SECTION 3.830. Premium Tax Credit for Examination Expenses and Valuation Fees

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Direct examination expenses--These expenses include travel (food, lodging, and transportation) and miscellaneous expenses incurred by Texas Department of Insurance (TDI) examiner(s) during the examination of an insurer.

(2) Indirect examination expenses--These expenses include TDI examiner salaries, any costs paid directly by the insurance company under examination to third party examiners hired by the TDI to conduct the examination, the overhead assessment, and examination expenses paid to other State of Texas regulatory agencies.

(3) Overhead assessment--The overhead assessment is billed by the TDI to cover the operating expenses of the examinations section. These expenses include, but are not limited to, support staff salaries, utilities, rent, office equipment, furniture and fixtures, supplies, and miscellaneous expenses.

(4) Rehabilitation fees--These fees are assessed on companies that have undergone a successful rehabilitation by TDI to cover the costs of the rehabilitation.

(5) Valuation fee--An annual fee which is assessed by the TDI on Texas domestic life insurance carriers. The fee is used to offset the cost of valuing life insurance policies issued by these carriers. The fee is based on the amount of direct life insurance in force at the end of the calendar year and is reported on the Annual Maintenance, Assessment and Retaliatory Report (Form 25-102).

(b) Examination expense credit.

(1) Domestic insurers may elect to maintain all or a portion of their books and records outside of Texas under the Insurance Code, Article 1.28. Companies electing to maintain their books and records out of state are allowed to claim indirect examination expenses and the overhead assessment, as defined in subsection (a) of this section, paid during the tax year as a credit.

(2) Domestic insurers who maintain all of their books and records in Texas and foreign insurers can claim direct examination expenses, indirect examination expenses, and the overhead assessment, as defined in subsection (a) of this section, paid during the tax year as a credit.

(c) Valuation fee credit. This credit can be taken by any company that has paid the valuation fee during the tax year for which the premium tax is due.

(d) Limitation of credit. The aggregate of the examination expense credit and the valuation fee credit is limited to the premium tax liability due prior to the application of any premium tax prepayments and/or guaranty association assessment credits available. Any credit which exceeds the premium tax liability for a given year is lost and cannot be carried forward to future year(s) nor carried back to previous year(s). Only examination expenses specifically enumerated in subsection (a) of this section are allowed to be used in the computation of the examination expense credit. Rehabilitation fees assessed by the TDI under the Insurance Code, Article 21.28, are not allowed as a credit.

Source Note: The provisions of this §3.830 adopted to be effective August 6, 1996, 21 TexReg 7045.