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You are here: Home . rules . 2004 . 1108-059
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Subchapter C. Maintenance Taxes and Fees

28 TAC §1.414

The Texas Department of Insurance proposes an amendment to §1.414, concerning assessment of maintenance taxes and fees for payment in the year 2005. The amendment is necessary to adjust the rates of assessment for maintenance taxes and fees for 2005 on the basis of gross premium receipts for calendar year 2004 or on some other designated basis. Section 1.414 sets rates of assessment and applies those rates to life, accident, and health insurance; motor vehicle insurance; casualty insurance, and fidelity, guaranty and surety bonds; fire insurance and allied lines, including inland marine; workers' compensation insurance; title insurance; health maintenance organizations; third party administrators; and corporations issuing prepaid legal services contracts.

Karen A. Phillips, Chief Financial Officer, has determined that for the first five-year period the section is in effect, the anticipated fiscal impact on state government is estimated income of $34,124,137 to the state's general revenue fund. There will be no fiscal implications for local government as a result of enforcing or administering the proposed section, and there will be no effect on local employment or local economy.

Ms. Phillips has determined that for each year of the first five years the amended section is in effect, the public benefit anticipated as a result of enforcing the section will be facilitation in the collection of maintenance tax and fee assessments. The cost in 2005 to an insurer receiving premiums in 2004 for motor vehicle insurance will be .036 of 1% of those gross premiums; for casualty insurance, fidelity, guaranty and surety bonds, .073 of 1% of those gross premiums; for fire insurance and allied lines, including inland marine, .184 of 1% of those gross premiums; for workers´ compensation insurance, .027 of 1% of those gross premiums; and for title insurance, .037 of 1% of those gross premiums. The cost in 2005 for an insurer receiving premiums in 2004 for life, health, and accident insurance, will be .026 of 1% of those gross premiums. In 2005, a health maintenance organization will pay $.34 per enrollee if it is a single service health maintenance organization or a limited service health maintenance organization, and $1.02 per enrollee if it is a multi-service health maintenance organization. In 2005, a third party administrator will pay .125 of 1% of its correctly reported gross amount of administrative or service fees received in 2004. In 2005, for a corporation issuing prepaid legal service contracts, the cost will be .022 of 1% of correctly reported gross revenues for 2004. There will be no difference in rates of assessment between micro, small and large businesses. Based on the department's experience, the actual cost of gathering the information required to fill out the form, calculate the assessment and complete the form will be the same for micro, small and large businesses. Generally a person familiar with the accounting records of the company and accounting practices in general will perform the activities necessary to comply with the section. Such persons are similarly compensated by small and large insurers. The compensation is generally between $17 - $ 30 an hour. The actual amount of ti me necessary to complete the form will vary depending on the number of lines of insurance written by the company. For a company that writes only one line of business subject to the tax, the department estimates it will take two hours to complete the form. If a company writes all the lines subject to the tax, the department estimates it will take six hours to complete the form. The department does not believe it is legal or feasible to waive or modify the requirements of the proposed section for small and micro businesses because the assessment is required by statute and makes no provision for waiving or reducing assessments for small or micro-businesses.

To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on December 20, 2004 , to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P.O. Box 149104 , Austin , Texas 78714-9104 . An additional copy of the comments should be simultaneously submitted to Karen A. Phillips, Chief Financial Officer, Mail Code 108-1A, Texas Department of Insurance, P.O. Box 149104 , Austin , Texas 78714-9104 . Any requests for a public hearing should be submitted separately to the Office of the Chief Clerk.

The amendment is proposed under the Insurance Code Articles 4.17, 5.12, 5.24, 5.49, 5.68, 9.46, 21.07-6 §21, 23.08A, and 20A.33 and §36.001. These articles provide authorization for the Texas Department of Insurance to assess maintenance taxes and fees for the lines of insurance and related activities specified in amended §1.414. Article 4.17 establishes a maintenance tax based on insurance premiums for life, accident, and health coverage and the gross considerations for annuity and endowment contracts. Article 5.12 establishes a maintenance tax based on insurance premiums for motor vehicle coverage. Article 5.24 establishes a maintenance tax based on insurance premiums for casualty insurance and fidelity, guaranty and surety bonds coverage. Article 5.49 establishes a maintenance tax based on insurance premiums for fire and allied lines coverage, including inland marine. Article 5.68 establishes a maintenance tax based on insurance premiums for workers' compensation coverage. Article 9.46 establishes a maintenance fee based on insurance premiums for title coverage. Article 21.07-6 §21 establishes a maintenance tax based on the correctly reported gross amount of administrative or service fees for third party administrators. Article 23.08A establishes a maintenance tax based on the correctly reported gross revenues of corporations issuing prepaid legal service contracts. Article 20A.33 establishes an annual tax based on the gross amounts of revenues collected for the issuance of health maintenance certificates or contracts. Section 36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.

The following articles of the Insurance Code are affected by this rule: Articles 4.17, 5.12, 5.24, 5.49, 5.68, 9.46, 21.07-6 §21, 21.46, 21.54, 23.08A and 20A.33.

§1.414. Assessment of Maintenance Taxes and Fees, 2005 [ 2004 ].

(a) The following rates for maintenance taxes and fees are assessed on gross premiums of insurers for calendar year 2004 [ 2003 ] for the lines of insurance specified in paragraphs (1) - (5) of this subsection:

(1) for motor vehicle insurance, pursuant to the Insurance Code Article 5.12, the rate is .036 [ .035 ] of 1.0%;

(2) for casualty insurance, and fidelity, guaranty and surety bonds, pursuant to the Insurance Code Article 5.24, the rate is .073 [ .091 ] of 1.0%;

(3) for fire insurance and allied lines, including inland marine, pursuant to the Insurance Code Article 5.49, the rate is .184 [ .188 ] of 1.0%;

(4) for workers' compensation insurance, pursuant to the Insurance Code Article 5.68, the rate is .027 [ .030 ] of 1.0%;

(5) for title insurance, pursuant to the Insurance Code Article 9.46, the rate is .037 [ .045 ] of 1.0%.

(b) The rate for the maintenance tax to be assessed on gross premiums for calendar year 2004 [ 2003 ] for life, health, and accident insurance and the gross considerations for annuity and endowment contracts, pursuant to the Insurance Code Article 4.17, is .026 of 1.0%.

(c) Rates for maintenance taxes are assessed for calendar year 2004 [ 2003 ] for the following entities:

(1) pursuant to the [ Texas Health Maintenance Organization Act, §33 (Insurance Code Article 20A.33)] Insurance Code Article 20A.33 , the rate is $.34 [ $.30 ] per enrollee for single service health maintenance organizations, $1.02 [ $0.89 ] per enrollee for multi-service health maintenance organizations and $.34 [ $.30 ] per enrollee for limited service health maintenance organizations;

(2) pursuant to the Insurance Code Article 21.07-6, §21, the rate is .125 [ .150 ] of 1.0% of the correctly reported gross amount of administrative or service fees for third party administrators; and

(3) pursuant to the Insurance Code Article 23.08A, the rate is .022 of 1.0% of correctly reported gross revenues for corporations issuing prepaid legal service contracts.

(d) The enactment of Senate Bill 14, 78th Legislature, Regular Session, relating to certain insurance rates, forms, and practices, did not affect the calculation of the maintenance tax rates or the assessment of the taxes.

(e) The taxes assessed under subsections (a), (b), and (c) of this section shall be payable and due to the Comptroller of Public Accounts, Austin , TX 78774-0100 on March 1, 2005 [ 2 004 ].



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