Florida has initiated audits on businesses paying captive premiums to assess the 5.3 per cent Independently Procured Tax (IPT).
Every insured who purchases insurance from another state or country with a "unauthorised foreign or alien insurer" is subject to a 5.3 per cent tax under Florida Statute Section 626.938, titled Report and tax of independently procured coverages.
The IPC tax is due on the forty-fifth day following each calendar quarter after the insurance is procured.
Delinquent taxes bear interest at six per cent per year, compounded annually.
The measure targets captive insurance entities, which often operate outside their business's state, bypassing local insurance companies and agents.
The state's strategy to audit and penalise non-compliant businesses seeks to ensure tax compliance and enhance revenue from insurance operations using out-of-state channels.
Despite the historical laxity of enforcing this tax, some US states have taken measures to collect it, including Texas, Washington and Florida.
Experts advised that businesses utilising captive insurance must now contemplate strategies to mitigate the tax impact, such as redesigning their programme and policies to limit the premium subject to the IPC tax or re-domiciling a captive to their home state.
