Delaware General Assembly


CHAPTER 83

FORMERLY

HOUSE BILL NO. 383

AS AMENDED BY HOUSE AMENDMENT NO. 1

AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE RELATING TO THE PRIVILEGE TAX ON CERTAIN DOMESTIC INSURERS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (three-fifths of all members elected to each House thereof concurring therein):

Section 1. Delete §703 of Title 18, Delaware Code, in its entirety and substitute in lieu thereof new §703 as follows:

§703. Privilege tax on certain domestic insurers.

(a) Except as provided in subsection (e) of this section, a domestic insurer, other than a mutual insurer doing business on the assessment premium plan, shall pay to the Commissioner for the use of the State an annual privilege tax in the amount determined in accordance with subsections (b) and (c) of this section, due and payable at the same time as the premium tax and estimated payments as provided in §702 of this title. The payment of such privilege tax shall accompany a form as designated and furnished by the Commissioner, together with such information required thereon relating to the provisions of this section.

(a) For purposes of subsection (a), the privilege tax with respect to each year shall be an amount determined in accordance with following table, less any credits provided in subsection (c) of this section:

If annual gross receipts are:

The annual privilege tax shall be:

Under $1,000,000 Exempt

$1,000,000 to $5,000,000 $10,000

$5,000,001 to $10,000,000 $25,000

$10,000,001 to $20,000,000 $45,000

$20,000,001 to $30,000,000 $65,000

$30,000,001 to $40,000,000 $85,000

over $40,000,000 $95,000

For purposes of the foregoing table and subsection (e), the 'annual gross receipts' of a domestic insurance company shall consist of its net premium income and its investment income. As the terms are used herein: (i) the term 'net premium income' shall mean an amount determined by taking the domestic insurer's gross direct premium income and all other considerations for insurance received by the domestic insurer on account of insurance contracts, but excluding considerations received for annuity contracts, and subtracting therefrom the amount of any returned premiums on cancelled policies (but not including the return of cash surrender values of life insurance policies) and the unabsorbed portion of any deposit premium and the amount returned to policyholders as dividends and similar returns, whether paid in cash or credited or applied in reduction of premiums; and (ii) the term 'investment income' shall mean the amount shown on the line for investment income on the annual statement filed in accordance with §526(a) of this title.

(a) In determining the annual privilege tax under subsection (a), the
amount of tax determined in the table provided in subsection (b) shall be reduced, but with respect to domestic insurers that do not maintain their principal offices in the state to an amount not less than $15,000, by the credits with respect to such year provided in this subsection. Except as
limited by subsection (d), the domestic insurer subject to tax under this section is entitled to credits against annual privilege tax liability as follows:

(i) For each $100,000 of gross salaries, wages and other compensation paid by the domestic insurer and its affiliates for employee services performed within Delaware, the domestic insurer shall be entitled to a credit of $1,500 for such year;

(d) Domestic insurers shall not be entitled to carry-over or carry back or otherwise apply a credit to any year other than the year to which the credit originally applies.

(a) In the case of domestic insurers with one, two or three domestic insurer affiliates, only the affiliate with the largest gross receipts as defined herein shall be subject to the annual privilege tax imposed pursuant to subsection (b). Any affiliates exceeding three in number shall each be subject to the annual privilege tax.

(a) For purposes of subsections (c) and (e), 'affiliate' shall (1) have the same meaning as provided in Subchapter V of Chapter 7 of Title 5, Delaware Code, and (2) shall mean any corporation which is a member of a controlled group of corporations as defined in §1563(a) of the Internal Revenue Code of 1986 ('IRC'), without regard to subsections (a)(4) and (b)(2)(D) of IRC §1563, except that more than 50 percent' shall be substituted for 'at least 80 percent' each place it appears in IRC §1563(a); provided further that 'affiliate' shall also include, the insurance division of a bank created pursuant to 5 W. C. §767(a).

Section 2. If any provision of this Act or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to that end the provisions of this Act are declared to be severable.

Section 3. This Act shall become effective for tax years commencing on or after January 1, 1991.

Approved July 1, 1991.