Opinion ID: 1205077
Heading Depth: 2
Heading Rank: 3

Heading: taxation of title insurers in california

Text: California taxes insurance companies differently than it taxes all other corporations. With some exceptions not relevant to this case, the California Constitution requires insurers to pay an annual tax in lieu of all other state and local taxes. (Cal. Const., art. XIII, § 28, subds. (b), (f); see also Rev. & Tax. Code, §§ 12204, 12231.) For title insurers, the basis of the annual tax is all income upon business done in this State, except: [¶] (1) Interest and dividends. [¶] (2) Rents from real property. [¶] (3) Profits from the sale or other disposition of investments. [¶] (4) Income from investments. (Cal. Const., art. XIII, § 28, subd. (c).) Generally, all other insurance companies are taxed on the basis of gross premiums, less return premiums, received upon business done in California. ( Ibid. ) The annual tax for title insurers is subject only to those deductions specified in article XIII, section 28. (Cal. Const., art. XIII, § 28, subd. (b).) These deductions do not include ordinary and necessary business expenses. Therefore, title insurers cannot deduct from their taxable income amounts paid out on claims. Underwritten title companies, on the other hand, are taxed as corporations and can deduct claims paid as ordinary and necessary business expenses to the extent the expenses are not reimbursed under a separate errors and omissions insurance policy. (See Rev. & Tax. Code, §§ 12001 et seq. & 24343.)