KRS § 91A.080 — KY Code / Title IX / Chapter 91A / Section 91A.080
91A.080 License tax on insurance companies
Status: in_force

91A.080 License tax on insurance companies.

(1) The legislative body of each local government which elects to impose and collect

license fees or taxes upon insurance companies for the privilege of engaging in the

business of insurance may, except as provided in subsection (10) of this section,

enact or change its license fee or rate of tax to be effective July 1 of each year on a

prospective basis only and shall file with the commissioner of insurance at least one

hundred (100) days prior to the effective date, a copy of all ordinances and

amendments which impose a license fee or tax. No less than eighty-five (85) days

prior to the effective date, the commissioner of insurance shall promptly notify each

insurance company engaged in the business of insurance in the Commonwealth of

those local governments which have elected to impose the license fees or taxes and

the current amount of the license fee or rate of tax.

(2) Any license fee or tax imposed by a local government upon an insurance company

with respect to life insurance policies may be based upon the first year's premiums,

and, if so based, shall be applied to the amount of the premiums actually collected

within each calendar quarter upon the lives of persons residing within the corporate

limits of the local government.

(3) Any license fee or tax imposed by a local government upon any insurance company

with respect to any policy which is not a life insurance policy shall be based upon

the premiums actually collected by the insurance company within each calendar

quarter on risks located within the corporate limits of the local government on those

classes of business which the insurance company is authorized to transact, less all

premiums returned to policyholders. In determining the amount of license fee or tax

to be collected and to be paid to the local government, the insurance company shall

use the tax rate effective on the first day of the policy term. When an insurance

company collects a premium as a result of a change in the policy during the policy

term, the tax rate used shall be the rate in effect on the effective date of the policy

change. With respect to premiums returned to policyholders, the license fee or tax

shall be returned by the insurance company to the policyholder pro rata on the

unexpired amount of the premium at the same rate at which it was collected and

shall be taken as a credit by the insurance company on its next quarterly report to

the local government.

(4) The Department of Insurance shall, by administrative regulation, provide for a

reasonable collection fee to be retained by the insurance company or its agent as

compensation for collecting the tax, except that the collection fee shall not be more

than fifteen percent (15%) of the fee or tax collected and remitted to the local

government or two percent (2%) of the premiums subject to the tax, whichever is

less. To facilitate computation, collection, and remittance of the fee or tax and

collection fee provided in this section, the fees or taxes set out in subsection (1), (2),

or (3) of this section, together with the collection fee in this section, may be rounded

off to the nearest dollar amount.

(5) Pursuant to KRS 304.3-270, if any other state retaliates against any Kentucky

domiciliary insurer because of the requirements of this section, the commissioner of

insurance shall impose an equal tax upon the premiums written in this state by

insurers domiciled in the other state.

(6) Accounting and reporting procedures for collection and reporting of the fees or

taxes and the collection fee herein provided shall be determined by administrative

regulations promulgated by the Department of Insurance.

(7) (a) Upon written request of the legislative body of any local government, at the

expense of the requesting local government, which shall be paid in advance by

the local government to the Department of Insurance, the Department of

Insurance shall audit, or cause to be audited by contract with qualified

auditors, the books or records of the insurance companies or agents subject to

the fee or tax to determine whether the fee or tax is being properly collected

and remitted, and the findings of the audit shall be reported to the local

government and the insurance company subject to the audit. An insurance

company may appeal the findings of the audit conducted under this subsection

and any assessment issued pursuant to the audit findings in accordance with

the provisions of KRS 91A.0804(5).

(b) Willful failure to properly collect and remit the fee or tax imposed by a local

government pursuant to the authority granted by this section shall constitute

grounds for the revocation of the license issued to an insurance company or

agent under the provisions of KRS Chapter 304.

(c) If the Department of Insurance finds that an insurance company has willfully

engaged in a pattern of business conduct that fails to properly collect and

remit the fee or tax imposed by a local government pursuant to the authority

granted by this section, the Department of Insurance may assess the

responsible insurance company an appropriate penalty fee no greater than ten

percent (10%) of the additional license fees or taxes determined to be owed to

the local government. The penalty fee shall be paid to the local government

owed the license fee or tax less any administrative costs of the Department of

Insurance in enforcing this section. Any insurance company or agent held

responsible for a penalty fee may request a hearing with the Department of

Insurance to be conducted pursuant to KRS 304.2-310 to 304.2-370 regarding

the finding of a willful violation and the subsequent penalty fee.

(8) The license fees or taxes provided for by subsections (2) and (3) of this section shall

be due thirty (30) days after the end of each calendar quarter. Annually, by March

31, each insurance company shall furnish each local government to which the tax or

fee is remitted with a breakdown of all collections in the preceding calendar year for

the following categories of insurance:

(a) Casualty;

(b) Automobile;

(c) Inland marine;

(d) Fire and allied perils;

(e) Health; and

(f) Life.

(9) Any license fee or tax not paid on or before the due date shall bear interest at the tax

interest rate as defined in KRS 131.010(6) from the date due until paid. Such

interest payable to the local government is separate of penalties provided for in

subsection (7) of this section. In addition, the local government may assess a ten

percent (10%) penalty for a tax or fee not paid within thirty (30) days after the due

date.

(10) No license fee or tax imposed under this section shall apply to premiums:

(a) Received on policies of group health insurance provided for state employees

under KRS 18A.225;

(b) Received on policies insuring employers against liability for personal injuries

to their employees or the death of their employees caused thereby, under the

provisions of KRS Chapter 342;

(c) Received on health insurance policies issued to individuals;

(d) Received on policies issued through Kentucky Access created in Subtitle 17B

of KRS Chapter 304;

(e) Received on policies for high deductible health plans as defined in 26 U.S.C.

sec. 223(c)(2);

(f) Received on multistate surplus lines, defined as non-admitted insurance as

provided in Title V, Subtitle B, the Non-Admitted and Reinsurance Reform

Act of 2010, of the Dodd-Frank Wall Street Reform and Consumer Protection

Act, Pub. L. No. 111-203;

(g) Paid to insurance companies or surplus lines brokers by nonprofit self-

insurance groups or self-insurance entities whose membership consists of

school districts; or

(h) Paid to insurance companies or surplus lines brokers by nonprofit self-

insurance groups or self-insurance entities whose membership consists of

cities, counties, charter county governments, urban-county governments,

consolidated local governments, unified local governments, school districts, or

any other political subdivisions of the Commonwealth.

(11) No county may impose the tax authorized by this section upon the premiums

received on policies issued to public service companies which pay ad valorem taxes.

(12) Insurance companies which pay license fees or taxes pursuant to this section shall

credit city license fees or taxes against the same license fees or taxes levied by the

county, when the license fees or taxes are levied by the county on or after July 13,

1990. For purposes of this subsection, a consolidated local government, urban-

county government, charter county government, or unified local government shall

be considered a county.

(13) No license fee or tax imposed under this section shall apply to premiums paid to

insurers of municipal bonds, leases, or other debt instruments issued by or on behalf

of a city, county, charter county government, urban-county government,

consolidated local government, special district, nonprofit corporation, or other

political subdivision of the Commonwealth. However, this exemption shall not

apply if the bonds, leases, or other debt instruments are issued for profit or on behalf

of for-profit or private organizations.

(14) A county may impose a license fee or tax covering the entire county or may limit

the application of the fee or tax to the unincorporated portions of the county.