Chapter 0153 - 531R - H Ver of HB2069

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 20-224, Arizona Revised Statutes, is amended to read:

START_STATUTE20-224. Premium tax; reports

A. On or before March 1 of each year, each authorized domestic insurer, each other insurer and each formerly authorized insurer referred to in section 20‑206, subsection B shall file with the director a report in a form prescribed by the director showing total direct premium income including policy membership and other fees and all other considerations for insurance from all classes of business whether designated as a premium or otherwise received by it during the preceding calendar year on account of policies and contracts covering property, subjects or risks located, resident or to be performed in this state, after deducting from such total direct premium income applicable cancellations, returned premiums, the amount of reduction in or refund of premiums allowed to industrial life policyholders for payment of premiums direct to an office of the insurer and all policy dividends, refunds, savings coupons and other similar returns paid or credited to policyholders within this state and not reapplied as premiums for new, additional or extended insurance. No deduction shall be made of the cash surrender values of policies or contracts. Considerations received on annuity contracts, as well as the unabsorbed portion of any premium deposit, shall not be included in total direct premium income, and neither shall be subject to tax. The report shall separately indicate the total direct fire insurance premium income received from property located in the incorporated cities and towns certified by the state fire marshal pursuant to section 9‑951, subsection B, as procuring the services of a private fire company.

B. Coincident with the filing of such the tax report, each insurer shall pay to the director for deposit, pursuant to sections 35‑146 and 35‑147, a tax on such net premiums at the following rates:

1. For fire insurance:

(a) On property located in a city or town certified by the state fire marshal pursuant to section 9‑951, subsection B, as procuring the services of a private fire company, .66 percent.

(b) On all other property, 2.2 percent.

2. For disability insurance, 2.0 percent.

3. For health care service plans, the rates prescribed under sections 20‑837, 20‑1010 and 20‑1060.

4. For other insurance:

(a) For premiums received in calendar year 2016, 1.95 percent.

(b) For premiums received in calendar year 2017, 1.90 percent.

(d) For premiums received in calendar year 2019, 1.80 percent.

(e) For premiums received in calendar year 2020, 1.75 percent.

(f) For premiums received in calendar year 2021 and for each subsequent calendar year, 1.70 percent.

C. Any payments of tax pursuant to subsection F of this section shall be deducted from the tax payable pursuant to subsection B of this section. Each insurer shall reflect the cost savings attributable to the lower tax in fire insurance premiums charged on property located in an incorporated city or town certified by the state fire marshal pursuant to section 9‑951, subsection B, as procuring the services of a private fire company. No insurer shall be liable to the state or to any other person, or shall be subject to regulatory action, relating to the calculation or submittal of fire insurance premium taxes based in good faith on the state fire marshal's certification.

D. Eighty‑five percent of the tax paid under this section by an insurer on account of premiums received for fire insurance shall be separately specified in the report and shall be apportioned in the manner provided by sections 9‑951, 9‑952 and 9‑972, except that all of the tax so allocated to a fund of a municipality or fire district that has no volunteer firefighters or pension obligations to volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system and all of the tax so allocated to a fund of a municipality or fire district that has both full‑time paid firefighters and volunteer firefighters or pension obligations to full‑time paid firefighters or volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system where it shall be reallocated by actuarial procedures proportionately to the municipality or fire district for the account of the full‑time paid firefighters and to the municipality or fire district for the account of the volunteer firefighters. A municipality or fire district shall provide to the public safety personnel retirement system all information that the system deems necessary to perform the reallocation prescribed by this section. A full accounting of such the reallocation shall be forwarded to the municipality or fire district and their its local boards.

E. This section shall not apply to title insurance, and such insurers shall be taxed as provided in section 20‑1566.

F. Any insurer that paid or is required to pay a tax of two fifty thousand dollars or more on net premiums received during the preceding calendar year, pursuant to subsection B of this section and sections 20‑224.01, 20‑837, 20‑1010, 20‑1060 and 20‑1097.07, shall file on or before the fifteenth day of each month from March through August a report for that month, on a form prescribed by the director, accompanied by a payment in an amount equal to fifteen percent of the amount paid or required to be paid during the preceding calendar year pursuant to subsection B of this section and sections 20‑224.01, 20‑837, 20‑1010, 20‑1060 and 20‑1097.07. The payments are due and payable on or before the fifteenth day of each month and shall be made to the director for deposit, pursuant to sections 35‑146 and 35‑147.

G. Except for the tax paid on fire insurance premiums pursuant to subsections B and D of this section, an insurer may claim a premium tax credit if the insurer qualifies for a credit pursuant to section 20‑224.03, 20‑224.04, 20‑224.06 or 20‑224.07.

H. On receipt of a properly documented claim, a refund shall be provided to an insurer from available funds for the excess amount of any fire insurance premium improperly paid by the insurer. The insurer shall reflect the refund in the fire insurance premiums charged on the property that was charged the excessive amount.

I. On or before September 30 of each year, the director of insurance shall report to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting on the amount of insurance premium tax credits established by sections 20‑224.03, 20‑224.04, 20‑224.05, 20‑224.06 and 20‑224.07 that were used during the previous fiscal year.

J. For the purposes of:

1. Subsection B of this section, fire insurance is one hundred percent of fire lines, forty percent of commercial multiple peril nonliability lines, thirty‑five percent of homeowners' multiple peril lines, twenty‑five percent of farm owners' multiple peril lines and twenty percent of allied lines.

2. Section 20‑416, fire insurance is eighty‑five percent of fire and allied lines.

K. From and after December 31, 2017, the director may require that reports and payments under this section be submitted electronically. If the director requires electronic submission, the director shall include on the department's official website a list of one or more acceptable third‑party services through which an insurer must submit reports and payments. END_STATUTE

Sec. 2. Section 20-225, Arizona Revised Statutes, is amended to read:

START_STATUTE20-225. Failure to pay tax; penalty; exception

A. Any insurer failing to pay the tax prescribed by sections 20‑224, 20‑224.01, 20‑837, 20‑1010, 20‑1060 and 20‑1097.07 is subject to a civil penalty equal to not to exceed the greater of twenty‑five dollars or five per cent percent of the amount due plus interest at the rate of one per cent percent per month from the date the tax was due.

B. The director may refuse to renew the certificate of authority of any insurer failing to pay such the tax on or before the date it is due. The director shall revoke the certificate of authority of any insurer failing to pay such the tax for more than thirty days after it was due.

C. If the director requires the tax to be paid electronically through a designated third‑party service pursuant to section 20-224, subsection K, no penalty accrues with respect to any payment of tax or interest that is late due to delays caused by the third‑party service. END_STATUTE

Sec. 3. Section 36-2905, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2905. Removal of medicaid special exemption for payments to contractors; civil penalty

A. Notwithstanding any other law, beginning on October 1, 2003, each contractor shall pay to the director of the department of insurance a tax equal to two per cent percent of the total capitation, including reinsurance, and any other reimbursement paid to the contractor by the administration for persons eligible pursuant to section 36‑2901, paragraph 6, subdivisions (a) and (g) and article 4 of this chapter. The tax shall be paid in four payments pursuant to subsection C of this section and deposited in the state general fund pursuant to sections 35‑146 and 35‑147.

B. The contractor shall not deduct any disallowance or penalty imposed by the administration pursuant to this chapter from the financial information submitted to the director of the department of insurance.

C. Each contractor shall file the estimated tax and documentation with the director of the department of insurance on a form prescribed by the director of the department of insurance to pay the estimated tax. A contractor shall make estimated tax payments to the director of the department of insurance for deposit in the state general fund pursuant to sections 35‑146 and 35‑147. The tax payments are due on or before September 15, December 15, March 15 and June 15 of each year. The amount of the payments shall be an estimate of the tax due for the quarter that ends in the month that payment is due.

D. On or before April 1, 2004 and annually on or before April 1 thereafter, the director of the department of insurance shall use data provided by the administration to reconcile the amount paid by each contractor pursuant to this section with the actual amount of title XIX and title XXI reimbursement made by the administration to the contractor in the preceding calendar year. If there is a discrepancy in the two amounts, the director of the department of insurance shall notify the contractor of the difference, provide a notice of right of appeal and bill the contractor for the unpaid amount of the premium tax or, if there is an overpayment, the director of the department of insurance shall either refund the amount of the overpayment to the contractor or issue a credit for the amount of the overpayment that the contractor can apply against future tax obligations prescribed by this section.

E. A contractor who that fails to file an estimated payment or pay an unpaid premium tax as prescribed by this section is subject to a civil penalty equal to the greater of twenty‑five dollars or five per cent percent of the amount due and is subject to interest on the amount due at the rate of one per cent percent per month from the date the amount was due.

F. From and after December 31, 2017, the director of insurance may require that reports and payments under this section be submitted electronically. If the director requires electronic submission, the director shall include on the department of insurance's official website a list of one or more acceptable methods by which a contractor must submit reports and payments. END_STATUTE

Sec. 4. Section 36-2944.01, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2944.01. Removal of medicaid special exemption for payments to program contractors; civil penalty

A. Notwithstanding any other law, beginning on October 1, 2003, each program contractor shall pay to the director of the department of insurance a tax equal to two per cent percent of the total capitation, including reinsurance, and any other reimbursement paid to the program contractor by the administration for persons eligible pursuant to section 36‑2931, paragraph 5. The tax shall be paid in four payments pursuant to subsection C of this section and deposited in the state general fund pursuant to sections 35‑146 and 35‑147.

B. The program contractor shall not deduct any disallowance or penalty imposed by the administration pursuant to this chapter from the financial information submitted to the director of the department of insurance.

C. Each program contractor shall file the estimated tax and documentation with the director of the department of insurance on a form prescribed by the director of the department of insurance. A program contractor shall make estimated tax payments to the director of the department of insurance for deposit in the state general fund pursuant to sections 35‑146 and 35‑147. The tax payments are due on or before September 15, December 15, March 15 and June 15 of each year. The amount of the payments shall be an estimate of the tax due for the quarter that ends in the month that payment is due.

D. On or before April 1, 2004 and annually on or before April 1 thereafter, the director of the department of insurance shall use data provided by the administration to reconcile the amount paid by each program contractor pursuant to this section with the actual amount of title XIX reimbursement made by the administration to the program contractor in the preceding calendar year. If there is a discrepancy in the two amounts, the director of the department of insurance shall notify the program contractor of the difference, provide a notice of right of appeal and bill the program contractor for the unpaid amount of the premium tax or, if there is an overpayment, the director of the department of insurance shall either refund the amount of the overpayment to the contractor or issue a credit for the amount of the overpayment that the program contractor can apply against future tax obligations prescribed by this section.

Sec. 5. Effective date

This act is effective from and after December 31, 2017.