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Code of Virginia
Title 58.1. Taxation
Chapter 25. License Tax on Certain Insurance Companies
11/26/2020

Article 1. Levy.

§ 58.1-2500. Definitions.

As used in this chapter the term or phrase:

"Commission" means the State Corporation Commission.

"Company" means any association, aggregation of individuals, business, corporation, individual, joint-stock company, Lloyds type of organization, organization, partnership, receiver, reciprocal or inter-insurance exchange, trustee or society.

"Department" means the Department of Taxation.

"Direct gross premium income" means the gross amount of all premiums, assessments, dues and fees collected, received or derived, or obligations taken therefor, from business in this Commonwealth during each year ending December 31, excluding premiums received for reinsurance assumed from licensed insurance companies, without any deduction for dividends paid or deduction on any other account except for premiums returned on cancelled policies, or on account of reduction in rates or reduction in the amount insured, and excluding premiums received or derived to provide insurance of the kinds classified in §§ 38.2-102 and 38.2-109 issued on a group basis by an insurance company insuring its employees, agents and representatives. In computing direct gross premium income on insurance issued by mutual insurance companies other than life insurance companies, refunds or returns made to policyholders otherwise than for losses may be deducted.

"Estimated tax" means the amount which the insurance company estimates as the amount of the tax imposed by this chapter for the license year, measured by direct gross premium income received or derived in the taxable year.

"Insurance company" means any company engaged in the business of making contracts of insurance.

"License year" means the 12-month period beginning on July 1 next succeeding the taxable year and ending on June 30 of the subsequent year.

"Preceding year's tax" means the tax as ascertained on the preceding year's tax report.

"Subscriber fee income" means the gross premium or deposit income collected, received or derived from and credited to the accounts of subscribers from business in the Commonwealth during the preceding year ending December 31, decreased by all returns for cancellation and all amounts returned to subscribers or credited to their accounts as savings.

"Tax" means the amount derived by multiplying the direct gross premium income in the taxable year by the tax rate.

"Taxable year" means the calendar year preceding the license year upon the basis of which direct gross premium income is computed. The term includes, in the case of direct gross premium income for a fractional part of a calendar year, the period in which such direct gross premium income is received or derived from business in this Commonwealth.

Code 1950, §§ 58-486, 58-502, 58-502.1, 58-502.2; 1952, c. 190; 1954, c. 207; 1966, c. 264; 1968, c. 13; 1978, c. 4; 1984, c. 675; 1998, c. 365; 2003, c. 372; 2011, c. 850.

§ 58.1-2501. Levy of license tax.

A. For the privilege of doing business in the Commonwealth, there is hereby levied on every insurance company defined in § 38.2-100 which issues policies or contracts for any kind of insurance classified and defined in §§ 38.2-102 through 38.2-134 and on every corporation which issues subscription contracts for any kind of plan classified and defined in §§ 38.2-4201 and 38.2-4501, an annual license tax as follows:

1. For any kind of insurance classified and defined in §§ 38.2-109 through 38.2-134 or Chapters 44 (§ 38.2-4400 et seq.) and 61 (§ 38.2-6100 et seq.) of Title 38.2, except workers' compensation insurance on which a premium tax is imposed under the provisions of § 65.2-1000, such company shall pay a tax of two and three-fourths percent of its subscriber fee income or direct gross premium income on such insurance for each taxable year through 1988. For taxable year 1989 and each taxable year thereafter, such company shall pay a tax of two and one-fourth percent of its subscriber fee income or direct gross premium income on such insurance;

2. For policies or contracts for life insurance as defined in § 38.2-102, such company shall pay a tax of two and one-fourth percent of its direct gross premium income on such insurance. However, with respect to premiums paid for additional benefits in the event of death, dismemberment or loss of sight by accident or accidental means, or to provide a special surrender value, special benefit or an annuity in the event of total and permanent disability, the rate of tax shall be two and three-fourths percent for each taxable year beginning January 1, 1987, through December 31, 1988, and two and one-fourth percent for taxable year beginning January 1, 1989, and each taxable year thereafter;

3. For policies or contracts providing industrial sick benefit insurance as defined in § 38.2-3544, such company shall pay a tax of one percent of its direct gross premium income on such insurance. No company, however, doing business on the legal reserve plan, shall be required to pay any licenses, fees or other taxes in excess of those required by this section on such part of its business as is industrial sick benefit insurance as defined in § 38.2-3544; but any such company doing business on the legal reserve plan shall pay on all industrial sick benefit policies or contracts on which the sick benefit portion has been cancelled as provided in § 38.2-3546, or which provide a greater death benefit than $250 or a greater weekly indemnity than $10, and on all other life, accident and sickness insurance, the same license or other taxes as are required by this section; and

4. For subscription contracts for any kind of plan classified and defined in § 38.2-4201 or § 38.2-4501, such corporation shall pay a tax of two and one-fourth percent of its direct gross subscriber fee income derived from subscription contracts issued to primary small groups as defined in § 38.2-3431 and three-fourths of one percent of its direct gross subscriber fee income derived from other subscription contracts for taxable year 1997. For each of taxable years 1998 through 2013, such corporation shall pay a tax of three-fourths of one percent of its direct gross subscriber fee income derived from subscription contracts issued to individuals and from open enrollment contracts as defined in § 38.2-4216.1, and two and one-fourth percent of its direct gross subscriber fee income derived from other subscription contracts. For each taxable year thereafter, such corporation shall pay a tax of two and one-fourth percent of its direct gross subscriber fee income derived from all subscription contracts. The declaration of estimated tax pursuant to this subsection shall commence on or before April 15, 1988.

B. Notwithstanding any other provisions of this section, any domestic insurance company doing business solely in the Commonwealth which is purely mutual, has no capital stock and is not designed to accumulate profits for the benefit of or pay dividends to its members, and any domestic insurance company doing business solely in the Commonwealth, with a capital stock not exceeding $25,000 and which pays losses with assessments against its policyholders or members, shall pay an annual license tax of one percent of its direct gross premium income.

Code 1950, §§ 58-490, 58-491, 58-492, 58-501; 1952, c. 190; 1968, c. 13; 1978, c. 658; 1984, c. 675; 1987, cc. 565, 655; 1997, cc. 807, 913; 2004, c. 668; 2013, cc. 136, 210.

§ 58.1-2501.1. Premium tax; travel insurance.

A. As used in this section:

"Blanket travel insurance" has the same meaning ascribed thereto in § 38.2-1887.

"Primary certificate holder" has the same meaning ascribed thereto in § 38.2-1887.

"Primary policyholder" has the same meaning ascribed thereto in § 38.2-1887.

"Travel assistance services" has the same meaning ascribed thereto in § 38.2-1887.

"Travel insurance" has the same meaning ascribed thereto in § 38.2-1887.

B. A travel insurer shall pay premium tax as provided in § 58.1-2501 on travel insurance premiums paid by any of the following:

1. A primary policyholder who is a resident of the Commonwealth;

2. A primary certificate holder that is a resident of the Commonwealth; or

3. A blanket travel insurance policyholder that is a resident of the Commonwealth or that has its principal place of business or the principal place of business of an affiliate or subsidiary that has purchased blanket travel insurance in the Commonwealth for eligible blanket group members, subject to apportionment rules that apply to the insurer across multiple taxing jurisdictions or that permits the insurer to allocate premiums on an apportioned basis in a reasonable and equitable manner in those jurisdictions.

C. A travel insurer shall (i) document the state of residence or principal place of business of the primary policyholder or primary certificate holder and (ii) report as premium only the amount allocable to travel insurance and not any amounts received for travel assistance services or cancellation fee waivers.

2019, cc. 266, 346.

§ 58.1-2502. Exemptions and exclusions.

Nothing in this chapter shall be construed to require any tax, other than taxes imposed upon property and the license tax imposed by § 38.2-4127:

1. Upon fraternal benefit societies as defined in § 38.2-4100.

2. Upon any mutual assessment fire insurance company as defined in §§ 38.2-2501 and 38.2-2503 which (i) confines its business to not more than four contiguous counties and cities located therein and wholly surrounded thereby in the Commonwealth, if any such city has a population of not more than 30,000, or (ii) confines its business to more than four contiguous counties in the Commonwealth if such counties together have a population not in excess of 100,000.

3. Upon premiums derived from workers' compensation insurance on which a premium tax is imposed under the provisions of § 65.2-1000.

4. Upon consideration for contracts for annuities as defined in § 38.2-106.

Code 1950, §§ 58-493, 58-494; 1952, c. 190; 1956, c. 527; 1960, c. 452; 1977, c. 248; 1984, c. 675.

§ 58.1-2503. When tax payable.

The annual license tax shall be transmitted to the Department on or before March 1 of each year for deposit into the state treasury.

Code 1950, § 58-489; 1952, c. 190; 1968, c. 13; 1978, c. 4; 1984, c. 675; 2011, c. 850.

§ 58.1-2504. Companies commencing business.

A. The license tax on a company commencing business in the Commonwealth shall be paid to the Department before the license is issued. If a payment is made in an amount subsequently found to be in error, the Department shall, if an additional amount is due, notify the taxpayer of the additional amount due and the company shall pay such amount within 30 days of the date of the notice, and, if an overpayment is made, issue a refund as provided for in § 58.1-2505.

B. No license to transact the business of insurance shall be issued by the Commission for less than a year except to a company when it first commences business in the Commonwealth, in which case the initial license shall be issued for that part of the year from the date of the issuance of the license to June 30 following.

Code 1950, §§ 58-487, 58-489; 1952, c. 190; 1968, c. 13; 1978, c. 4; 1984, c. 675; 2011, c. 850; 2013, cc. 29, 163.

§ 58.1-2505. Amount of license tax for company commencing business.

The license tax on a company commencing business in the Commonwealth shall be measured by an estimate of direct gross premium income reasonably expected to be derived from such business in the Commonwealth from the time of commencing business to December 31 following. Every estimate made under this section shall be subject to review by the Department after the close of the year for which the estimate is made and, if there is any variance between the estimate and the actual direct gross premium income, the Department shall issue a refund or provide notice of the assessment of additional license tax depending on whether such estimate was in excess of or less than the actual direct gross premium income of such company for such year.

Code 1950, § 58-488; 1952, c. 190; 1968, c. 13; 1984, c. 675; 2011, c. 850; 2013, cc. 29, 163.

§ 58.1-2506. Reports to the Department.

Every company subject to the provisions of this chapter shall, on or before March 1 of each year, report under oath to the Department, upon forms to be furnished or approved by and in such detail as may be prescribed by the Department, the direct gross premium income derived from its business in the Commonwealth during the preceding year ending December 31.

Code 1950, § 58-497; 1952, c. 190; 1978, c. 4; 1984, c. 675; 1997, c. 419; 2011, c. 850.

§ 58.1-2507. Penalties for failure to make report or pay tax; revocation of license; recovery by suit.

A. Every company failing to make the report required by § 58.1-2506 shall be fined $50 for each day's failure to make the report.

B. Upon the failure of any such company to pay the license tax within the time required by this chapter, there shall be added to such tax a penalty of 10 percent of the amount of the tax and interest at a rate equal to the rate of interest established pursuant to § 58.1-15 for the period between the due date and the date of full payment. The Department shall notify the taxpayer of all additional amounts owed, and the taxpayer shall pay such amounts within 30 days of the date of the notice. If an overpayment is made, the Department shall issue a refund of the amount of the overpayment to the taxpayer pursuant to subsection B of § 58.1-2526. The Commission may suspend or revoke the company's license to do business in this Commonwealth pursuant to § 38.2-1040 upon notification by the Department that the additional amounts due are not paid. The Department shall proceed to recover the tax, penalty and interest (i) in the same manner as is done for any other tax administered by the Department or (ii) by proceedings brought to subject any bonds or other securities deposited by such company with the Treasurer.

C. If such failure is due to providential or other good cause shown to the satisfaction of the Department, such return or payment or return and payment may be accepted exclusive of penalties; however, such company shall pay interest on such tax as prescribed in subsection B.

Code 1950, § 58-498; 1952, c. 190; 1968, c. 13; 1978, c. 4; 1984, c. 675; 2003, c. 372; 2011, c. 850; 2013, cc. 29, 163.

§ 58.1-2508. Taxes applicable to insurance companies.

A. The real estate and tangible personal property, situated or located in the Commonwealth, of every such company and every fraternal benefit society transacting insurance in the Commonwealth shall be listed and assessed on the land and property books of the commissioner of the revenue in the same manner as other real estate and tangible personal property are assessed, and shall be taxed at the same rates as other like property is taxed.

B. The license tax provided in this chapter, the tax on real estate and tangible personal property provided for in subsection A, the fee assessed by the Commission for the administration of the insurance laws pursuant to Chapter 4 (§ 38.2-400 et seq.) of Title 38.2, the fee assessed by the Commission for the Fire Programs Fund pursuant to § 38.2-401, the fee assessed by the Commission for the Dam Safety, Flood Prevention and Protection Assistance Fund pursuant to § 38.2-401.1, the fee assessed by the Commission to fund the program to reduce losses from motor vehicle thefts pursuant to § 38.2-414, the fee assessed by the Commission to fund the program to reduce losses from insurance fraud pursuant to § 38.2-415, and the retaliatory amounts assessed by the Department pursuant to § 38.2-1026 shall be in lieu of all fees, licenses, taxes and levies whatsoever, state, county, city or town; however, nothing in this section shall be construed to exempt insurance companies from the tax levied in Chapter 6 (§ 58.1-600 et seq.) of this title. No additional fee or license tax shall be applicable to an agent of an insurance company other than the annual license fee on agents required pursuant to Article 3 (§ 38.2-1819 et seq.) of Chapter 18 of Title 38.2.

Code 1950, §§ 58-499, 58-500; 1952, c. 190; 1984, c. 675; 1985, c. 545; 1992, c. 678; 1996, c. 22; 1998, c. 590; 2001, c. 706; 2006, cc. 648, 765; 2011, c. 850.

§ 58.1-2509. Certain other provisions not affected by chapter.

Nothing in this chapter shall be construed to affect or apply to the law providing that the expenses of maintaining the division or bureau of the Commission which administers the insurance laws of the Commonwealth shall be paid by the insurance companies doing business therein, and the law providing that the expense of keeping the bonds deposited with the State Treasurer shall be paid by the insurance company depositing such bonds.

Code 1950, § 58-495; 1952, c. 190; 1984, c. 675.

§ 58.1-2510. Tax credit for retaliatory costs paid to other states.

A. For license years beginning on and after July 1, 1998, every qualified company shall be allowed a credit against the tax imposed by § 58.1-2501 in an amount equal to the retaliatory costs incurred during the corresponding taxable year as a result of the difference between other states' lower premium tax rates and other costs and the tax rates and costs imposed by the Commonwealth of Virginia. For license years beginning on and after July 1, 2006, and taxable years ending on and after December 31, 2006, the amount of the credit for those qualified companies not receiving a credit for the taxable year 2000 shall be limited to 60 percent of the retaliatory costs paid to other states for those companies.

B. As used in this section:

"Affiliate" of a specific company or a company "affiliated" with a specific company means a company that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with the company specified. A company shall be deemed to control, be controlled by, or be under common control with the company specified if their relationship to each other is such that one company owns at least 80 percent of the voting power of the other company or at least 80 percent of the voting power of all companies is owned by the same interests.

"Affiliated insurance group" means two or more affiliated companies (i) at least one of which is a domestic insurance company and (ii) each of which is in the business of insurance, leasing, financial services, or providing administrative or other support for other members of the group, or is a holding company for the other members of the group.

"Domestic insurance company" means any insurance company incorporated or organized under the laws of this Commonwealth and headquartered within this Commonwealth.

"Permanent full-time position" means a position of an indefinite duration in this Commonwealth requiring a minimum of 35 hours of an employee's time a week for the entire normal year of the company's operations, which "normal year" shall consist of at least 48 weeks. Seasonal or temporary positions and positions in building and grounds maintenance, security, and other such positions which are ancillary to the principal business of the employer shall not qualify as new, permanent full-time positions.

"Qualified company" means a domestic insurance company that (i) has made a qualified investment in this Commonwealth and (ii) for license years beginning on or after July 1, 1998, maintained the employment level required for a qualified investment, such level to be measured as of December 31 of the corresponding taxable year. The foregoing requirements may be satisfied by either the domestic insurance company or collectively by all the members of the affiliated insurance group of which the qualified company is a member.

"Qualified full-time employee" means an employee filling a permanent full-time position with a domestic insurance company or member of an affiliated insurance group.

"Qualified investment" means an investment in this Commonwealth by a domestic insurance company or any one or more members of an affiliated insurance group that results in (i) an increase as of December 31, 1997, of at least 325 qualified full-time employees above such company's or group's total combined employment level in this Commonwealth on December 31, 1996, or (ii) during any taxable year beginning on or after January 1, 2001, such company or group having more than 100 qualified full-time employees in this Commonwealth during that entire taxable year.

"Retaliatory cost" means the additional regulatory costs, including any taxes or fees exacted for the privilege of doing business, paid by a Virginia-domiciled insurer to another state pursuant to a law of such state requiring, when an insurer domiciled in such other state is subject to regulatory costs in this Commonwealth that are greater than those imposed by such other state on insurers domiciled in this Commonwealth, the Virginia-domiciled insurer to pay additional regulatory costs to equal the regulatory costs imposed by this Commonwealth on an insurer domiciled in such other state. Such term, however, shall not include penalties or interest for late payment of taxes, fees or other charges, fines or penalties assessed as the result of the violation of laws of such other state, or sums paid in settlement or compromise of alleged violations of such laws.

C. Applications for a credit and for a refund of excess taxes may be submitted by a qualified company individually or on behalf of the members of an affiliated insurance group on or before March 1 next succeeding the end of the taxable year. Any payment of the tax imposed under § 58.1-2501, including any credit claimed under this section, shall be deemed to have been made with the return filed on March 1 reporting such tax and claiming any credits or on the last day prescribed for the timely filing of such return or, if later, the actual date of payment or notice of denial of any credits claimed hereunder. An amended application or return may be filed, and a credit claimed under this section, within one year of the payment of the tax for such year. Applications shall be submitted with a form approved by the Department and signed by an independent certified public accountant licensed by the Commonwealth who states that the domestic insurance company or affiliated insurance group, as applicable, is eligible for the credit claimed.

D. Any credit provided pursuant to this section shall be taken after all other applicable credits. Any credit not taken by a domestic insurance company may be taken by other members of an affiliated insurance group. Any credit not used to offset tax for the taxable year in which the credit was allowed may be, to the extent not so used, carried forward to future taxable years until the entire credit amount is used. Unused credits, including credits carried forward from previous years, exclusive of refunds due to overpayment or other sources, per domestic insurance company or affiliated insurance group, as applicable, shall be refunded to such company, or to the members of such group as they may agree, upon filing a refund application with the Department, in an amount not exceeding $800,000 annually, except for those qualified companies receiving a credit in taxable year 2000, which may file a refund application with the Department for taxable years beginning on and after January 1, 2011, for an amount not exceeding $7 million, annually. Refunds for unused credits shall first be applied to reduce the oldest unused credits. Refunds, including refunds based on the application of credits and overpayments of estimated taxes, shall be made after July 1 following the filing of the refund application and paid out of the state treasury.

E. If two or more domestic insurance companies paying retaliatory costs in any year are members of an affiliated insurance group, the total of the retaliatory costs paid may be combined and apportioned among the members of the affiliated insurance group as the members may agree.

F. The failure of a domestic insurance company or members of an affiliated insurance group to qualify for a new credit under this section in any year shall not affect its ability to use credits carried over from previous years.

1998, c. 365; 2009, c. 567; 2011, cc. 817, 850, 863.

§ 58.1-2511. Reserved.

Reserved.