CALIF. RETROACTIVE PREMIUM TAX TO BE REVIEWED

According to the American Insurance Association (AIA), the California Office of Administrative Law (OAL) has accepted their request to review the California Department of Insurance’s (CDI) recent retroactive premium tax notice. This notice, sent to workers’ compensation insurers on Feb. 25, attempts to impose taxes on reimbursements of paid losses as far back as 1997 from businesses to insurers under workers’ comp deductible policies. AIA asked OAL to examine if the CDI violated California’s Administrative Procedures Act (APA) in a request for determination filed on Feb. 28. Mark Webb, AIA vice president for state affairs, western region, remarked that there are strong legal and policy reasons why the Department of Insurance’s effort to collect taxes going back to 1997 is inappropriate. Webb commented that CDI’s notice to carriers effectively changes the definition of ‘premium’ for the purposes of taxing insurers. Webb said the new definition should have been proposed as a regulation. If CDI had followed the requirements of the APA, Webb added that the AIA is confident that OAL would have ruled the Department acted without legal authority. Webb noted that OAL’s acceptance of AIA’s request does not stop CDI from continuing to assess insurers. CDI can continue seeking to recover back taxes under its new interpretation until OAL or the Board of Equalization (BOE) makes a final determination.

Topics California