The North Carolina General Assembly is considering legislation to exempt ‘foreign’ captive insurance companies from all state taxes.
‘Foreign’ captive insurance companies are those domiciled outside of North Carolina but within the US.
North Carolina does not currently tax captives that do business in or write coverage in the state but are chartered in other states.
The specific tax exemptions are for premium taxes, corporate income taxes, franchise taxes, privilege taxes and insurance regulatory charges imposed by the North Carolina Department of Insurance.
The considered legislation would also prohibit the North Carolina Department of Revenue from taxing premiums taxes, for example, by a captive domiciled outside of North Carolina doing business and insuring a risk located in the state.
Originally contained in SB 715, the exemption language has now been absorbed into and combined with the annual State Budget Changes for 2018-2019, which is contained in the Conference Committee Substitute for SB 99.
Since the original Captive Insurance Act was passed in 2013, it has been the stated policy of both North Carolina and the North Carolina Captive Insurance Association (NCCIA) to encourage both ‘foreign’ captives and ‘alien’ captives, those domiciles offshore, to redomicile in the state.
As part of that policy, the NCCIA is considering advocating for a ‘premium tax holiday’ in 2019, as an incentive to attract both on and offshore captives into the state.
This incentive would offset the one-time costs of redomiciling, and the association has suggested it may spur health care providers, banks, and other organisations to relocate their captive to North Carolina.
