SECTION 3.831. Gross Premium Definitions for Property and Casualty; Life, Accident, and Health; Health Maintenance Organizations; and Title Insurance Companies; and Clarification of the Taxation on the Distribution of Title Premiums

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

(1) Gross premium definition for property and casualty companies--

(A) Gross premiums are the total gross amount of premiums, membership fees, assessments, dues, and any other considerations for the taxable year on insurance written on each and every kind of property or risk located in the state, with no deduction for premiums paid for reinsurance, and excluding:

(i) return premiums (i.e., unearned premiums returned to policyholders);

(ii) dividends paid to policyholders;

(iii) premiums received from other licensed companies for reinsurance; and

(iv) premium finance charges clearly identified in a premium note or other evidence of premium payable that are separately stated to the policyholder (i.e., invoice, billing, contract).

(B) The following non-taxable premiums are deducted from gross premiums in order to calculate taxable premiums:

(i) crop insurance reinsured by the Federal Crop Insurance Corporation under Federal Crop Insurance Act (7 U.S.C. §1508), §508;

(ii) premiums for the Property Protection Program for Underserved Areas under Insurance Code, Article 5.35-3.

(C) Gross premium defined in subparagraph (A) of this paragraph applies to every insurance carrier, including Lloyds, reciprocal exchanges, and any other organization or concern writing gross premiums from the business of fire, marine, inland marine, accident, credit, livestock, fidelity, guaranty, surety, casualty, employers' liability, or any other kind or character of insurance. However, the definition does not apply to:

(i) title insurance companies;

(ii) premium receipts from the business of life insurance, personal accident insurance, life and accident insurance, or health and accident insurance for profit, or health maintenance organization coverage;

(iii) fraternal benefit associations or societies in this state, non-profit group hospital service plans, stipulated premium companies, mutual assessment associations, companies or corporations regulated by the Insurance Code, Chapter 14, as amended; and

(iv) cooperative or mutual fire insurance companies administered by the members thereof solely for the protection of their own property and not for profit.

(2) Gross premium definition for life, health, and accident insurance companies and health maintenance organizations--

(A) Gross premiums are the total gross amount of all premiums, including membership fees, assessments, dues and any other consideration received during the taxable year, with no deduction for premiums paid for reinsurance, on each and every kind of life, accident, or health insurance policy or contract that covers persons who are located in the State of Texas, or the gross amount of revenues for the issuance of health maintenance organization certificates or contracts, and excludes:

(i) return premiums (i.e., unearned premiums returned to policyholders);

(ii) dividends applied to purchase paid-up additions to life insurance or to shorten the endowment or premium payment period for life insurance policies;

(iii) premiums that an insurance carriers receives from another insurance carrier for reinsurance (a stop-loss or excess-loss insurance policy issued to a health maintenance organization is considered reinsurance);

(iv) premium finance charges that are clearly identified in a premium note or other evidence of premium payable, and that are separately stated to the policyholder (i.e., invoice, billing, contract);

(v) premiums received from the State Comptroller or from the Treasury of the United States for accident and health insurance or health maintenance organization coverage for which the state or federal government contracts for the purpose of providing welfare benefits to designated welfare recipients, or for insurance for which the state or federal government contracts in accordance with, or in furtherance of the provisions of the Human Resource Code, Title 2, or the Federal Social Security Act; and

(vi) premiums paid on group health, accident, and life insurance policies or health maintenance organization coverage in which the group covered has established a single non-profit trust to provide coverage primarily for employees of:

(I) a municipality, county, or hospital district in this state; or

(II) a county or municipal hospital, without regard to whether the employees are employees of the county or municipality or another entity that operates the hospital on behalf of the county or municipality.

(B) The following non-taxable premiums are deducted from gross premiums in order to calculate taxable premiums:

(i) group benefits provided under Insurance Code, Articles 3.50-2, 3.50-3, and 3.50-4;

(ii) premiums for the Texas 65 Health Insurance Plan under Insurance Code, Article 3.71; and

(iii) premiums for the Federal Employees Health Benefit Program under United States Code, Title 5, §8909.

(C) The definition of gross premiums does not include annuities or annuity considerations. Therefore, annuities and annuity consideration are not subject to premium taxation under Article 4.11. However, annuities and annuity considerations are included for purposes of Article 4.17, Maintenance Tax on Gross Premiums, and are taxed accordingly. Maintenance taxes are assessed when annuities are purchased from insurance companies (at the time of annuitization), which is typically known as back-end reporting.

(D) The gross premium definition in subparagraph (A) of this paragraph applies to every insurance carrier that receives premiums from the business of life insurance, accident insurance, health insurance, life and accident insurance, life and health insurance, health and accident insurance, or life, health and accident insurance, including variable life insurance, credit life insurance, and credit accident and health insurance for profit or otherwise or for mutual benefit or protection in the State of Texas, and to every health maintenance organization that receives revenues for the issuance of certificates or contracts in the State of Texas.

(3) Gross premium definition for title insurance companies--Gross premiums are the total gross amount of premiums, membership fees, dues, and any other considerations received by the title insurer or its agent for the taxable year on title insurance written on property located in this state with no deduction for premiums paid for reinsurance, and excludes:

(A) premiums received from other licensed title insurance companies for reinsurance; and

(B) return premiums paid to policyholders.

(4) Taxation on distribution of title insurance premiums--

(A) Premium and maintenance taxes are levied on all amounts defined to be title premiums whether paid to the title insurance company or retained by the title insurance agent.

(B) The collection of the title premium tax and maintenance fee remitted to the comptroller on the premium retained by the title agent is incorporated in the division of the premium between insurer and agent so that the insurer receives the premium tax and maintenance fee due on the agent's portion of the premium.

(C) Title insurers and title agents are both subject to the premium and maintenance tax on their proportional share of the premiums and are separately liable for the tax if the insurer fails to remit the tax due on the agent's portion.

(D) The insurer is required to remit to the comptroller the total title premium and maintenance taxes due.

Source Note: The provisions of this §3.831 adopted to be effective May 17, 1996, 21 TexReg 3948; amended to be effective May 23, 2001, 26 TexReg 3632