Insurance Premium Tax
Background
Colorado’s insurance premium tax was enacted in 1913. This tax applies to insurance premiums charged by insurance companies licensed by the state of Colorado and surplus line brokers, who offer policies for insurance companies not licensed in the state of Colorado. Insurance premium taxes are due March 1st for the preceding calendar year to the Division of Insurance within the Department of Regulatory Agencies.1 Insurance premium tax revenue is subject to the spending and revenue limitations of TABOR.
Tax Rate
This tax is imposed on the gross amount of all premiums, and the tax rates vary by the type of insurance company as follows:
|
Insurance Company Type
|
Tax Rate
|
|
Captive insurance company*
|
$5,000 minimum
|
|
Insurance companies with a home office in Colorado
|
1%
|
|
Other insurance companies not otherwise exempted
|
2%
|
|
Surplus line insurance**
|
3%
|
Tax Credits
Insurance companies may claim tax credits against the insurance premiums tax for any investment in Certified Capital Companies (CAPCOs), or the Colorado Venture Capital Authority. The total amount of the credits is capped at $200 million and is spread over a ten-year period.2
Distribution
Revenue from the insurance premium tax is credited to the General Fund for spending on general operations after appropriations to:
- the Division of Insurance Tax Fund to fund division operations (limited to 5 percent of revenue); and
- the Wildfire Emergency Response Fund and Wildfire Preparedness Fund, which pays for wildfire prevention and response efforts.3
Appropriations are made at the discretion of the General Assembly.
State Comparisons
Hawaii is the only state that does not impose a tax on insurance premiums. Across states levying a tax, rates range 0.5 percent to 4.35 percent and average just below 3.0 percent.