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You are here: Home . rules . 2005 . 1114a-059
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PROPOSED SECTIONS

Subchapter C. Assessment of Maintenance Taxes and Fees

28 TAC 1.414

1. INTRODUCTION. The Texas Department of Insurance proposes amendments to 1.414, concerning assessment of maintenance taxes and fees for payment in the year 2006. The proposed amendments are necessary to adjust the rates of assessment for maintenance taxes and fees for 2006 on the basis of gross premium receipts for calendar year 2005 or on some other statutorily designated basis. Section 1.414 proposes rates of assessment to be applied 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; workers' compensation self-insured groups; title insurance; health maintenance organizations; third party administrators; nonprofit legal services corporations issuing prepaid legal services contracts; and workers' compensation certified self-insurers. New paragraphs (5) and (6) of subsection (a) and subsection (d) are proposed as a result of the enactment of House Bill 7, enacted by Acts 2005, 79th Legislature, ch. 265, eff. Sept. 1, 2005. New paragraph (7) of subsection (a) recognizes the addition of workers' compensation self-insurance groups which were authorized by HB 2095, enacted 2003, 78th Legislature, ch. 275, codified as Labor Code Chapter 407A.

The department will consider the proposed amendment to 1.414 in a public hearing under Docket No. 2630, scheduled for 9:30 a.m. on December 12, 2005 in Room 100 of the William P. Hobby Jr. State Office Building, 333 Guadalupe Street in Austin, Texas.

2. FISCAL NOTE. Jacque Canady, Chief Financial Officer, has determined that for the first five-year period the proposal will be in effect, the anticipated fiscal impact on state government is estimated income of $106,221,189 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.

3. PUBLIC BENEFIT/COST NOTE. Ms. Canady 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 2006 to an insurer receiving premiums in 2005 for motor vehicle insurance will be .062 of 1% of those gross premiums; for casualty insurance, fidelity, guaranty and surety bonds, .119 of 1% of those gross premiums; for fire insurance and allied lines, including inland marine, .291 of 1% of those gross premiums; for workers' compensation insurance, .051 of 1% of those gross premiums; and for title insurance, .107 of 1% of those gross premiums. An insurer receiving premiums for workers' compensation will also pay 1.051% of that premium for the operation of the department's Division of Workers' Compensation Insurance. Workers' compensation self-insurance groups will pay 1.051% of its gross premium for a group's retention under Labor Code 407A.301 and .051 of 1% of its gross premium for a group's retention under Labor Code 407A.302. The cost in 2006 for an insurer receiving premiums in 2005 for life, health, and accident insurance, will be .040 of 1% of those gross premiums. In 2006, a health maintenance organization will pay $.51 per enrollee if it is a single service health maintenance organization or a limited service health maintenance organization, and $1.53 per enrollee if it is a multi-service health maintenance organization. In 2006, a third party administrator will pay .149 of 1% of its correctly reported gross amount of administrative or service fees received in 2005. In 2006, for a nonprofit legal services corporation issuing prepaid legal service contracts, the cost will be .044 of 1% of correctly reported gross revenues for 2005. In 2006, a workers' compensation certified self-insurer shall pay 1.051% of the tax base calculated pursuant to Labor Code 407.103(b). Except for workers' compensation certified self-insurers, there are two components of costs for entities required to comply with the proposal: the cost to gather the information, calculate the assessment and complete the required forms; and the cost of the maintenance tax or fee. Based on the information obtained by the department, 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 the same number of lines 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 between $17 - $30 an hour by small and large insurers. The actual amount of time 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, regardless of whether the company is micro, small, or large, the department estimates it will take two hours to complete the form. If a company writes all the lines subject to the tax, regardless of whether the company is micro, small, or large, the department estimates it will take six hours to complete the form. In the case of a certified insurer, the Division of Workers' Compensation will calculate the maintainance tax and bill the certified self-insurer. The requirement to pay the maintenance tax or fee is the result of the legislative enactment of the statutes that impose the maintenance tax or fee and is not a result of the adoption or enforcement of this proposal. There is no difference in rates of assessment proposed by the department for micro, small and large businesses. The department after considering the purpose of the authorizing statutes does not believe it is legal or feasible to waive or modify the requirements of the proposal for small and micro businesses.

4. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on December 26, 2005 , 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 Jacque Canady, Chief Financial Officer, Mail Code 108-1A, Texas Department of Insurance, P.O. Box 149104 , Austin , Texas 78714-9104 . Any request for a public hearing should be submitted separately to the Office of the Chief Clerk.

5. STATUTORY AUTHORITY. The amendment is proposed under the Insurance Code 251.001, 252.001 - 252.003, 253.001 - 253.003, 254.001 - 254.003, 255.001 - 255.003, 257.001 - 257.003, 258.002 - 258.004, 259.002 - 259.004, 260.001 - 260.003, 271.002 - 271.006 and 36.001; and Labor Code 403.002, 403.003, 407.103, 407A.301, and 407A.302. Insurance Code 251.001 directs the commissioner to annually determine the rate of assessment of each maintenance tax imposed under Insurance Code, Title 3, Subtitle C, Insurance Maintenance Taxes. Sections 252.001 252.003 impose a maintenance tax on each authorized insurer based on the insurer's gross premiums for fire and allied lines coverage, including inland marine. Sections 253.001 253.003 impose a maintenance tax on each authorized insurer based on the insurer's gross insurance premiums for casualty insurance and fidelity, guaranty and surety bonds coverage. Sections 254.001 254.003 impose a maintenance tax on each authorized insurer based on the insurer's gross premiums for motor vehicle coverage. Sections 255.001 255.003 impose a maintenance tax on each authorized insurer based on the insurer's gross premiums for workers' compensation coverage. Sections 257.001 257.003 impose a maintenance tax on each authorized insurer based on the insurer's gross premiums collected from Texas residents for life, accident, and health coverage and the gross considerations collected for annuity and endowment contracts. Sections 258.002 258.004 impose a per capita maintenance tax on each authorized health maintenance organization based on the correctly reported gross revenues collected from issuing health maintenance certificates or contracts in Texas . Sections 259.002 259.004 impose a maintenance tax on each authorized third-party administrator based on each administrator's correctly reported administrative or service fees. Sections 260.001 260.003 impose a maintenance tax on each nonprofit legal services corporation based on the correctly reported gross revenues received from issuing prepaid legal services contracts in this state . Sections 271.002 - 271.006 impose a maintenance fee on each insurer's correctly reported gross premiums for writing title insurance in this state. Labor Code 403.002 and 403.003 impose a maintenance tax on each insurer, except for a governmental entity, writing workers' compensation based on the insurer's correctly reported gross workers' compensation insurance which will pay the cost of administering the Division of Workers' Compensation, Office of Injured Employee Counsel and support the prosecution of workers' compensation insurance fraud in Texas. Labor Code 407.103 imposes a maintenance tax on each workers' compensation certified self-insurer. Labor Code 407A.301 imposes a self-insurance group maintenance tax on each workers' compensation self-insurance group based on gross premium for the group's retention. This maintenance tax is to pay for: the administration of the Division of Workers' Compensation; the prosecution of workers' compensation insurance fraud in Texas ; the research functions of the department under Labor Code Chapter 405; and the administration of the Office of Injured Employee Counsel under Labor Code Chapter 404. Labor Code 407A.302 requires each workers' compensation self-insurance group to pay the maintenance tax imposed under Insurance Code 255.001 based on gross premium for the group's retention; this is to be used for the administrative costs incurred by the department in administering Labor Code, Chapter 407A. Insurance Code 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.

6. CROSS-REFERENCE TO STATUTE. The following sections of the Insurance Code and the Labor Code are affected by this rule: Insurance Code 251.001, 252.001 - 252.003, 253.001 - 253.003, 254.001 - 254.003, 255.001 - 255.003, 257.001 - 257.003, 258.002 - 258.004, 259.002 - 259.004, 260.001 - 260.003, 271.002 - 271.006, and Labor Code 403.002, 403.003, 407.103, 407A.301, 407A.302.

7. TEXT.

1.414. Assessment of Maintenance Taxes and Fees, 2006 [ 2005 ].

(a) The following rates for maintenance taxes and fees are assessed on gross premiums of insurers for calendar year 2005 [ 2004 ] for the lines of insurance specified in paragraphs (1) (8) [(5)] of this subsection:

(1) for motor vehicle insurance, pursuant to the Insurance Code 254.002 [ Article 5.12 ], the rate is .062 [ .036 ] of 1.0%;

(2) for casualty insurance, and fidelity, guaranty and surety bonds, pursuant to the Insurance Code 253.002 [ Article 5.24 ], the rate is .119 [ .073 ] of 1.0%;

(3) for fire insurance and allied lines, including inland marine, pursuant to the Insurance Code 252.002 [ Article 5.49 ], the rate is .291 [ .184 ] of 1.0%;

(4) for workers' compensation insurance, pursuant to the Insurance Code 255.002 [ Article 5.68 ], the rate is .051 [ .027 ] of 1.0%;

(5) for workers' compensation insurance, pursuant to Labor Code 403.003, the rate is 1.051%;

(6) for workers' compensation insurance, pursuant to Labor Code 407A.301, the rate is 1.051%;

(7) for workers' compensation insurance, pursuant to Labor Code 407A.302, the rate is .051 of 1%;

(8) [ (5) ] for title insurance, pursuant to the Insurance Code 271.004 [ Article 9.46 ], the rate is .107 [ .037 ] of 1.0%.

(b) The rate for the maintenance tax to be assessed on gross premiums for calendar year 2005 [ 2004 ] for life, health, and accident insurance and the gross considerations for annuity and endowment contracts, pursuant to the Insurance Code 257.002 [ Article 4.17 ], is .040 [ .026 ] of 1.0%.

(c) Rates for maintenance taxes are assessed for calendar year 2005 [ 2004 ] for the following entities:

(1) pursuant to the Insurance Code 258.003 [ Article 20A.33 ], the rate is $.51 [ $.34 ] per enrollee for single service health maintenance organizations, $1.53 [ $1.02 ] per enrollee for multi-service health maintenance organizations and $.51 [ $.34 ] per enrollee for limited service health maintenance organizations;

(2) pursuant to the Insurance Code 259.003 [ Article 21.07-6, 21 ], the rate is .149 [ .125 ] 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 260.002 [ Article 23.08A ], the rate is .044 [ .022 ] of 1.0% of correctly reported gross revenues for nonprofit legal service corporations issuing prepaid legal service contracts.

(d) Pursuant to Labor Code 407.103, each certified self-insurer shall pay a self-insurer maintenance tax in calendar year 2006 at a rate of 1.051% of the tax base calculated pursuant to Labor Code 407.103(b) which shall be billed to the certified self-insurer by the Division of Workers' Compensation;

(e) 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.

(f) [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, 2006 [ 2 005 ].



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