FISCAL NOTE
Date Requested: January 23, 2018
Time Requested: 12:10 PM |
| Agency: |
Insurance Commission |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1789 |
Introduced |
HB4266 |
|
|---|
| CBD Subject: |
Insurance |
|---|
|
FUND(S):
7152, 1331
Sources of Revenue:
Special Fund
Legislation creates:
Decreases Existing Revenue
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
If enacted, House Bill 4266 will have no direct fiscal impact on the operations of the Insurance Commissioner, but it will reduce revenues collected by the Insurance Commissioner and deposited into the Insurance Tax Fund for transfer by the State Treasurer to State General and Special Revenue accounts. See memorandum entry for estimates of the impact to Revenue.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2018
Increase/Decrease
(use"-") |
2019
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years.
Memorandum
House Bill 4266, if enacted, would eliminate taxation on annuity considerations collected and received by a life insurer. The OIC estimates that this would result in a reduction in net revenues of approximately $4.49 million per year.
The net annuity tax revenues collected under §33-3-15 for the prior three fiscal years are as follows:
FY2017 -$4,487,186.67
FY2016 -$5,056,402.76
FY2015-$3,935,740.00
The average net annuity collections for the three years is $4,493,109.81, however this average and the numbers above do not reflect the full amount of credits that may be taken in future periods against the taxes collected in these fiscal years.
Annuity tax paying companies that have elected to pay their taxes on a “front-end” basis can request a refund for any tax paid since the inception of the policy if it has not annuitized. Therefore, based on information collected during tax year 2016, there is approximately $26 million in potential refunds (1% of remaining premiums) that could be taken in future years, if the refunds are allowed on future filings once the annuity tax is removed. It is unknown what portion of the potential $26 million future credits / refunds of annuity taxes will be requested by the insurance companies in the future. If these credits are requested, it will occur over many future tax periods. For the past 5 years, credits and refunds on annuity taxes paid for “front-end” basis companies have averaged $1 million dollars annually.
1. HB4266 does not clearly state that the repeal of the annuity tax assessed per §33-3-15 effective January 1, 2018, will include the removal of future annuity tax credits and annuity tax refund amounts for front-end surrenders. If the ability to receive a credit or refund of annuity taxes paid for front end surrenders is not removed along with the annuity tax, then the it is estimated that an additional net revenue loss of an estimated $1 million per year will occur until all credits / refunds have expired. This would bring the total potential revenue tax reduction for the enactment of HB4266 to an estimated $5.5 million annually.
Person submitting Fiscal Note: Melinda Ashworth Kiss
Email Address: Melinda.A.Kiss@wv.gov