The Minnesota Department of Revenue has proposed changes to Form IG255 that will require individuals or businesses buying insurance directly from a non-admitted insurer to report their non-admitted direct procured insurance premium tax.
The state’s department of revenue explained that the proposed updates define more clearly what non-admitted insurance means and further clarify the types of direct procured insurance policies that must be reported to the department for insurance premium tax.
It said, in addition to surplus lines policies purchased directly from non-admitted insurance companies, premiums paid to a captive insurance company must also be reported on Form IG255.
Under Minnesota law, an insured headquartered in the state that directly procures insurance from a non-admitted insurer must pay a Minnesota tax equal to 2 percent of the premiums paid.
Individuals or businesses that are required to file and pay self-procured insurance tax are required to file Form IG255 and pay the tax by 1 March for any premiums paid during the previous calendar year.
However, Ryan Sugden and Peter Thrane of Stinson explained that Minnesota's insurance taxation statutes “do not define what constitutes a captive”.
Sudgen and Thrane said: “The text of the revised form does not provide an explanation of what is considered a captive for purposes of this tax.”
“Insureds directly procuring insurance from an insurer falling within the broad ambit of what constitutes a captive will need to evaluate each placement to determine whether a transaction is subject to the tax and to consider strategies for mitigating the tax,” they added.
