On May 12, 2021, Washington State Governor Jay Inslee signed into law Second Substitute Senate Bill 5315 (SSSB 5315), which details the applicability of:
An overview of the law and how it could impact your business follows.
Washington law provides that Washington-authorized insurers are subject to a 2% premium tax on the amount of premiums written. Based on past guidance and communications, the Washington Office of the Insurance Commissioner (OIC) held the position that captive insurers are subject to the premium tax.
SSSB 5315 confirms that eligible captive insurers are subject to the premium tax on premiums for insurance directly procured by and provided to its parent or another affiliate for Washington risks during the preceding calendar years.
Washington risks means the share of risk covered by the premiums that’s allocable to Washington, based on either:
An eligible captive insurer means an insurance company that has the following characteristics:
Eligible captive insurers may provide only property and casualty insurance.
Within 120 days after May 12, 2021, or, if later, 120 days after first issuing a policy that covers Washington risks, an entity acting as an eligible captive insurer must register with the OIC.
Registration will be approved if:
Taxes on premiums are due from an eligible captive insurer for any period after January 1, 2011, if not previously remitted to the commissioner.
Taxes due for periods before July 1, 2021, aren’t subject to penalties or interest if captive insurers register with the OIC before September 12, 2021.
However, for periods beginning July 1, 2021, a registered eligible captive insurer is subject to penalties and interests.
For questions regarding the new captive insurer legislation, contact your Moss Adams professional.
Special thanks to Cory Van Arnum, senior, State & Local Tax Services, for contributions to this article.