A1266

An Act concerning the taxation of surplus lines of insurance and amending P.L.1960, c.32.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 25 of P.L.1960, c.32 (C.17:22-6.59) is amended to read as follows:

25. The premiums charged for surplus lines coverages are subject to a premium receipts tax of [5%] 3% of all gross premiums less any return premiums charged for such insurance. The surplus lines agent shall collect from the insured, either directly or through the originating broker, the amount of the tax, in addition to the full amount of the gross premium charged by the insurer for the insurance; provided, however, that the tax on any unearned portion of the premium shall be returned to the policyholder by the surplus lines agent. The surplus lines agent is prohibited from absorbing such tax, or, as an inducement for insurance or for any other reason, rebating all or any part of such tax or of his commission.

The surplus lines agent shall forward to the commissioner together with his quarterly report submitted pursuant to section 24 of P.L.1960, c.32 (C.17:22-6.58) a check in the amount of the premium receipts tax due for that period made out to "the State of New Jersey," except that where the policies cover fire insurance on property in any municipality or portion of a township, or fire district in this State, which now has or may hereafter have, a duly incorporated firemen's relief association, [3% of] the premium receipts tax covering such insurance shall be paid to the treasurer of the New Jersey State Firemen's Association [and the remaining 2% of the premium receipts tax shall be forwarded to the commissioner].

The tax imposed hereunder, if delinquent, shall be subject to the provisions of R.S.54:49-3 and R.S.54:49-4.

The check covering taxes paid under the provisions of this act shall be forwarded by the commissioner to the Director of the Division of Taxation and that portion of the premiums representing fire insurance shall be distributed by him in the amount now or hereafter provided by law as to taxes collected by him from fire insurance companies of other states and foreign countries. The commissioner shall ascertain and report to the Director of the Division of Taxation all facts necessary to enable the director to ascertain, fix and collect the amount of the tax to be paid by each licensee subject thereto under this act.

If a surplus lines policy covers risks or exposures in this State

and other states, where this State is the home state, as defined in section 7 of P.L.1960, c.32 (C.17:22-6.41), the tax payable pursuant to this section shall be based on the total United States premium for the applicable policy.

This section does not apply as to insurance of or with respect to insurance of risks of the State Government or its agencies, or of any county or municipality or of any agency thereof.

(cf: P.L.2011, c.119, s.2.)

2. Section 30 of P.L.1960, c.32 (C.17:22-6.64) is amended to read as follows:

30. Every insured who in this State procures or causes to be procured or continues or renews insurance with an unauthorized foreign or alien insurer, or any insured or self-insurer who procures or continues excess loss, catastrophe or other insurance, upon a subject of insurance resident, located or to be performed within this State, other than insurance procured through a surplus lines agent pursuant to the surplus lines law of this State or exempted from tax under section 25 of P.L.1960, c.32 (C.17:22-6.59), shall within 30 days after the date such insurance was so procured, continued, or renewed, file a report of the same with the commissioner in writing and upon forms designated by the commissioner and furnished to such an insured upon request. The report shall show the name and address of the insured or insureds, name and address of the insurer, the subject of the insurance, a general description of the coverage, the amount of premium currently charged therefor, and such additional pertinent information as is reasonably requested by the commissioner.

Any insurance in an unauthorized insurer procured through negotiations or an application, in whole or in part occurring or made within or from within this State, or for which premiums in whole or in part are remitted directly or indirectly from within this State, shall be deemed to be insurance procured, or continued or renewed in this State within the intent of this section.

There is hereby levied upon the obligation, chose in action, or right represented by the premium charged for such insurance, a tax at the rate of [5%] 3% of the gross amount of such premium less any return premiums charged for such insurance. Within 30 days after the insurance was so procured, continued or renewed, and coincidentally with the filing with the commissioner of the report provided for in this section, the insured shall pay the amount of the tax to the commissioner, who, after reviewing the above report, shall turn over the amount of the tax to the Director of the Division of Taxation along with a summary of the facts necessary to enable the director to ascertain and fix the proper amount of the tax, except that where the policies cover fire insurance on property in any municipality or portion of a township, or fire district in this State, which now has or may hereafter have, a duly incorporated firemen's relief association, [3% of] the premium receipts tax covering such insurance shall be paid to the treasurer of the New Jersey State Firemen's Association [and the remaining 2% of the premium receipts tax shall be forwarded to the commissioner].

If the insured fails to withhold from the premium the amount of tax herein levied, the insured shall be liable for the amount thereof and shall pay the same to the commissioner within the time specified in this section.

If a surplus lines policy covers risks or exposures in this State and other states, where this State is the home state, as defined in section 7 of P.L.1960, c.32 (C.17:22-6.41), the tax payable pursuant to this section shall be based on the total United States premium for the applicable policy.

The tax imposed hereunder if delinquent shall be subject to the provisions of R.S.54:49-3 and R.S.54:49-4.

The tax shall be collectible from the insured by civil action brought by the commissioner.

The amount of taxes paid to the Director of the Division of Taxation under the provisions of this section on premiums for fire insurance shall be distributed by him in the manner now or hereafter provided by law as to taxes collected by him from fire insurance companies of other states and foreign countries.

This section does not abrogate or modify, and shall not be construed or deemed to abrogate or modify, any provision of section 3 of P.L.1960, c.32 (C.17:22-6.37), representing or aiding unauthorized insurer prohibited; section 4 of P.L.1960, c.32 (C.17:22-6.38), penalty for representing unauthorized insurer; or section 5 of P.L.1960, c.32 (C.17:22-6.39), suits by unauthorized insurers prohibited; or any other provision of this Title.

This section does not apply as to life or disability insurances.

(cf: P.L.2011, c.119, s.3)

3. This act shall take effect on January 1, 2013.

STATEMENT

This bill decreases the premium receipts tax for surplus lines coverage, whether procured directly by the insured or through a surplus lines agent, from 5% to 3%. This decrease represents a reduction in this tax to the same level at which it existed prior to the enactment of P.L.2009, c.75.

Additionally, in response to this decrease, the bill clarifies that of the 3% premium receipts tax paid, all of it shall be paid to the treasurer of the New Jersey State Firemen’s Association in the case of any surplus lines policies that cover fire insurance on property located in a municipality or fire district with a duly incorporated firemen’s relief association. This is merely a continuation of the current law’s dedication, and accounts for the bill’s elimination of the additional 2% tax on such policies, which under P.L.2009, c.75 was forwarded to the Commissioner of Banking and Insurance.