Relating to taxation of insurance; creating new provisions; amending ORS 314.385, 314.525, 317.650, 731.820, 731.822, 731.828, 731.842 and 731.859; and repealing ORS 731.836.

 
 
 
     71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
 
NOTE:  Matter within  { +  braces and plus signs + } in an
amended section is new. Matter within  { -  braces and minus
signs - } is existing law to be omitted. New sections are within
 { +  braces and plus signs + } .
 
LC 599
 
                         Senate Bill 266
 
Printed pursuant to Senate Interim Rule 213.28 by order of the
  President of the Senate in conformance with presession filing
  rules, indicating neither advocacy nor opposition on the part
  of the President (at the request of Governor John A. Kitzhaber,
  M.D., for Department of Consumer and Business Services)
 
 
                             SUMMARY
 
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
 
  Transfers administrative responsibilities for auditing and
collecting corporate excise taxes paid by insurers from
Department of Revenue to Department of Consumer and Business
Services.
  Applies to tax reporting periods beginning on or after January
1, 2002.
 
                        A BILL FOR AN ACT
Relating to taxation of insurance; creating new provisions;
  amending ORS 314.385, 314.525, 317.650, 731.820, 731.822,
  731.828, 731.842 and 731.859; and repealing ORS 731.836.
Be It Enacted by the People of the State of Oregon:
  SECTION 1.  { + (1) In order to carry out responsibilities
under ORS 731.820, 731.822, 731.854 and 731.859 and ORS chapter
317, the Director of the Department of Consumer and Business
Services shall exercise the powers granted to the Director of the
Department of Revenue by ORS chapters 305, 314, 315 and 317,
shall carry out the rules adopted by the Department of Revenue
thereunder and is subject to the same restrictions, limitations
and prohibitions thereunder. The Director of the Department of
Consumer and Business Services may also adopt rules as needed for
the purpose of carrying out the responsibilities of the
Department of Consumer and Business Services under this section.
  (2) For returns filed under ORS chapter 317 by insurers, the
Director of the Department of Consumer and Business Services
shall distribute and use forms and formats prescribed and
authorized by the Department of Revenue under ORS 314.385 for
filing returns.  The Director of the Department of Revenue shall
consult with the Director of the Department of Consumer and
Business Services in the course of prescribing corporate excise
and income tax return forms and formats.
  (3) For the purpose of enabling the Director of the Department
of Consumer and Business Services to carry out the duties and
authority imposed by this section, references in ORS chapters
305, 314, 315 and 317 to the Director of the Department of
Revenue and to the Department of Revenue are considered to be
references to the Director of the Department of Consumer and
Business Services and the Department of Consumer and Business
Services, unless the context requires otherwise. + }
  SECTION 2. ORS 731.822 is amended to read:
  731.822.   { - (1) Every insurer with a tax obligation under
section 2, chapter 786, Oregon Laws 1995, ORS 731.820 or ORS
731.854 and 731.859 shall make prepayment of the tax obligations
under section 2, chapter 786, Oregon Laws 1995, ORS 731.820,
731.854 and 731.859 for the current calendar year's business, if
the sum of the tax obligations under section 2, chapter 786,
Oregon Laws 1995, ORS 731.820, 731.854 and 731.859 for the
preceding calendar year's business is $400 or more. - }
    { - (2) The Director of the Department of Consumer and
Business Services shall credit the prepayment toward the
appropriate tax obligations of the insurer for the current
calendar year under section 2, chapter 786, Oregon Laws 1995, or
ORS 731.820 or ORS 731.854 and 731.859. - }
    { - (3) The amounts of the prepayments shall be percentages
of the insurer's tax obligation based on the preceding calendar
year's business adjusted, if necessary, to reflect the declining
percentages set forth in section 2 (3), chapter 786, Oregon Laws
1995, applicable for the current year, and shall be paid to the
director by the due dates and in the following amounts: - }
    { - (a) On or before June 15, 45 percent; - }
    { - (b) On or before September 15, 25 percent; and - }
    { - (c) On or before December 15, 25 percent. - }
   { +  (1) Every insurer expecting to have a combined tax
liability of $500 or more for all taxes payable under ORS
731.820, 731.854 and 731.859 and ORS chapter 317 shall make and
report an estimate of each such tax liability for the insurer's
tax year and shall pay the amount of the combined tax liability
in installments, as provided in ORS 314.515, to the Department of
Consumer and Business Services. If the insurer is required by ORS
314.518 to pay the estimated tax liability under ORS 314.505 to
314.525 by electronic funds transfer, the insurer also shall pay
all other estimated tax liabilities under ORS 731.820, 731.854
and 731.859 by electronic funds transfer.
  (2) The provisions of ORS 314.525 and the rules adopted
thereunder apply to an insurer required to make a payment of
estimated tax under this section.
  (3) The Director of the Department of Consumer and Business
Services shall allocate the taxes paid under ORS 731.820, 731.854
and 731.859 as the director determines appropriate for satisfying
outstanding tax obligations. + }
  (4) The effect of transferring policies of insurance from one
insurer to another insurer is to transfer the tax
 { - prepayment obligation - }  { +  liability + } with respect
to   { - such - }  { +  the + } policies.
    { - (5) On or before June 1 of each year, the director shall
notify each insurer required to make prepayments in that year of
the amount of each prepayment, and shall provide remittance forms
to be used by the insurer. However, an insurer's responsibility
to make prepayments is not affected by failure of the director to
send, or the insurer to receive, the notice or forms. - }
   { +  (5) An insurer may file returns for corporate excise
taxes owed under ORS chapter 317 and other taxes owed under ORS
731.820, 731.854 and 731.859 with the Director of the Department
of Consumer and Business Services on or before April 15 following
the end of the corporate excise tax year of the taxpayer. The
director may allow further time to the insurer to file its
corporate excise tax return as provided in ORS 314.385, but no
extension may be allowed to file returns for other taxes owed
except as provided in ORS 731.842. + }
  SECTION 3. ORS 731.820 is amended to read:
  731.820. (1)(a)  { + As provided in ORS 731.822,  + }for the
purpose of maintaining the office of State Fire Marshal and
paying the expenses incident thereto, every insurer transacting
insurance covering the peril of fire shall pay a tax to the
Director of the Department of Consumer and Business Services
 { - , on or before April 1 of each year, - }  equal to one
percent of the gross amount of premiums  { + that the insurer
anticipates will be + } received by it or its agents from such
business, from and under its policies covering direct domestic
risks in the   { - preceding - }  { +  current + } calendar year
after deducting the amount of return premiums  { + that the
insurer anticipates will be  + }paid and the amount of dividend
payments  { + that the insurer anticipates will be  + }made to
policyholders or, in the case of a reciprocal insurer, the amount
of savings { +  that the insurer anticipates will be + } paid or
credited to the accounts of subscribers, with respect to such
policies.
  (b) For the purpose of paragraph (a) of this
subsection { + , + } the following portions of the amounts
 { - required - }  { +  anticipated + } to be reported by line of
business in the annual financial statement required by ORS
731.574 shall be considered premiums for insurance covering the
peril of fire:
  (A) Fire, 100 percent.
  (B) Homeowners and farm owners multiple peril, 65 percent.
  (C) Commercial multiple peril, 50 percent.
  (D) Inland marine, 20 percent.
  (E) Automobile physical damage, eight percent.
  (F) Aircraft physical damage, eight percent.
  (2) If an insurer ceases to do business or collect premiums on
direct domestic risks, it thereupon shall make a report to the
director of its premiums subject to taxation as provided in
subsection (1) of this section and collected or due as of the
date when it ceased to do business or collect premiums on direct
domestic risks, and not theretofore reported, and shall forthwith
pay to the director the tax thereon.
  (3) If the director  { - , during the period in which the
director under ORS 731.836 may collect taxes owing under this
section, - } finds the amount of   { - such - }  taxes  { + owing
under this section + } paid by an insurer to have been incorrect,
the director shall charge or credit the insurer with the
difference between the correct amount of tax and the amount
actually paid.
  SECTION 4. ORS 731.842 is amended to read:
  731.842. (1) The Director of the Department of Consumer and
Business Services may grant, for good cause shown, a request for
an adjustment of the amount of the   { - prepayment - }  { +
estimated tax installments + } due under ORS 731.822 or an
extension of time for payment of taxes under ORS 731.808 to
731.828 and 731.859. The extension shall be requested no later
than the due date and may not exceed 30 days or one month,
whichever is longer, except that an extension of time for
payments under ORS 731.822 may not exceed 10 days.
  (2) Interest   { - at the rate of two-thirds of one percent per
month or fraction of a month shall accrue on any such tax payment
not made - }  { +  on estimated tax installments due under ORS
731.822 that are not paid + } by the due date (determined without
regard to extensions) { +  shall accrue as provided under ORS
314.525 + }. { +  For purposes of determining the underpayment of
estimated tax on which interest accrues, underpayments of
estimated tax installments due under ORS 731.822 shall be
considered underpayments of estimated tax under ORS 314.505 to
314.525. + }
    { - (3) A penalty of 10 percent of the tax amount shall be
imposed upon any late payment of any such tax, except for a
payment made within an extension period as provided in subsection
(1) of this section or when the director believes extenuating
circumstances justify waiver of the penalty. - }
  SECTION 5. ORS 314.525 is amended to read:
  314.525. (1) An underpayment of estimated tax under ORS 314.505
to 314.525 will be considered to have occurred if the estimated
tax is not paid as required.
  (2) Notwithstanding subsection (1) of this section, there shall
be no underpayment of estimated tax if the estimated tax paid
equals or exceeds the amount described in any one of the
following paragraphs:
  (a) The amount which would be required to be paid if the
estimated tax liability were equal to 100 percent of the tax
shown on the return for the taxable year or, if no return was
filed, 100 percent of the tax for such taxable year.
  (b) The amount which would be required to be paid if the
estimated tax liability were equal to 100 percent of the tax
shown on the return for the preceding taxable year, and the
preceding taxable year was a taxable year of 12 months.
  (c)(A) An amount equal to 100 percent of the tax for the
taxable year computed by placing on an annualized basis the
taxable income:
  (i) For the first three months of the taxable year, in the case
of the installment required to be paid in the fourth month;
  (ii) For the first three months or for the first five months of
the taxable year, in the case of the installment required to be
paid in the sixth month;
  (iii) For the first six months or for the first eight months of
the taxable year in the case of the installment required to be
paid in the ninth month; and
  (iv) For the first nine months or for the first 11 months of
the taxable year, in the case of the installment required to be
paid in the 12th month of the taxable year.
  (B) For purposes of this paragraph the taxable income shall be
placed on an annualized basis by:
  (i) Multiplying by 12 the taxable income referred to in
subparagraph (A) of this paragraph; and
  (ii) Dividing the resulting amount by the number of months in
the taxable year (3, 5, 6, 8, 9 or 11, as the case may be)
referred to in subparagraph (A) of this paragraph.
  (d) An amount equal to 100 percent of the amount obtained by
applying section 6655(e) (3)(C) of the Internal Revenue Code to
Oregon taxable income.
  (e) An election made under section 6655(e) (2)(C) of the
Internal Revenue Code (relating to annualization periods) for
federal tax purposes shall also apply for purposes of estimated
tax under ORS 314.505 to 314.525.
  (3) Interest shall accrue on the underpayment of estimated tax
under ORS 314.505 to 314.525 at the rate established under ORS
305.220, for each month or fraction thereof during which period
the estimated tax or any installment thereof remains unpaid.
   { +  (4) + } The penalty provisions contained in this chapter
and ORS chapters 317 and 318 for underpayment of tax shall not
apply to underpayments of estimated tax under ORS 314.505 to
314.525.
    { - (4) - }  { +  (5) + } For purposes of subsection (3) { +
and (4) + } of this section, the underpayment of estimated tax
shall be the excess of:
  (a) The amount of the installment which would be required to be
paid if the estimated tax were equal to 100 percent of the tax
shown on the return for the taxable year or, if no return was
filed, 100 percent of the tax for such year, over
  (b) The amount, if any, of the installment paid on or before
the last date prescribed for payment.
    { - (5) - }  { +  (6) + } In the case of a large corporation,
subsection (2)(b) of this section shall apply only to determine
the amount of the first required installment for any taxable
year. Any reduction in the first installment by reason of this
subsection shall be added to the amount of the next required
installment determined without regard to subsection (2)(b) of
this section. For purposes of this subsection, a 'large
corporation' is any corporation that had federal taxable income,
determined without regard to any amount carried to any of the
three taxable years under section 172 or 1212(a) of the Internal
Revenue Code, of $1 million or more in any of the three taxable
years immediately preceding the taxable year involved.
    { - (6) - }  { +  (7) + } The application of this section to
taxable years of less than 12 months shall be in accordance with
rules adopted by the Department of Revenue.
  SECTION 6. ORS 317.650 is amended to read:
  317.650. (1) ORS 317.356, relating to depreciation and basis,
shall be applicable to every insurer.
  (2) Notwithstanding ORS 314.835 or 314.840 or any other law
concerning confidentiality of tax returns, the Department of
Consumer and Business Services and the Department of Revenue may
disclose to each other returns and all other information
necessary
  { - to carry out the provisions of section 2, chapter 786,
Oregon Laws 1995, and otherwise - }  to administer the corporate
excise tax imposed by this chapter on insurers { +  and to
administer the taxes imposed on insurers under ORS 731.820,
731.822, 731.854 and 731.859 + }.
  (3) Notwithstanding ORS 314.085 or other law, for purposes of
this chapter, any  { + insurer + }   { - foreign or alien
insurer, or any insurer described in ORS 731.816 (1993
Edition), - }  must file a return on a calendar year basis.
   { +  (4) The Director of the Department of Consumer and
Business Services is responsible for auditing insurers to ensure
compliance with the tax laws of this state. + }
  SECTION 7. ORS 314.385 is amended to read:
  314.385. (1)(a) For purposes of ORS chapter 316, returns shall
be filed with the Department of Revenue on or before the due date
of the corresponding federal return for the tax year as
prescribed under the Internal Revenue Code and the regulations
adopted pursuant thereto, except that the final return of a
decedent shall be filed at any time following the death of the
decedent, to and including the 15th day of the fourth month after
expiration of the regular tax year of the decedent.
  (b) For purposes of ORS chapters 317 and 318, returns shall be
filed with the department on or before the 15th day of the month
following the due date of the corresponding federal return for
the tax year, as prescribed under the Internal Revenue Code and
the regulations adopted pursuant thereto.
  (c) The department may allow further time for filing returns
equal in length to the extension periods allowed under the
Internal Revenue Code and its regulations.
   { +  (d) For purposes of corporate excise taxes owed by an
insurer under ORS chapter 317, returns shall be filed as provided
in ORS 731.822. + }
    { - (d) - }  { +  (e) + } If no return is required to be
filed for federal income tax purposes, the due date or extension
period for a return shall be the same as the due date, or
extension period, would have been if the taxpayer had been
required to file a return for federal income tax purposes for the
tax year. However, the due date for returns filed for purposes of
ORS chapter 317 or 318 shall be on or before the 15th day of the
month following what would have been the federal return due date
for the tax year.
  (2) There shall be annexed to the return a statement verified
as provided under ORS 305.810 by a declaration of the taxpayer
making the return to the effect that the statements contained
therein are true.
  (3) Returns shall be in such form as the department may, from
time to time, prescribe. The department shall prepare blank forms
for the returns and distribute them throughout the state. Such
forms shall be furnished the taxpayer upon request, but failure
to receive or secure a form shall not relieve the taxpayer from
the obligation of making any return required by law.
  (4) The department may by rule authorize the filing of a return
in alternative formats to those described in subsection (3) of
this section and may prescribe the conditions, requirements and
technical standards for a filing under this subsection.
  SECTION 8. ORS 731.828 is amended to read:
  731.828. (1) Each insurer transacting wet marine and
transportation insurance in this state shall file annually on or
before June 15 with the Director of the Department of Consumer
and Business Services and in the form prescribed by the director,
a report of all the items pertaining to its insurance business as
enumerated and prescribed in ORS 731.824.
  (2) Each insurer that has been writing such insurance in this
state for three years shall furnish the director a statement of
all of the items referred to in subsection (1) of this section,
in the form prescribed by the director, for each of the preceding
three calendar years. An insurer that has not been writing such
insurance for three years shall furnish to the director a
statement of all such items for each of the calendar years during
which it has written such insurance.
  (3) On or before June 15 of each year, if the insurer has
transacted such insurance for three years, the insurer shall:
  (a) Ascertain the average annual underwriting profit, as
provided in ORS 731.824, derived by the insurer from such
insurance business written within the United States during the
last preceding three calendar years.
  (b) Ascertain the proportion which the average annual premiums
of the insurer from such insurance written by it in this state
during the last preceding three calendar years bears to the
average total of such wet marine and transportation insurance
premiums of the insurer during the same three years.
  (c) Pay five percent on this proportion of the average annual
underwriting profit of the insurer from such insurance to the
director as a tax upon such insurance written by it in this state
during the current calendar year.
  (4) The insurer each year shall compute the tax, according to
the method described in this section, upon the average annual
underwriting profit of such insurer from such insurance during
the preceding three years, including the current calendar year.
At the expiration of each current calendar year, the profit or
loss on such insurance business of that year is to be added or
deducted, and the profit or loss upon such insurance business of
the first calendar year of the preceding three-year period is to
be dropped so that the computation of underwriting profit for
purposes of taxation under this section will always be on a
three-year average.
  (5) An insurer that has not been writing wet marine and
transportation insurance in this state for three years shall,
until it has transacted such business in this state for that
number of years, be taxed on the basis of its annual underwriting
profit on such insurance written within the United States for the
current calendar year, subject, however, to an adjustment in the
tax as soon as the insurer, in accordance with the provisions of
this section, is enabled to compute the tax on the three-year
basis.
  (6) In the case of mutual insurers the insurer shall not
include in the underwriting profit, when computing the tax
prescribed by this section, the amounts refunded by such insurers
on account of premiums previously paid by their policyholders.
  (7) If the director  { - , during the period in which the
director under ORS 731.836 may collect taxes owing under this
section, - } finds the amount of   { - such - }  taxes  { + owing
under this section + } paid by an insurer to have been incorrect,
the director shall charge or credit the insurer with the
 
difference between the correct amount of tax and the amount
actually paid.
  (8) If an insurer ceases to transact wet marine and
transportation insurance in the state, it shall thereupon make
report to the director of the items pertaining to such insurance
business, as enumerated and described in this section, to the
date of its ceasing to transact such insurance and not
theretofore reported, and forthwith pay to the director the taxes
computed according to this section and the annual authorization
fees thereon.
  SECTION 9. ORS 731.859 is amended to read:
  731.859. (1) On or before April 1 of each year, each foreign or
alien insurer shall:
  (a) Determine and report to the Director of the Department of
Consumer and Business Services whether the provisions of the laws
of any state or country require the imposition of the burdens
specified by ORS 731.854;
  (b) Compute the amount owing under ORS 731.854; and
  (c) Pay to the director that amount.
  (2) If the director  { - , during the period in which the
director under ORS 731.836 may collect taxes owing under this
section, - } finds the amount of   { - such - }  taxes  { + owing
under this section + } paid by an insurer to have been incorrect,
the director shall charge or credit the insurer with the
difference between the correct amount of tax and the amount
actually paid.
  SECTION 10.  { + Section 1 of this 2001 Act and the amendments
to ORS 314.385, 314.525, 317.650, 731.820, 731.822, 731.828,
731.842 and 731.859 by sections 2 to 9 of this 2001 Act apply to
insurer tax reporting periods beginning on or after January 1,
2002. + }
  SECTION 11.  { + ORS 731.836 is repealed. + }
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