Title 44
Taxation

Chapter 17
Taxation of Insurance Companies

§ 44-17-1. Companies required to file — Payment of tax — Retaliatory rates.

(a) Every domestic, foreign, or alien insurance company, mutual association, organization, or other insurer, including any health maintenance organization as defined in § 27-41-2, any medical malpractice insurance joint underwriters association as defined in § 42-14.1-1, any nonprofit dental service corporation as defined in § 27-20.1-2 and any nonprofit hospital or medical service corporation as defined in chapters 19 and 20 of title 27, except companies mentioned in § 44-17-6 and organizations defined in § 27-25-1, transacting business in this state, shall, on or before April 15 in each year, file with the tax administrator, in the form that he or she may prescribe, a return under oath or affirmation signed by a duly authorized officer or agent of the company, containing information that may be deemed necessary for the determination of the tax imposed by this chapter, and shall at the same time pay an annual tax to the tax administrator of two percent (2%) of the gross premiums on contracts of insurance, except for ocean marine insurance as referred to in § 44-17-6, covering property and risks within the state, written during the calendar year ending December 31st next preceding.

(b) Qualifying insurers for purposes of this section means every domestic, foreign, or alien insurance company, mutual association, organization, or other insurer and excludes:

(1) Health maintenance organizations, as defined in § 27-41-2;

(2) Nonprofit dental service corporations, as defined in § 27-20.1-2; and

(3) Nonprofit hospital or medical service corporations, as defined in §§ 27-19-1 and 27-20-1.

(c) For tax years 2018 and thereafter, the rate of taxation may be reduced as set forth below and, if so reduced, shall be fully applicable to qualifying insurers instead of the two percent (2%) rate listed in subsection (a). In the case of foreign or alien companies, except as provided in § 27-2-17(d), the tax shall not be less in amount than is imposed by the laws of the state or country under which the companies are organized upon like companies incorporated in this state or upon its agents, if doing business to the same extent in the state or country. The tax rate shall not be reduced for gross premiums written on contracts of health insurance as defined in § 42-14-5(c) but shall remain at two percent (2%) or the appropriate retaliatory tax rate, whichever is higher.

(d) For qualifying insurers, the premium tax rate may be decreased based upon Rhode Island jobs added by the industry as detailed below:

(1) A committee shall be established for the purpose of implementing tax rates using the framework established herein. The committee shall be comprised of the following persons or their designees: the secretary of commerce, the director of the department of business regulation, the director of the department of revenue, and the director of the office of management and budget. No rule may be issued pursuant to this section without the prior, unanimous approval of the committee;

(2) On the timetable listed below, the committee shall determine whether qualifying insurers have added new qualifying jobs in this state in the preceding calendar year. A qualifying job for purposes of this section is any employee with total annual wages equal to or greater than forty percent (40%) of the average annual wages of the Rhode Island insurance industry, as published by the annual employment and wages report of the Rhode Island department of labor and training, in NAICS code 5241;

(3) If the committee determines that there has been a sufficient net increase in qualifying jobs in the preceding calendar year(s) to offset a material reduction in the premium tax, it shall calculate a reduced premium tax rate. Such rate shall be determined via a method selected by the committee and designed such that the estimated personal income tax generated by the increase in qualifying jobs is at least one hundred and twenty-five percent (125%) of the anticipated reduction in premium tax receipts resulting from the new rate. For purposes of this calculation, the committee may consider personal income tax withholdings or receipts, but in no event may the committee include for the purposes of determining revenue neutrality income taxes that are subject to segregation pursuant to § 44-48.3-8(f) or that are otherwise available to the general fund;

(4) Any reduced rate established pursuant to this section must be established in a rulemaking proceeding pursuant to chapter 35 of title 42, subject to the following conditions:

(i) Any net increase in qualifying jobs and the resultant premium tax reduction and revenue impact shall be determined in any rulemaking proceeding conducted under this section and shall be set forth in a report included in the rulemaking record, which report shall also include a description of the data sources and calculation methods used. The first such report shall also include a calculation of the baseline level of employment of qualifying insurers for the calendar year 2015; and

(ii) Notwithstanding any provision of the law to the contrary, no rule changing the tax rate shall take effect until one hundred and twenty (120) days after notice of the rate change is provided to the speaker of the house, the president of the senate, the house and senate fiscal advisors, and the auditor general, which notice shall include the report required under the preceding provision.

(5) For each of the first three (3) rulemaking proceedings required under this section, the tax rate may remain unchanged or be decreased consistent with the requirements of this section, but may not be increased. These first three (3) rulemaking proceedings shall be conducted by the division of taxation and occur in the following manner:

(i) The first rulemaking proceeding shall take place in calendar year 2017. This proceeding shall establish a rule that sets forth: (A) A new premium tax rate, if allowed under the requirements of this section, which rate shall take effect in 2018, and (B) A method for calculating the number of jobs at qualifying insurers;

(ii) The second rulemaking proceeding shall take place in calendar year 2018. This proceeding shall establish a rule that sets forth: (A) A new premium tax rate, if allowed under the requirements of this section, which rate shall take effect in 2019, and (B) The changes, if any, to the method for calculating the number of jobs at qualifying insurers; and

(iii) The third rulemaking proceeding shall take place in calendar year 2019. This proceeding shall establish a rule that sets forth: (A) A new premium tax rate, if allowed under the requirements of this section, which rate shall take effect in 2020, and (B) The changes, if any, to the method for calculating the number of jobs at qualifying insurers.

(6) The tax rate established in the regulation following regulatory proceedings that take place in 2019 shall remain in effect through and including 2023. In calendar year 2023, the department of business regulation will conduct a rulemaking proceeding and issue a rule that sets forth: (A) A new premium tax rate, if allowed under the requirements of this section, which rate shall take effect in 2024, and (B) The changes, if any, to the method for calculating the number of jobs at qualifying insurers. A rule issued by the department of business regulation may decrease the tax rate if the requirements for a rate reduction contained in this section are met, or it may increase the tax rate to the extent necessary to achieve the overall revenue level sought when the then-existing tax rate was established. Any rate established shall be no lower than one percent (1%) and no higher than two percent (2%). This proceeding shall be repeated every three (3) calendar years thereafter, however, the base for determination of job increases or decreases shall remain the number of jobs existing during calendar year 2022;

(7) No reduction in the premium tax rate pursuant to this section shall be allowed absent a determination that qualifying insurers have added in this state at least three hundred fifty (350) new, full-time, qualifying jobs above the baseline level of employment of qualifying insurers for the calendar year 2015;

(8) Notwithstanding any provision of this section to the contrary, the premium tax rate shall never be set lower than one percent (1%);

(9) The division of taxation may adopt implementation guidelines, directives, criteria, rules and regulations pursuant to chapter 35 of title 42 as are necessary to implement this section; and

(10) The calculation of revenue impacts under this section is at the sole discretion of the committee established under subsection (d)(1). Notwithstanding any provision of law to the contrary, any administrative action or rule setting a tax rate pursuant to this section or failing or declining to alter a tax rate pursuant to this section shall not be subject to judicial review under chapter 35 of title 42.