Thursday, November 14, 2019

Bill to exclude Puerto Rico insurers from federal excise tax introduced in U.S. House

By on March 22, 2019

Island is treated as a foreign jurisdiction for tax purposes

SAN JUAN – Puerto Rico’s resident commissioner in Washington, D.C., Jenniffer González and other lawmakers introduced legislation that would amend the 1986 Internal Revenue Code to exempt from the foreign insurer excise tax certain insurance policies issued by Puerto Rico.

Titled the Puerto Rico Insurance Excise Tax Exemption of 2019, House Bill 1483 was filed March 4. Currently, foreign insurance companies in Puerto Rico pay an excise tax imposed by Section 4371 of the U.S. Internal Revenue Code. However, Puerto Rico’s insurers are covered by the same federal laws and regulations as stateside insurance companies.

The bill would exempt certain insurance plans underwritten by insurers formed in U.S. territories from the federal excise tax (FET).

“While the Code exempts states and U.S. territories from the excise tax, the IRS considers Puerto Rico a U.S. possession and not a territory,” explains a release issued by González’s office.

The tax puts Puerto Rico’s insurers and reinsurers at a disadvantage to cover risks in the United States. The tax applied on gross insurance premiums is collected at a 4% rate for accident insurance and indemnity bonds; 1% for life insurance, accident insurance and annuity contracts; and 1% for reinsurance.

“This bill seeks to correct the treatment that is given to Puerto Rico under U.S. tax laws. It is highly improbable for the FET to have as a goal to put Puerto Rico at a disadvantage,” González said.

The bill was filed along with Reps. Peter King (R-NY), Brian Fitzpatrick (R-PA) and Ann Kirkpatrick (D-AZ).

You must be logged in to post a comment Login