| 1. What is premium tax and how is it collected?
All companies authorized to do insurance business in the State of Delaware are required to file reports with the Delaware Insurance Department showing the amount of insurance premiums written in Delaware during the calendar year. All report forms and filing instructions are available on the Department’s website. Detailed instructions describe the specific requirements mandated in the Insurance Code regarding the proper reporting of premiums and all other considerations for insurance, allowable deductions, fees, etc. (18 Del. C., §702(a); §708(a)). The premium tax is assessed and collected on those reported premium amounts.
Companies make four quarterly estimated premium tax prepayments and pay the balance of taxes and fees with the annual report. All fees, charges, administrative fines and taxes are paid to and collected by the Insurance Department and promptly deposited to the State of Delaware’s General Fund (except as otherwise expressly provided) (18 Del. C., §710(a), (c)).
2. What is the premium tax rate in Delaware?
The premium tax rate is 2%. (1¾ % per §702 and ¼ % per §707)
3. What is the definition of premium?
Premium is defined as: “...the consideration for insurance by whatever name called. Any "assessment," or any "membership," "policy," "survey," "inspection," "service" or similar fee or other charge in consideration for an insurance contract is deemed part of the premium.”(18 Del. C., § 2703)
4. What is the premium tax base?
Premium taxes are calculated on gross direct premiums written during the calendar year, including policy, membership and other fees, other than workmen's compensation and employer's liability premiums, covering property, subjects or risks located, resident or to be performed in this State (with proper proportionate allocation of premiums for risks in this State insured under policies covering risks in more than 1 state), after deducting (1) the amount of returned premiums on cancelled policies (but not including the return of cash surrender values of life insurance policies) and (2) the unabsorbed portion of any deposit premium and the amount returned to policyholders as dividends and similar returns, whether paid in cash or credited or applied in reduction of premiums.
NOTE: There is no provision for a premium tax credit due to negative gross direct premium income. Tax liability may not be less than $0.00.
Premiums for Wet Marine and Transportation Insurance are not included in gross direct premiums written. Insurers who write Wet Marine and Transportation Insurance report the premiums on a separate form and pay a separate Wet Marine and Transportation Insurance Profits Tax.
Premiums for Annuity contracts are not subject to the taxes imposed by § 702 or § 707 and should not be included in gross direct premiums written.
Premiums received for Employer Owned Life Insurance policies, as defined in § 2704(e), and Trust Owned Life Insurance policies, as defined in § 2704(c) (5), are itemized separately in the annual tax report and taxed on a sliding scale.
5. Are Medicare Prescription Drug Plan premiums taxable?
No. They are exempt from state taxes by Federal mandate. But the companies that write these premiums must report the premiums to the Department and pay annual renewal fees like any domestic or foreign insurer.
6. Are there any other types of premium that are tax exempt?
At this time the following types of premium are exempt from premium tax in Delaware:
- Premiums written as part of the Federal Employees Health Benefits Program
- Premiums written for Annuity contracts
- Premiums written by Fraternal Benefit Societies
- Premiums written by DPO, HMO or HSC companies
NOTE: Fraternal Benefit Societies must file an annual tax return to report premiums written, but no tax is assessed. DPO, HMO, and HSC companies must still file an annual renewal form and pay annual renewal fees
7. What is the tax treatment for alien premium (risks located in a foreign country) received by a Delaware domiciled company?
If a Delaware domestic insurer writes premium in a state or province of Canada – or any foreign country – to which no premium tax is paid on that premium, the insurer is required to include that premium in its Delaware taxable premium. This would still hold true if the premium is considered tax exempt in that country, unless the premium would be similarly tax exempt in the United States. In that case, the company should ask for tax exemption by contacting the Delaware Insurance Department in writing. The company should include any documents substantiating its claim for tax exemption with its request.
8. Who is required to file a premium tax return?
- Each authorized insurer and each formerly authorized insurer must file with the Commissioner a report showing gross direct premium written, less allowable deductions and must pay an annual 2% (18 Del. C., §§ 702, 707), premium tax on that premium. Certain other unauthorized companies must also file annual reports, pay annual fees, and may be subject to premium tax.
Important: “Formerly authorized” insurers – for example, companies that have been placed in Receivership or Rehabilitation; are Suspended or under Supervision; or are in Liquidation – that wish to continue to hold a Delaware certificate of authority until the company’s future is determined, MUST submit the annual premium tax return and pay annual renewal fees. Failure to do so may result in the company’s Delaware certificate of authority being revoked.
- Medicare Prescription Drug Plan Providers must file the same tax return as a domestic or foreign admitted insurer.
- Fraternal Benefit Societies, although exempt from premium tax, must file a tax return, pay annual renewal fees and report gross premiums written. Fraternal Benefit Societies may be subject to Retaliatory Tax.
- Foreign Risk Retention Groups are taxed on the same basis as foreign admitted insurers.
The following types of companies are exempt from paying premium tax but MUST file an annual renewal form and pay annual renewal fees:
- Dental Plan Organizations (DPO)
- Health Maintenance Organizations (HMO)
- Nonadmitted Approved Accredited Reinsurers (AR)
- Nonadmitted Surplus Lines Insurers (SL)
- Non-profit Health Service Corporations (HSC)
- Risk Purchasing Groups (PG)
9. What fees are paid along with the premium taxes?
All insurance companies, both admitted and non-admitted, are required to pay annual renewal fees (§ 701). The Annual Statement Filing Fee and the Fraud Prevention Bureau annual assessment are also paid with the premium taxes. NOTE: Do not send the annual statement filing fee with the annual statement – send it with the premium tax return as instructed. The fees are line items on the premium tax form, so they are incorporated into the total tax calculation. The company should only submit one check with the premium tax return.
10. Which annual premium tax form should I use?
It depends on the company type as listed below. Use the Domestic version if the company is domiciled in Delaware for all or any part of the calendar year. Use the Foreign version if the company is domiciled in another state. There are not different forms for Life/Health and Property/Casualty.
Admitted (authorized) Companies:
- Alien (U.S. Branch) Insurers (formed under the laws of a foreign country, but authorized in one State)
- Domestic Insurers (formed under the laws of the State of Delaware)
- Foreign Insurers (formed under the laws of another State)
- Medicare Prescription Drug Plan Providers
- Title Insurers
The five company types listed above should use the domestic or foreign Annual Premium Tax and Fees Report, Working Forms T-1 through T-8 to report all lines of business.
Captive Insurance Companies are regulated in accordance with 18 Del. C., Chapter 69. The Captive Premium Tax and Fees Report should be used by all Delaware captive companies, including Delaware domestic Risk Retention Groups.
- DPO / HMO / HSC Companies
Use the DPO-HMO-HSC Annual Fees Assessment Form. This single form is used for all of these company types. Follow instructions carefully.
- Fraternal Benefit Societies
Use the Fraternal Annual Tax and Fees Report. Although these companies are exempt from premium tax in Delaware, they may be subject to Retaliatory tax. They must file a tax return, pay annual renewal fees and report gross premiums written.
Non-Admitted (unauthorized) Companies:
- Surplus Lines Insurers
- Approved Accredited Reinsurers
Use the Non-Admitted Annual Fees Assessment Form. NOTE: Companies that are approved as both a Surplus Lines Insurer and an Approved Accredited Reinsurer must pay fees for BOTH non-admitted types, but may use one form.
Use the Risk Purchasing Group Annual Tax and Fees Report. NOTE: Purchasing Groups should NOT mail tax returns to the bank lockbox. Mail PG tax returns to the Department’s Dover address.
DOMESTIC: Use the Captive Premium Tax and Fees Report as described above.
FOREIGN: Use the Annual Premium Tax and Fees Report, Working Forms T-1 through T-8 to report all lines of business. Foreign Risk Retention Groups are taxed in the same manner as foreign admitted insurers and should use the foreign version of the forms.
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11. What is the difference between admitted companies and non–admitted companies?
Admitted or authorized companies hold a Certificate of Authority issued by the Commissioner showing that they are duly authorized to transact insurance business in the state. By becoming authorized in Delaware, these companies place themselves under the jurisdiction of the Delaware Insurance Commissioner, and are regulated by the Insurance Department. Most insurance coverage is placed through admitted insurers. However, there are several types of coverage that are specialized or difficult to obtain and those policies may be placed through non-admitted or unauthorized companies. Non-admitted companies do not have a certificate of authority, but are deemed eligible to provide certain types of coverage if approved by the Department. The Department still regulates these companies, but to a much lesser extent than it regulates admitted companies.
12. Are barcodes required on premium tax forms?
No. Barcodes are no longer required on Delaware premium tax forms.
13. What attachments are required with the Delaware premium tax return?
- All companies should attach the State Page Exhibit (statutory page 14) from the annual statement. NOTE: Insurers using the Health Annual Statement should attach the Exhibit of Premiums, Enrollment and Utilization.
- All companies should attach the Schedule T page from the annual statement.
- Delaware domestic insurers claiming the Employee Services credit on the Privilege Tax must include W-3 forms or year-end payroll reports.
- Companies claiming a Travelink Traffic Mitigation Act Credit must attach documentation from the Delaware Department of Transportation verifying participation in a Department of Transportation certified program as set forth in Title 30, Del. C., §2030 et. seq.
- Title Companies that do not perform the title search\examination in Delaware and have excluded the costs of title search/examination charged by title agents from premiums should attach a detailed schedule that reconciles the amount of taxable premium reported to the amount of premiums written as reported on Schedule T.
14. Who should sign the annual premium tax return?
Annual premium tax and fees reports are to be signed by the company President and Secretary. Another responsible officer of the company may sign the return if the President or Secretary is not available. The tax return must be notarized. Indicate on the Affidavit the title of the signing company officer(s) and the reason another officer signed if necessary.
15. Is a signature stamp acceptable for estimates and/or returns for premium tax?
A signature stamp is acceptable to the Department as long as it is acceptable to the notary who will affix his or her seal to the tax form.
NOTE: The only form that requires an officer signature is the annual premium tax report. Quarterly estimates do not require an officer signature.
16. What deductions can be taken to reduce taxable premiums?
The only deductions that can be applied to gross direct premiums written are:
- The amount of returned premiums on cancelled policies (but not including the return of cash surrender values of life insurance policies)
- The unabsorbed portion of any deposit premium and the amount returned to policyholders as dividends and similar returns, whether paid in cash or credited or applied in reduction of premiums. Exception: Dividends and similar returns may not be deducted from Worker’s Compensation and Employer Liability premiums.
IMPORTANT: There is no provision in Delaware law for any other deductions from gross direct premiums written.
17. What credits can be applied to premium taxes?
- Payments for Class C assessments to either the Delaware Insurance Guaranty Association or the Delaware Life and Health Insurance Guaranty Association may be applied as a credit to annual premium tax liability at the rate of 20% per year for five years beginning the year after the assessment is paid.
Class C assessments are the only type of Guaranty Fund assessments that are applicable. Class A and Class B assessments are considered administrative assessments and may not be applied as credits to premium tax liability.
IMPORTANT: Guaranty Fund credits may not reduce tax liability to less than zero. Credits may not be carried over from year to year.
- Credit granted for participation in a Department of Transportation Certified Travelink Traffic Mitigation Program for at least 30 days of the tax year as described in Delaware Code, Title 30, Chapter 20, § 2030 et. seq. Participation documentation must be attached to the premium tax return.
18. Can examination fees paid to the Delaware Insurance Department be taken as a credit on the Premium Tax and Fees Report?
No. Please see Questions # 17. NOTE: Company financial examinations are performed by an outside contractor and examination fees are paid to the contractor, not the Insurance Department.
19. If I am claiming Guaranty Fund Credits on the premium tax return, what needs to be submitted with the tax return?
The Department issues a Notice of Guaranty Fund Assessment Premium Tax Offset Allowance to each company that has any available credits. No attachment is necessary unless the company has a Certificate of Contribution for a Class C assessment that was not included on the Notice.
20. I received a Certificate of Contribution for a Class B assessment that was paid to the Guaranty Association. At the bottom it said to save for tax purposes. Can it be applied as a credit to premium tax?
No. You may be able to use it on other types of tax (for example, Federal taxes) to which the company may be subject, but the Commissioner has declared that only Class C assessments may be applied as credits to premium tax.
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21. When are premium tax returns due?
Annual Premium Tax and Fees Reports and Annual Renewal Forms must be received on or before March 1 each year. Quarterly tax reports and estimated prepayments must be received on or before April 15, June 15, September 15 and December 15 each year.
22. Is a postmark date acceptable?
No. Premium tax returns and payment must be received on or before the due dates. If the payment and tax return are received separately, the Department will use the later date as the received by date. The Department considers the date the filing is received at the lockbox to be the date received.
23. Where do I send my premium tax returns?
The Delaware Department of Insurance has established a lockbox operation for the receipt of premium tax payments and related documents. Unless specifically instructed to do otherwise, you should send the premium tax reports, attachments, and checks (if applicable) to one of the bank addresses listed below.
If using U.S. Postal Service (regular mail): Delaware Insurance Department
c/o National City Bank
6705 Reliable Parkway
Chicago, IL 60686
NOTE: This address is a PO Box – no personnel are present to accept deliveries.
If using Courier Service (FedEx, UPS, etc.): Delaware Insurance Department
c/o National City Bank
Attention: Lockbox # 6705
5635 S. Archer Ave.
Chicago, IL 60638-1656
NOTE: If Federal Express requires a phone number on the delivery slip use the Department’s number: 302-674-7300.
DO NOT SEND THE PREMIUM TAX FILING OR CHECK WITH YOUR ANNUAL STATEMENT. Although the Annual Statement filing fee and the continuation fee for Certificate of Authority are paid along with premium taxes, the annual statements are received at a different section of the Insurance Department. If you send your tax forms and check in the annual statement, the filing may not reach the tax department and the company could be subject to late penalty.
24. If I am submitting a zero report or have a refund request, and will not be attaching a check, do I still send my tax return to the lockbox address?
Yes. Part of the services provided by National City Bank is to capture electronic images of all tax forms.
25. Is e-filing available for Delaware premium taxes?
At this time the Department is not set up to accommodate online submission of premium taxes directly, however, E-Filing with Online Submission is an available option offered by TriTech Software Development Corporation to its clients. It is approved by DE, but is not mandatory.
26. What penalties could be assessed in association with premium tax returns?
The Commissioner is empowered to assess penalties for various reasons, but the two most common penalties associated with premium tax filings are:
- Late or Incomplete Filing Penalty – The Commissioner has established a $100.00 per business day administrative penalty for late or incomplete premium tax and fees reports or annual renewal forms. Penalties are based on the date received.
- Underpayment Penalty – 18 Del. C., § 702(f) requires the addition of an amount determined at the rate of 1½ % per month to the tax for the taxable year upon the underpayment amount of the estimated quarterly prepayments. The underpayment penalty is calculated from the time when the payment was due until it was actually paid. No penalty for underpayment shall be imposed if the quarterly estimated tax payments equal 100% of the total tax due and paid for the previous tax year.
27. Can I request an extension of time for filing my annual return or payment of tax?
Yes. The Tax Section is permitted to grant an extension for up to 15 calendar days if the request is deemed reasonable. Requests for longer extensions must be reviewed by the Commissioner. All requests are reviewed on an individual basis. Requests must be received in writing (electronic PDF format is acceptable) at least 30 days before the tax due date.
Send requests to: Delaware Insurance Department
Premium Tax Section
841 Silver Lake Blvd.
Dover, De 19904-2465
Or email request to: Ann Fletcher, Tax Coordinator at Ann.Fletcher@state.de.us
28. Does the Tax Section accept electronic fund transfers?
Yes. At this time, Delaware accepts electronic payments using an ACH CCD+ Credit format for annual and quarterly tax payments only. ACH payments are encouraged but not required at this time.
Companies must submit a completed Authorization Agreement before participating in the electronic filing program. NOTE: The Department DOES NOT accept Federal wire transfers or credit card payment for premium tax payments.
29. If I have an overpayment can I apply it against future quarterly tax liability?
No. The State of Delaware will issue a refund check to the company. Refund checks are sent by the Office of the State Treasurer upon request by the Insurance Department.
30. How do I request a refund if I have an overpayment?
The Department will automatically request refunds based on the amount listed on Line 20 of Working Form T-1 of the Annual Tax and Fees Report after careful review of the tax return. It is not necessary to send a separate request for refund.
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31. How do I amend my premium tax return?
Use a blank copy of the tax return for the calendar year filing you are amending. Forms for prior years can be found by clicking the link labeled Amendments (Prior Year Forms) on the Premium Tax Page. Complete the return as if filing for the first time, including signatures on the Affidavit page. Attach a cover letter explaining the reason for the amendment. Follow the same filing instructions as the original return.
If the company is requesting a refund with the amended return, the return must be received within one year after the year in which the tax was originally due. For example, an amended 2006 return with a refund request would have to be received before March 1, 2008, since it was originally submitted on March 1, 2007.
32. Who is required to file quarterly premium tax prepayments?
All admitted insurers that have an estimated year-end tax liability greater than zero must file the quarterly T-9 tax form and make quarterly estimated prepayments. Non-admitted companies or companies that write only tax exempt premiums are not required to file the quarterly tax form.
33. Does your state have a minimum threshold for the estimated quarterly taxes?
Zero quarterly tax reports are not required, but if the company has any estimated premium tax liability, quarterly prepayments are required. If the total annual tax liability is expected to be less than $500.00, the company may pay all 4 quarters with the April 15 report.
34. How do I figure my quarterly estimated prepayment amounts?
Many companies base their quarterly prepayments on their prior year tax liability, but prepayments should be based on the current year year-end estimate. The Estimated Tax Liability should be based on the amount you expect to appear on Working Form T-1, Line 10, of the Annual Premium Tax and Fees Report for the current year.
Companies with premium from Employer/Trust Owned Life Insurance policies must include their estimated year-end tax liability as will appear on Working Form T-1, Line 13, of the Annual Premium Tax and Fees Report in the calculation of quarterly premium tax prepayments.
Delaware Domestic Insurers must include Domestic Insurers’ Privilege Tax liability, as calculated according to 18 Del. C., § 703.
There shall be made four equal payments, each equaling 25% of the estimated tax liability, including COLI tax liability and Delaware Domestic Insurers’ Privilege Tax liability, if applicable.
NOTE: If the company has no estimated tax liability and there is no quarterly payment amount due, a zero filing ($0.00) is NOT required.
35. Is it acceptable to send all four prepayments at one time if estimated tax liability is a small amount?
According to Working Form T-9 instructions, if annual tax liability is less than $500.00, all 4 quarters may be paid in the April 15 payment.
36. Where do I mail my quarterly premium tax payments?
The Delaware Department of Insurance has established a lockbox operation for the receipt of premium tax payments and related documents. Unless specifically instructed to do otherwise, all premium tax reports and checks (if applicable) should be sent to one of the bank addresses listed below.
If using U.S. Postal Service (regular mail): Delaware Insurance Department
c/o National City Bank
6705 Reliable Parkway
Chicago, IL 60686
NOTE: This address is a PO Box – no personnel are present to accept deliveries.
If using Courier Service (FedEx, UPS, etc.): Delaware Insurance Department
c/o National City Bank
Attention: Lockbox # 6705
5635 S. Archer Ave.
Chicago, IL 60638-1656
NOTE: If Federal Express requires a phone number on the delivery slip use the Department’s number: 302-674-7300.
37. When are quarterly payments due?
Premium taxes are prepaid based on current year projections. Four equal quarterly installments of 25% are due on April 15, June 15, September 15, and December 15 each year. An annual payment of any remaining balance is due when the annual premium tax report is submitted on or before March 1 each year.
38. What other taxes and fees does the Insurance Department collect from insurance companies?
- The Department collects 2% premium tax on Workers’ Compensation and Employers’ Liability Premiums in the same manner as premium tax on other types of premium. However, this tax is collected according to 18 Del. C., §704 and Delaware Code, Title 19, Chapter 23, Section 2391 (a). There is no provision for the deduction of dividends and similar returns to policyholders from workers’ compensation and employers’ liability premiums as there is for other types of insurance.
- Delaware domestic insurers (incorporated in Delaware) also pay a Domestic Insurers’ Privilege Tax according to a sliding scale and based on annual gross receipts, as defined in the Delaware Insurance Code (18 Del. C., § 703). This tax is collected quarterly and annually in the same manner as premium tax. The working form for calculating the tax is a part of the Domestic Annual Premium Tax and Fees package.
- Foreign insurers (incorporated in another state) doing business in Delaware may also be subject to an additional Retaliatory Tax when the retaliatory provision is applicable (18 Del. C., § 532). This tax is only collected annually, and the working form for calculating the tax is a part of the Foreign Annual Premium Tax and Fees package.
- A 2% premium tax (18 Del. C., § 1917) is also collected on Surplus Lines Premiums for business placed with unauthorized insurers for risks located in Delaware. Surplus Lines is defined as specialized property or liability coverage provided by a non-admitted insurer in cases where the coverage is not available in the regular market through an admitted insurer. This insurance is written through specially trained and licensed surplus lines brokers, and these brokers are responsible for paying the tax. All brokers file detailed reports on each surplus lines policy written, broker affidavits as applicable, and quarterly and annual premium tax reports.
- A separate 5% Wet Marine and Transportation Insurance Profits Tax is collected annually. The Wet Marine and Transportation tax, as required in the Delaware Insurance Code (18 Del. C., § 705), is calculated using established formulas relative to underwriting profits and losses. There are approximately 200 insurers authorized to write Wet Marine and Transportation insurance who file this separate report, due on or before June 1 annually.
- In addition to these other insurance taxes, the Department collects the Fraud Prevention Bureau fee on behalf of the Delaware Insurance Fraud Prevention Bureau. The practice of collecting the Fraud fee at the same time that premium taxes are collected was instituted in an effort to reduce administrative costs. The fees are deposited into the Delaware Insurance Fraud Auxiliary Fund, separate from the State's General Fund. Due to the separate nature of the special fund for the Bureau, the Delaware Insurance Department considers the Fraud fee to be a Special Purpose Assessment. For this reason, Delaware Fraud Bureau fees are not permitted to be included in retaliatory calculation.
39. Do insurance companies pay Franchise taxes?
Insurers that are incorporated in the State of Delaware may be subject to Franchise Taxes, which are assessed by the Division of Corporations. IMPORTANT: The Insurance Department DOES NOT collect franchise taxes. Contact the Division of Corporations for more information.
40. Do all companies have to file the separate Wet Marine and Transportation Insurance Profits Tax return?
No. Only companies that have written Wet Marine and Transportation Insurance in any of the United States in the past three years are required to submit this tax form.
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41. If a company dissolves during the calendar year, is a final premium tax and fees report required?
Yes. If the company was active for any part of the calendar year, a final tax return is required. Mark the form FINAL RETURN. The lines for the $550.00 Fraud fee and the $100.00 annual continuation fee may be marked $0.00. If the annual statement filing requirement has been waived the $100.00 annual statement filing fee may also be marked $0.00. However, if the company is required to file a final annual statement, the company must pay the $100.00 annual statement filing fee.
42. What are the premium tax filing requirements if companies merge during the calendar year?
If only one annual statement will be filed by the surviving company, the surviving company may file a single premium tax return at year-end as usual (March 1), which includes premium data for both the survivor and the merged company(s). A schedule should be attached which shows any quarterly prepayments that had been made by the merged company(s), as well as any Guaranty Fund Credits that were transferred to the surviving company. Include a cover sheet explaining the details of the merger.
If separate annual statements are being filed, each company should file an individual tax return. Mark the form for the merged company(s) “FINAL RETURN”. The lines for the $550.00 Fraud fee, and the $100.00 annual continuation fee should be marked $0.00, however, the company must pay the $100.00 annual statement filing fee. Separate checks for premium tax should be sent. Include a cover sheet explaining the details of the merger.
43. We are looking into re-domesticating to the state of Delaware. Would there be any additional taxes or fees imposed upon our company as a Delaware Domestic insurance company?
Delaware domestic insurers are subject to a Domestic Insurers Privilege Tax (§ 703). This is an annual sliding scale tax based on the annual gross receipts of the prior year for domestic companies who are domiciled in Delaware for any part of the current tax year. Delaware law does not provide for prorating privilege tax. The privilege tax is separate from premium tax, though it is due and filed in conjunction with the annual premium tax filing, and must be included when calculating quarterly premium tax prepayments.
44. If a company changes its state of domicile during the calendar year, does your state allow the company to calculate the retaliatory tax based on the state of domicile at the end of the year? Or, does your state require a “split” year, with retaliatory tax calculated separately for each state of domicile period and then added together?
The Department does not require a “split” year filing, but there are special requirements depending on the states involved in the re-domestication.
If the company is changing its domicile from one foreign state to another, calculate the retaliatory tax based on the state of domicile at the end of the year.
If the company is re-domesticating into or out of the state of Delaware, the company should file a domestic premium tax form. It is the Insurance Department's position that if a company is a Delaware domestic insurer for any part of the tax year, the insurer is subject to the full amount of privilege tax for that tax. There is no provision for prorating the privilege tax.
45. Some states have municipalities and counties that assess premium tax on insurance companies. Does Delaware require insurance companies to pay similar taxes?
No. The 2% insurance premium tax as imposed by the State of Delaware in accordance with Title 18, the Delaware Insurance Code is a statewide tax paid by all insurance companies that offer coverage in the state. It is the only tax paid on insurance premium in Delaware.
46. Can Guaranty Fund Credits be included in retaliatory tax calculation?
No. Delaware does not allow the inclusion of guaranty fund credits in retaliatory tax calculation. Please see Domestic/ Foreign Insurers Bulletin # 7 for more information.
47. Can Examination Fees be included in retaliatory tax calculation?
No. Examination fees are paid to an outside contractor, not to the Insurance Department. The fees are not a regular obligation routinely assessed, therefore they are not considered a retaliatory item as set forth in § 532.
48. Can the Workers' Compensation/ Second Injury Fund administrative expense assessment fees be included in retaliatory tax calculation?
Yes. Payments to the Delaware Workers Compensation Contingency Fund, under Title 19, Chapter 23, Sections 2391-97, are subject to 18 Del. C. § 532 and, therefore, may be counted in any foreign insurer's retaliatory tax calculation.
49. My company’s home state only charges agent license fees once every 2 years. Can you please explain how I should incorporate this into Line 9 of the retaliatory tax form?
Agent license fees are not considered in the retaliatory tax calculation, because the individual, not the company, pays the fee. You should not be reporting those fees. The only agent fees that are retaliatory are Agent Appointment fees. On Line 9 of the Retaliatory Tax form you should report the number of new agents that were appointed with your company in Delaware during the calendar year and make the comparison of total fees based on that number.
50. In preparing the retaliatory taxes, my software program is including the fraud fee that would be paid to my state of domicile in the Home State Total on Line 12. I see that for the Delaware portion I am not to include the $550 fraud fees in the retaliatory calculation. Should I also exclude the fraud fee from our home state calculation?
No. Your software program is performing correctly. The Delaware Insurance Department considers the $550.00 Fraud Prevention Bureau fee a special purpose assessment and does not permit foreign insurers to include the fee in the Delaware portion of the retaliatory tax calculation. However, retaliatory tax laws differ from state to state and some other states do require Delaware domestic companies to include the fee as part of retaliatory tax calculation, therefore foreign states’ fraud fees must be listed on the Delaware Retaliatory Tax Form.
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51. Another state is asking my Delaware domestic company to pay the Fraud fee on a retaliatory basis. Should I include it in the retaliatory calculation?
Yes. Some states do not consider the Fraud fee a special purpose assessment and can require that you include the fee on their retaliatory tax working form. Each state can treat fees differently. You should follow the instructions of the other state.
52. On Working Forms T-5 and T-6 of the annual return we provide information about the State Support of Fire Companies, but the forms say this is not a tax. Can you please tell me why we provide this information to you?
Working Form T-5 and T-6 are used to report what is generally referred to as “Fire Tax” because the premium amounts stated on these reports are used to calculate the amount of State support for volunteer fire departments and non-profit ambulance/rescue services. Fire Tax is not actually a “tax”, but rather a “break-down by lines and location” report.
On the premium tax report, a company must report ALL insurance business written in Delaware by that company during the previous calendar year. But the Fire Tax Report assembles data only on particular lines of business. Of the various property and casualty lines of business that a company may be licensed to sell in Delaware, the amount of premiums received for the specific types of coverage listed in 18 Del. C., §705(a) must be detailed on Working Form T-5. In Part I, the company reports the amount of premiums written for each line of business during the calendar year. In Part II, the company reports what portion of the premiums listed in Part I covers risks located in the City of Wilmington, New Castle County, Kent County, and Sussex County, respectively (18 Del. C., §705 (a)). The totals of Part I and Part II must be equal.
Based on the reported Fire Tax figures, a specified percentage of the funds collected through premium taxes is then disbursed to volunteer fire departments throughout the State, and to the City of Wilmington in accordance with 18 Del. C., §705(b).
53. What is the process of figuring how much money the Fire Companies should get?
The Insurance Department gathers and analyzes the reported data from all companies that complete Working Form T-5 to be sure the reported figures, and subsequent Fire Company disbursements, are as accurate as possible. After determining that all required companies have submitted filings, that what is reported is accurate, and that significant increases or decreases in premium are reasonable, the Insurance Department totals the reported portions of premiums allocable to each County and the City of Wilmington.
The Insurance Department then calculates the disbursement amounts that will be sent to fire departments throughout the State. These amounts are determined by first multiplying the total Fire Tax premiums for each county by 3¾%, as specified in 18 Del. C., §705(b), then dividing each county total by the number of registered volunteer fire departments within that county. The premium totals and calculated disbursement amounts are reported to the State Treasurer on April 1, to comply with 18 Del. C., §705(b).
According to 18 Del. C., §705(b), the State Treasurer is required to make disbursements to the fire departments on or before May 1, and again on or before September 15 each year. The Delaware Code specifically states that the amount of the May 1 payment shall be the distribution total mentioned above less the amount of the September 15 payment received during the previous year. Then, according to 18 Del. C., §705(c), each September 15 payment shall be ¾ % of the premiums reported as described above, again divided by the number of volunteer fire departments in each county. Using the Insurance Department’s reports, the State Treasurer processes and delivers disbursement checks to the fire departments as mandated.
54. What about the money for Ambulance Services? How are those disbursements determined?
In a manner similar to the fire company disbursement based on property premiums, all companies authorized to write any type of life and/or health insurance coverage within Delaware must report gross premiums to the Insurance Department and pay the 2% premium tax on those premiums.
The Insurance Department again determines that all required companies have filed, that what is reported is accurate, and that significant increases or decreases in premium are reasonable. The Department then ascertains the total amount of premiums as reported by the insurers on the premium tax reports, and notifies the State Treasurer of the totals.
The Insurance Commissioner also provides the names and addresses of registered non-profit organizations that provide ambulance and/or rescue services within this State, including, but not limited to, organizations such as volunteer fire companies, the Veterans of Foreign Wars and the American Legion. (18 Del. C., §713(a))
The State Treasurer then distributes, on a pro rata basis, an amount equal to .015% of the gross premiums to each of these non-profit organizations within the State that are engaged in providing ambulance and/or rescue services. (18 Del. C., §713(a)(1) and (2))
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