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last updated on March 13, 2008

SMALL PROPERTY/CASUALTY INVESTMENT INCOME ELECTION

THE ISSUE IS…to increase the small property/casualty insurance company investment income election (Internal Revenue Code Section 831(b)(2)) to reflect the inflationary impact since its enactment in 1986.

IT'S IMPORTANT BECAUSE…Section 831(b) of the Internal Revenue Code allows property/casualty insurance companies with direct or net written annual premiums not exceeding $1,200,000 to elect to be taxed on their net investment income. This election level has not changed since the Tax Reform Act of 1986 created Section 831(b). If it were indexed in order to account for inflationary changes since 1986, the investment income election would be $1,971,000.

NAMIC has led the legislative effort to increase the Section 831(b) level. In the 108th Congress, NAMIC was successful in getting this provision included in the FSC/ETI “JOBS” bill that was passed by both the House and Senate. Unfortunately, in order to achieve revenue neutrality many provisions were ultimately removed from the final package and the 831(b) provision was one of these casualties and the issue carried over to the 109th Congress.

In the 109th Congress, NAMIC succeeded in getting legislation introduced to increase the Section 831(b) investment income election from the current $1.2 million to $1.971 million with an annual cost-of-living adjustment. H.R. 3360 was introduced by Rep. Jim Nussle (R-Iowa) and its companion bill, S. 1553, was introduced by Senator Kit Bond (R-MO). Although there was no movement on the legislation, NAMIC worked tirelessly to gain further support and educate members of Congress about the importance of this legislation.

In the 110th Congress, NAMIC was successful in having legislation introduced again. Senators Blanche Lincoln, D-Ark., and Christopher “Kit” Bond, R-Mo., introduced S. 2040, which would increase the Section 831(b) investment income election from the current $1.2 million to $1.971 million with an annual cost-of-living adjustment. Through the Congressional Contact Program (CCP), NAMIC and its member companies discussed the importance of this legislation with 340 Representatives and Senators.

This remains a top legislative priority for NAMIC in 2008.

NAMIC POSITION…NAMIC strongly supports the expansion of Section 831(b)(2). The modification of this section is very important to the communities that depend on small property/casualty insurance companies to provide them with affordable property insurance. Many small companies are approaching the current $1.2 million limit and both they and their customers will be adversely impacted if it is not raised. With the increased election level, tied to an annual adjustment in the cost-of-living, these insurance companies can continue to keep premiums low in rural areas where larger insurers either do not write coverage or charge higher premiums than consumers can afford.

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Benjamin Franklin Public Policy Award

Every two years, NAMIC presents their coveted Benjamin Franklin Public Policy Award© to lawmakers who have supported a stronger insurance market at least 75 percent of the time. This is demonstrated based on their support of NAMIC's position on certain roll call votes taken, or being a principal player/sponsor on legislation affected the property/casualty insurance industry, during the previous Congress.