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Insurance Premium Property Sales Severance Tax

Concerning taxation, and, in connection therewith, narrowing the scope of the home office insurance premium tax rate reduction and the annuities consideration exemption for the insurance premium tax; for purposes of the property tax, requiring the actual value of real property to reflect the value of the fee simple estate and requiring personal property to be based on the property's value in use; increasing the per-schedule exemption for business personal property tax and reimbursing local governments for the lost tax revenue; for purposes of the sales and use tax, codifying that the definition of tangible personal property includes digital goods and specifying that the tax on sales and purchases of tangible personal property includes amounts charged for mainframe computer access, photocopying, and packing and crating; disallowing the sales tax vendor fee for retailers with a substantial amount of taxable sales during the filing period; for the severance tax on oil and gas, requiring the net-back deductions used to determine gross income be direct costs actually paid by the taxpayer; phasing-out tax credits and exemptions for the severance tax on coal; and making an appropriation.
2021 Regular Session
Fiscal Policy & Taxes
Bill Summary

The bill makes changes to several state and local government taxes.

Insurance premium tax. Currently, the insurance premium tax is equal to 2% of premiums collected or contracted for covering property or risks in this state; except that a company that is deemed to maintain a home office or regional home office in this state pays tax of 1%. Section 2 of the bill requires a company to have at least 2.5% a minimum percentage of its total domestic workforce in the state in order for the company to be deemed to maintain a home office or regional home office. This percentage is 2% for 2022, 2.25% for 2023, and 2.5% for 2024 and thereafter. This section also narrows the tax exemption for annuities considerations to those that are purchased in connection with a qualified retirement plan, a Roth 401(k), or an individual retirement account. For the purpose of auditing a company's tax statement, section 2 also authorizes the commissioner of insurance to appoint an independent examiner to conduct an examination on behalf of the commissioner.Property tax. For purposes of imposing the property tax, section 4 requires the actual value of real property to reflect the value of the fee simple estate. Section 5 requires that the actual value of personal property be determined based on the property's value in use, which will be defined by the property tax administrator.

There is an exemption from property tax for business personal property that would otherwise be listed on a single personal property if the property is less than a certain amount, which increases with inflation each property tax cycle. For the next current property tax cycle, section 6 increases the exemption from $7,900 to $50,000. Similar to the reimbursement for the homestead exemption, the state is required to reimburse local governments for lost property tax revenue caused by the increase. The first reimbursement will be based on actual property tax schedules filed, and future reimbursements will be adjusted estimates based on the initial amount. Section 7 requires the assessor to provide an estimate of the exempt business personal property along with the certifications to local governments.Sales and use tax. The state sales and use tax is imposed on the sale and use of tangible personal property. Section 7 8 codifies the department of revenue rule that the definition of "tangible personal property" includes "digital goods". Section 8 9 specifies that the state sales tax applies to amounts charged for mainframe computer access, photocopying, and packing and crating.

A retailer who collects state sales tax is currently allowed to retain 4% of the state sales taxes collected, with a monthly cap of $1,000, as compensation for the retailer's expenses incurred in collecting and remitting the tax (vendor fee). Beginning January 1, 2022, section 9 10 eliminates the vendor fee for any filing period that the retailer's total taxable sales were greater than $1 million.Severance taxes. The severance tax on oil and gas is currently imposed on gross income, which is equal to the net amount realized for the sale of the oil and gas. The net amount realized is equal to the gross lease revenues, less deductions for any transportation, manufacturing, or processing costs by the taxpayer borne by the taxpayer (netback deductions). Section 10 11 limits the netback deductions to direct costs actually paid by the taxpayer for those purposes, which disallows costs of capital and other indirect expenses.

Currently, the first 300,000 tons of coal produced in each quarter is exempt from the property tax. There is also a tax credit equal to 50% for coal produced from underground mines and another credit in the same amount for lignitic coal. Beginning with the 2022 taxable year, section 11 12 phases out the quarterly exemption and both tax credits. The additional severance tax that results from these changes is credited to the just transition cash fund under section 12 13 .

(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)

(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)




Bill Text