VOLUME 3; NUMBER 6
JUNE 2017
(SOUTHERN PINES)….Below is a legislative update from NCCIA as the NC General Assembly moves toward adjournment. By the time this Newsletter is distributed, the State House will probably be empty – no Representatives or Senators, no staffers, lobbyists or petitioning interest groups or citizens. On Thursday, the name of the game was to complete the calendar and like Congress in DC, get out of town for the week of Fourth of July. Since January 11, the legislative process has been monitored closely by the NCCIA,
Lane Brown, VP of Government Affairs wrote the following report from Raleigh on recent developments affecting the NC Captive Insurance Industry.
An Administrative Perspective: Working closely with Debbie Walker, Deputy Commissioner for the Captive Division at NC Department of Insurance, NCCIA lobbied members of the Appropriations Committees to fund additional positions at NCDOI needed to process the growing workload of Captive insurance applications. Representative Linda Johnson (R-Cabarrus), one of the Co-Chairs. of the House Budget conferees, was successful in getting 5 critical new positions reinstated and funded in the Budget Conference Report (Senate Bill 257, June 19, 2017). These CIC critical jobs had been deleted by the Senate early in the Appropriations process.
NC Premium Tax Calculation: Initiated by NCDOI working in concert with the NC Department of Revenue (“DOR”), the Association supported these tax calculation amendments to the NC Revenue Laws [NCGS 105-228.4A(a), (f) and (g)]. These tax law technical changes are incorporated into Senate Bill 628, which received final House approval on June 28. Working with Finance Chr. Jason Sain, Rep. Johnson was able to include the premium tax changes in the House floor amendment. When the Senate failed to concur in non-captive revenue law changes made by the House, Conferees were appointed on the 29th to resolve differences. The aggregate tax payable for a CIC (other than a protected cell CIC or special purpose CIC) shall not be less than $5,000. The minimum tax for a protected cell or a special purpose CIC shall not be less than $5,000 and shall apply to a protected cell or special purpose CIC as a whole and not to each cell or series. Most importantly, a further amendment in S628 clearly states that the maximum premium tax liability attributed to any one cell or series of the CIC is limited to $100,000; however, a maximum tax liability of $500,000 applies to any one call or series that acts as a direct-writing , risk-polling mechanism for other cells, series or captive insurers. These minimum and maximum dollar caps will become important to CICs as they grow, providing needed certainty to the industry regarding NC premium taxes. Subject to signing by the Governor (no veto expected), these provisions of S628 become effective for tax years beginning on or after January, 1, 2017. Details can be found at www.ncgeneralassembly.com. Click bill link for S628
Breaking News Development Regarding S628: After this Newsletter was prepared on the 29th, it was learned on Friday morning, the 30th, that the General Assembly failed to complete the enactment process for the revenue technical corrections bill. More specifically, the House and Senate Conferees were unable to reach an agreement on a sales tax issue unrelated to CIC premium tax issues! Thus the bill goes over for further consideration to a Special Session called for August 3, 2017. Hopefully, the S628 bill will be ratified legislative history by the time the NCCIA Annual Conference kicks off in Charlotte at the Ballantyne Resort on August 21.
IRS Notice 2016-66: This issue remains much debated and of major concern to CICs making the IRC Section 831(b) election. While the extended IRS filing deadline of May 1st is now behind us, CICs are looking to see which states will require a similar reporting. NCDOR advised NCDOI on May 12 that Revenue “has decided to send letters to all licensed NC CICs instructing them to send [DOR] a copy of all materials they filed with the IRS per Notice 2016-66…..However, this will most likely be a onetime request [with optional filing by mail or by fax].” NCCIA has vigorously opposed the IRS Notice at the federal and state levels, briefing NC Congressmen on March 1st; supporting the TN litigation seeking to enjoin implementation of the IRS Notice; proposing rescission pursuant to the Congressional Review Act; and urging Treasury to rescind the Notice pursuant to Executive Order No. 13789. Representative Johnson sought to block any NC reporting obligations for CIC “transactions of interest” via an amendment to S628 previously discussed. That effort was unsuccessful; with adjournment this week, it is also doubtful that any NCDOR restriction would be included in a Technical Corrections Bill in a later Special Session of the General Assembly. However, NCDOI has made a very strong case to Revenue that similar state reporting is unnecessary in light of annual reporting obligations by NC licensed captives to Department regulators and tax treaties between NCDOR and the IRS calling for information sharing between the tax authorities. Rescission by Executive Branch action per EO 13789 will legally resolve most industry objections to the Notice.
Now is the time to register for the NC Captive Insurance Association’s Annual Conference August 21-23 in Charlotte at the Ballantyne Hotel & Lodge. This year’s Conference has more of everything, educational content, CLE & CPA continuing education hours and opportunities for networking to name a few. To register, see the agenda and for hotel information go to (CLICK HERE).
The Staff of the NCCIA wishes you a safe and wonderful holiday remembering the great country now entrusted to us by General Washington, the Founding Fathers and the men and women who died in the Revolution to make possible our celebration today.