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Legislative Council Staff

Insurance Premium Tax 

Table of Contents

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. Pursuant to HB 21-1311, captive insurance companies that generate the majority of their revenue from sources other than insurance premiums are subject to the state’s income tax, rather than the insurance premium tax. 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%
*Captive insurance companies are owned by a parent company that is typically not an insurance company.
**To qualify for the home office designation, insurance companies must maintain 2 percent of their workforce in Colorado in tax year 2022, 2.25 percent for tax year 2023, and 2.5 percent for tax year 2024 and in subsequent years.
***Surplus line insurance brokers offer insurance policies for insurance companies that are not licensed within the state of Colorado. These policies tend to be higher risk.
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);
  • the Wildfire Emergency Response Fund and Wildfire Preparedness Fund, which pays for wildfire prevention and response efforts; and
  • the state health insurance affordability enterprise.3

Appropriations are made at the discretion of the General Assembly.

State Comparisons

As of 2023, all states except Illinois, Michigan, and Oregon assessed some type of premium tax on insurance companies. Of the three states that do not subject insurance companies to a premium tax,Illinois levies an annual privilege tax on all insurance companies, Michigan companies are subject to the Michigan business tax (if elected), corporate income tax, or retaliatory tax, whichever is greater. Insurers in Oregon are not subject to a premium tax, but pay a corporate excise tax on net income.

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1Section 10-3-209, Section 10-5-111, and Section 10-6-128, C.R.S.
2Section 10-3.5-105 and Section 10-3.5-106, C.R.S.
3Section 10-3-209 (4), C.R.S.
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