Bill Summary – FastDemocracy

67th Legislature                                                                                                     HB 514.1
                                                    HOUSE BILL NO. 514
                                               INTRODUCED BY M. NOLAND
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   A BILL FOR AN ACT ENTITLED: “AN ACT GENERALLY REVISING LAWS RELATED TO THE MONTANA
   STATE FUND; REQUIRING THE STATE FUND TO PAY THE TAX ON NET PREMIUMS; PROVIDING
   REQUIREMENTS IF THE STATE FUND FAILS TO PAY TAXES; AND AMENDING SECTIONS 33-1-115, 33-
   2-705, AND 39-71-2375, MCA.”
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   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
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              Section 1. Section 33-1-115, MCA, is amended to read:
              "33-1-115.    Operation of state fund as authorized insurer -- issuance of certificate of authority --
   exceptions -- use of calendar year -- risk-based capital -- reporting requirements. (1) The state fund
   provided for in 39-71-2313 is an authorized insurer and, except as provided in this section, is subject to the
   provisions in Title 33 that are generally applicable to authorized workers' compensation insurers in this state
   and the provisions of Title 39, chapter 71, part 23.
              (2)   (a) The commissioner shall issue a certificate of authority to the state fund to write workers'
   compensation insurance coverages, as provided in 39-71-2316, and except as otherwise provided in this
   section the requirements of Title 33, chapter 2, part 1, do not apply. The certificate of authority must be
   continuously renewed by the commissioner.
              (b)   The state fund shall pay the annual fee under 33-2-708, provide the surplus funds required under
   33-2-109 and 33-2-110, and provide to the commissioner the available documentation and information that is
   provided by other insurers when applying for a certificate of authority under 33-2-115.
              (c)   The state fund is subject to the reporting requirements under provisions of 33-2-705 but is not
   subject to the tax on net premiums.
              (3)   (a) The state fund, as the guaranteed market for workers' compensation insurance for employers
   pursuant to 39-71-2313, is not subject to:
              (i)   formation requirements of an insurer under Title 33, chapter 3;
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67th Legislature                                                                                                         HB 514.1
              (ii) revocation or suspension of its certificate of authority under any provision of Title 33 or any order or
   any provision that requires forfeiture of the state fund's obligation to insure employers as required in 39-71-
   2313;
              (iii) liquidation or dissolution under Title 33;
              (iv) participation in the guaranty association provided for in Title 33, chapter 10;
              (v)   33-12-104; or
              (vi) any assessment of punitive or exemplary damages.
              (b)   The state fund is subject to 33-16-1023, except as provided in 39-71-2316(1)(e), (1)(f), and (1)(g).
              (4)   The state fund shall complete financial reporting and accounting on a calendar year basis.
              (5)   (a) If the state fund's risk-based capital falls below the company action level RBC as defined in
   33-2-1902, the commissioner shall issue a report to the governor, the state fund board of directors, and to the
   legislature. If the legislature is not in session, the report must go to the economic affairs interim committee and
   to the legislative auditor. The report must provide a description of the RBC measurement, the regulatory
   implications of the state fund falling below the RBC criteria, and the state fund's corrective action plan. If the
   commissioner is reporting on a regulatory action level RBC event, the report must include the state fund's
   corrective action plan, results of any examination or analysis by the commissioner, and any corrective orders
   issued by the commissioner.
              (b)   If the state fund fails to comply with any lawful order of the commissioner, the commissioner may
   initiate supervision proceedings under Title 33, chapter 2, part 13, against state fund. If the state fund fails to
   comply with the commissioner's lawful supervision order under this subsection (5)(b), the commissioner may
   institute rehabilitation proceedings under Title 33, chapter 2, part 13, only if the commissioner is petitioning for
   rehabilitation based on the grounds provided in 33-2-1321(1) or (2).
              (6)   The state fund shall annually transfer funds to the commissioner, out of its surplus, for all
   necessary staffing and related expenses for a full-time attorney licensed to practice law in Montana and a full-
   time examiner qualified by education, training, experience, and high professional competence to examine the
   state fund pursuant to Title 33, chapter 1, part 4, and this section. The attorney and examiner must be
   employees of the commissioner.
              (7)   For the purposes of this section, the term "guaranteed market" has the definition provided in 39-
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67th Legislature                                                                                                      HB 514.1
   71-2312."
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              Section 2. Section 33-2-705, MCA, is amended to read:
              "33-2-705.    Report on premiums and other consideration -- tax. (1) Each authorized insurer and
   each formerly authorized insurer with respect to premiums received while an authorized insurer in this state
   shall file with the commissioner, on or before March 1 each year, a report in a form prescribed by the
   commissioner showing total direct premium income, including policy, membership, and other fees, premiums
   paid by application of dividends, refunds, savings, savings coupons, and similar returns or credits to payment of
   premiums for new or additional or extended or renewed insurance, charges for payment of premium in
   installments, and all other consideration for insurance from all kinds and classes of insurance, whether
   designated as a premium or otherwise, received by a life insurer or written by an insurer other than a life insurer
   during the preceding calendar year on account of policies covering property, subjects, or risks located, resident,
   or to be performed in Montana, with proper proportionate allocation of premium as to property, subjects, or risks
   in Montana insured under policies or contracts covering property, subjects, or risks located or resident in more
   than one state, after deducting from the total direct premium income applicable cancellations, returned
   premiums, the unabsorbed portion of any deposit premium, 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, all policy
   dividends, refunds, savings, savings coupons, and other similar returns paid or credited to policyholders with
   respect to the policies. As to title insurance, "premium" includes the total charge for the insurance. A deduction
   may not be made of the cash surrender values of policies. Considerations received on annuity contracts may
   not be included in total direct premium income and are not subject to tax.
              (2)   (a) Except as provided in subsections (2)(b) and (2)(c), coincident with the filing of the tax report
   referred to in subsection (1) and subject to 33-2-709, each insurer shall pay to the commissioner a tax on the
   net premiums computed at the rate of 2.75%.
              (b)   All casualty insurers issuing policies of legal professional liability insurance pursuant to 33-1-206
   shall pay to the commissioner a tax on the net premiums derived from legal professional liability insurance
   computed at a rate of 0.75%.
              (c)   A dormant captive insurer that has a valid certificate of dormancy shall pay to the commissioner an
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67th Legislature                                                                                                       HB 514.1
   annual dormancy tax of $1,000 as provided in 33-28-401.
              (3)   That portion of the tax paid under this section by an insurer on account of premiums received for
   fire insurance must be separately specified in the report required by the commissioner for apportionment as
   provided by law. When insurance against fire is included with insurance of property against other perils at an
   undivided premium, the insurer shall make a reasonable allocation from the entire premium to the fire portion of
   the coverage as must be stated in the report and as may be approved or accepted by the commissioner.
              (4)   With respect to authorized insurers, the premium tax provided by this section or the annual
   dormancy tax under 33-28-401 must be payment in full and in lieu of all other demands for any and all state,
   county, city, district, municipal, and school taxes, licenses, fees, and excises of whatever kind or character,
   excepting only those prescribed by this code, taxes on real and tangible personal property located in this state,
   and taxes payable under 50-3-109.
              (5)   (a) The Except as provided in subsection (5)(b), the commissioner may suspend or revoke the
   certificate of authority of any insurer that fails to pay its taxes as required under this section.
              (b)   (i) If the state fund fails to pay its taxes as required under this section, the commissioner shall
   issue a report to the governor, the state fund board of directors, and the legislature. If the legislature is not in
   session, the report must go to the economic affairs interim committee and to the legislative auditor. The report
   must provide a description of the failure, including the amount of the taxes owed remaining unpaid, the state
   fund's corrective action plan, the results of any examination or analysis by the commissioner, and any
   corrective orders issued by the commissioner.
              (ii) If the state fund fails to comply with any corrective order issued by the commissioner, the
   commissioner may initiate supervision proceedings under Title 33, chapter 2, part 13, against the state fund. If
   the state fund fails to comply with the commissioner's lawful supervision order under this subsection (5)(b), the
   commissioner may institute rehabilitation proceedings under Title 33, chapter 2, part 13.
              (6)   In addition to the penalty provided for in subsection (5), the commissioner may impose on an
   insurer who fails to pay the tax required under this section a fine of $100 plus interest on the delinquent amount
   at the annual interest rate of 12%.
              (7)   The commissioner may by rule provide a quarterly schedule for payment of portions of the
   premium tax under this section during the year in which tax liability is accrued."
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67th Legislature                                                                                                      HB 514.1
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              Section 3. Section 39-71-2375, MCA, is amended to read:
              "39-71-2375.     Operation of state fund as authorized insurer -- issuance of certificate of authority
   -- exceptions -- use of calendar year -- risk-based capital -- reporting requirements. (1) The state fund
   provided for in 39-71-2313 is an authorized insurer and, except as provided in this section, is subject to the
   provisions in Title 33 that are generally applicable to authorized workers' compensation insurers in this state
   and the provisions of Title 39, chapter 71, part 23.
              (2)   (a) The commissioner shall issue a certificate of authority to the state fund to write workers'
   compensation insurance coverages, as provided in 39-71-2316, and except as otherwise provided in this
   section the requirements of Title 33, chapter 2, part 1, do not apply. The certificate of authority must be
   continuously renewed by the commissioner.
              (b)   The state fund shall pay the annual fee under 33-2-708, provide the surplus funds required under
   33-2-109 and 33-2-110, and provide to the commissioner the available documentation and information that is
   provided by other insurers when applying for a certificate of authority under 33-2-115.
              (c)   The state fund is subject to the reporting requirements under provisions of 33-2-705 but is not
   subject to the tax on net premiums.
              (3)   (a) The state fund, as the guaranteed market for workers' compensation insurance for employers
   pursuant to 39-71-2313, is not subject to:
              (i)   formation requirements of an insurer under Title 33, chapter 3;
              (ii) revocation or suspension of its certificate of authority under any provision of Title 33 or any order or
   any provision that requires forfeiture of the state fund's obligation to insure employers as required in 39-71-
   2313;
              (iii) liquidation or dissolution under Title 33;
              (iv) participation in the guaranty association provided for in Title 33, chapter 10;
              (v)   33-12-104; or
              (vi) any assessment of punitive or exemplary damages.
              (b)   The state fund is subject to 33-16-1023, except as provided in 39-71-2316(1)(e), (1)(f), and (1)(g).
              (4)   The state fund shall complete financial reporting and accounting on a calendar year basis.
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67th Legislature                                                                                                         HB 514.1
              (5)   (a) If the state fund's risk-based capital falls below the company action level RBC as defined in
   33-2-1902, the commissioner shall issue a report to the governor, the state fund board of directors, and to the
   legislature. If the legislature is not in session, the report must go to the economic affairs interim committee and
   to the legislative auditor. The report must provide a description of the RBC measurement, the regulatory
   implications of the state fund falling below the RBC criteria, and the state fund's corrective action plan. If the
   commissioner is reporting on a regulatory action level RBC event, the report must include the state fund's
   corrective action plan, results of any examination or analysis by the commissioner, and any corrective orders
   issued by the commissioner.
              (b)   If the state fund fails to comply with any lawful order of the commissioner, the commissioner may
   initiate supervision proceedings under Title 33, chapter 2, part 13, against state fund. If the state fund fails to
   comply with the commissioner's lawful supervision order under this subsection (5)(b), the commissioner may
   institute rehabilitation proceedings under Title 33, chapter 2, part 13, only if the commissioner is petitioning for
   rehabilitation based on the grounds provided in 33-2-1321(1) or (2).
              (6)   The state fund shall annually transfer funds to the commissioner, out of its surplus, for all
   necessary staffing and related expenses for a full-time attorney licensed to practice law in Montana and a full-
   time examiner qualified by education, training, experience, and high professional competence to examine the
   state fund pursuant to Title 33, chapter 1, part 4, and this section. The attorney and examiner must be
   employees of the commissioner.
              (7)   For the purposes of this section, the term "guaranteed market" has the definition provided in 39-
   71-2312."
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Statutes affected: 
Introduced: 33-1-115, 33-2-705, 39-71-2375