When New York is the home state* of the insured, 100% of all written premium is subject to a 3.6% state premium tax rate even when the policy covers risks or property located in other states as well as New York. However, where the policy also covers risks outside the United States, only the portion of the premium attributable to the risk inside the United States is subject to 100% New York taxation. An excess line broker should utilize the appropriate allocation schedule contained in Regulation 41 for determining the premium allocable to United States risks or property. For a more detailed explanation, please see the “Excess Line Tax Allocation” ELANY Says.
Excess line premium tax is imposed on the excess line broker. The excess line broker can legally charge the tax back to the insured provided the insured signs a written memorandum agreeing to pay the tax in addition to the premium. The written memorandum is required by Insurance Law §2119. The memorandum is often referred to as a “Total Cost Form,” which is available on the ELANY website.
In late February/early March, ELANY issues to each excess line broker a data report reflecting the taxable premiums reported by that excess line broker for the prior year’s risks. If the excess line broker has properly reported all transactions to ELANY, the report makes easy work of the tax return the excess line broker must file electronically with the Department of Financial Services by March 15th each year for the preceding year’s risks.
Every licensee must file an electronic tax return with the Department of Financial Services even if no excess line business was produced. Failure to file will result in a penalty being imposed.
For a more comprehensive understanding of excess line taxes, please see the following ELANY educational and instructional videos: Taxes and Assessments on Excess Line and Other Non-Admitted Transactions and How to Complete and File an Excess Line Premium Tax Statement.
*The federal Nonadmitted and Reinsurance Reform Act (NRRA) prohibits any state, other than the insured’s home state, from charging premium tax on an excess line insurance policy.
This is not intended to be nor should it be construed as legal advice. Consult with your own legal counsel.
Last Reviewed/Revised: October 13, 2020