WASHINGTON (September 21, 2012) Legislation to adjust the tax code introduced in the U.S. Senate will help protect rural communities across the country by improving access to affordable insurance coverage, according to the National Association of Mutual Insurance Companies (NAMIC).
"Congress kept this longstanding provision in the 1986 tax code to help ensure predictability and stability for very small property/casualty insurance companies and their policyholders," said Jimi Grande, senior vice president of federal affairs for NAMIC. "Unfortunately, the provision was not indexed for inflation, and we need to fix it. Failing to do so is effectively a tax hike on these small insurers located on Main Street and primarily serving America's farms.
Introduced by Sens. Tom Harkin, D-Iowa, Charles Grassley R-Iowa, John D. Rockefeller, D-W.Va., and Amy Klobuchar, D-Minn., S.3594 would adjust the alternative tax liability limitation for small property/casualty insurance companies to their inflation adjusted levels and index them to inflation for the future.
"This bipartisan group of Senators should be commended for their hard work and dedication to America's rural communities," said Grande. Identical legislation has been introduced in the House of Representatives as HR 2198 by Rep. Erik Paulsen, R-Minn., along with co-sponsors Joe Donnelly, D-Ind., and Aaron Schock, R-Ill. Nearly 600 companies would be affected nationwide.
Under Section 831(b) of the Internal Revenue Code, certain small property/casualty insurers with direct or net written annual premiums not exceeding $1.2 million may elect to be taxed on their net investment incomes. This provision was enacted in 1986, but has not been adjusted to reflect the last 26 years of inflation. If it were indexed in order to account for inflationary changes since 1986, the investment income election would be $2,025,000.
"Mutual companies like these exist solely to serve the insurance needs of their policyholders, and especially for these smaller companies, play a vital role in their communities," Grande said.
Contact: Matt Brady
Public Affairs Director - Federal Affairs
Posted: Friday, September 21, 2012 2:04:27 PM. Modified: Tuesday, October 23, 2012 2:11:22 PM.
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