NAMIC Endorses Increase of Small Company Tax Exemption

The country’s smallest, mostly rural, insurance companies would receive a tax benefit if federal legislation introduced recently becomes law.

Reps. Jim Nussle, R-Iowa; Jim Ramstad, R-Minn.; and Earl Pomeroy, D-N.D.; introduced the measure in the House of Representatives (H.R. 1908) which would increase the amount of premium that could be exempted from federal income tax. All three congressmen are members of the Ways and Means Committee.

Under current law, an insurance company with $350,000 or less in direct or net written premium, whichever is greater, is tax-exempt. In addition, the law allows companies with direct or net written premiums, whichever is greater, that exceed $350,000 but do not exceed $1.2 million to elect to be taxed on their net investment income.

The bill would increase these amounts to $551,000 and $1.89 million.

“Since 1921, small insurance companies have been exempt from federal taxation to enable their financial resources to be used for claims paying,” Ramstad said. “It has been the public policy goal to maintain small, rural, farm-oriented insurers so that all Americans would have access to coverage at a reasonable cost.”

“This legislation will help ‘level the playing field’ for small mutual insurance companies across the country. By doing so, we will ensure that farmers and small business can get the insurance coverage they need at a price they can afford,” Pomeroy said.

“This is great news for rural Americans,” said Pam Allen, vice president-federal affairs for the National Association of Mutual Insurance Companies (NAMIC). “With this legislation, rural insurers will be able to continue to offer affordable insurance to their neighbors.”

“Along with a membership which includes five of the 10 largest p/c carriers, and every size regional and national p/c insurer, NAMIC represents many of America’s smallest insurers and this would be a welcome development for them,” said Allen. “These companies have few employees and typically write one line of insurance such as fire, windstorm or hail, often in only one rural county. They do not write auto insurance or any of the liability lines.”

“Congressman Pomeroy’s support is especially gratifying,” said Allen. “Two Republicans and a Democrat are co-sponsoring this legislation. That tells me that it is a bill that rises above party affiliation to do the right thing for one of America’s great small businesses.”

“Some of these small property and casualty companies have been around for more than 100 years writing insurance policies for their neighbors in the county,” Nussle said.

“NAMIC will work to enlist legislators as co-sponsors,” Allen said. The House Ways and Means and the Senate Finance Committees have jurisdiction over this legislation.

Observers expect a companion bill to be introduced in the Senate, according to Allen.

Topics Carriers Legislation Property Casualty