumed reinsurance premiums are shown in Figure 1 below.
Figure 1 — Reinsurance Premium Tax Rate Changes in HF 2636
Assumption
Changes in reinsurance tax rates for captive insurance premiums may have an impact on revenue collected in the Captive Insurance Regulatory and Supervision Fund, but the amount cannot be estimated, as there is not currently a market for captive insurance in the State.
Fiscal Impact
House File 2636 may decrease tax revenue to the Captive Insurance Regulatory and Supervision Fund in future years, as the Bill reduces the tax collected on each captive insurance company’s reinsurance premiums that are in excess of $40.0 million annually. Reinsurance premium taxes collected on a captive insurance company’s reinsurance premiums written between $40.0 million and $60.0 million will reduce from 5.000% to 0.045%, a 99.1% reduction. Reinsurance premium taxes collected on a captive insurance company’s reinsurance$0.0 to $20.0 $20.0 to $40.0 $40.0 to $60.0 $60.0 and Above Current Law 0.200% 0.125% 5.000% 5.000% Proposed Law 0.200% 0.125% 0.045% 0.020%
Amount of Assumed Reinsurance Premiums Written
(Dollars in Millions) premiums written in excess of $60.0 million will reduce from 5.000% to 0.020%, a 99.6% reduction.
There are not currently any reinsurance premium taxes collected on captive insurance companies; therefore, the fiscal impact to the State cannot be determined.
Sources
- Iowa Insurance Division, Department of Insurance and Financial Services
- Legislative Services Agency analysis
- Final Fiscal Note — Captive Insurance Companies, Reinsurance Tax · May 8, 2024
- Captive Insurance Companies, Reinsurance Tax · March 4, 2024
- Captive Insurance Companies, Reinsurance Tax · February 29, 2024
- Captive Insurance Companies, Reinsurance Tax · February 28, 2024