If they don’t all enter into an agreement for sharing, the compact/allocation procedure as envisioned by Dodd-Frank, then if a bunch of states create different mechanisms, it doesn’t satisfy Dodd-Frank, does it?
Actually, it does. As I mentioned below, the states were not forced to enter into a Compact by the Act itself, so the different mechanisms that would arise should have been anticipated.
How muddy will this get…… Brokers are at a loss as to who gets what on multi state accounts. Do we use the federal “home state” or the individual state or now in this instance this group of states. This is getting worse everyday.
Anyone: Last I checked,a broker does not have a problem. The broker just figures out the “Home State” (in the vast majority of cases, very easy, and if not, only moderately easy) and pays it there. That’s the beginning and the end for the broker. That’s federal law.
All this other nonsense is just about what happens afterwards involving tthe states themselves.
All of the states that have weighed in on NRRA have legislated to adopt a definition of “home state” that pretty much mirrors NRRA. Thus the taxes would be sent by the SL broker to that state. Stay tuned though. The devil is in the details of how much tax to charge. Some states are saying charge the home state tax rate on the entire policy premium (including multi-state risks). Some states are saying charge the location state tax rate, but send it to the home state. Some states are willing to share via a clearing house with other location states. Other states plan to retain 100% of the tax on multi-state risks. Things could get dicey when states that are cash strapped and scrimping for every tax dollar cry foul against states that plan to keep the windfall tax dollars that would otherwise have gone to the location state. It’s going to get messy. Typical legislative nightmare.
It’s going to take awhile to sort it all out. Yes, it will be ugly for all parties in the short-term, but I’m confident that it will all work out in the end. Unfortunately, the mess was partially created by the Dodd-Frank Act itself, as it did not force the states to enter into a compact.
Most states have adopted the NRRA “home state” definition, but that doesn’t simplify things that much on multi-state risks. Some states mandate the “home state” tax rate for the entire policy. Others say tax at the location state rate. Some states intend to retain 100% of the tax while others intend to share with the location states. Wait for the intense debate when a state loses tax revenue to a “home state”. Also, brokers will need to provide the premium splits by location state as part of the reporting. I don’t see this as simpler.
NIMA, aka: nimrod!
If they don’t all enter into an agreement for sharing, the compact/allocation procedure as envisioned by Dodd-Frank, then if a bunch of states create different mechanisms, it doesn’t satisfy Dodd-Frank, does it?
Actually, it does. As I mentioned below, the states were not forced to enter into a Compact by the Act itself, so the different mechanisms that would arise should have been anticipated.
How muddy will this get…… Brokers are at a loss as to who gets what on multi state accounts. Do we use the federal “home state” or the individual state or now in this instance this group of states. This is getting worse everyday.
Anyone: Last I checked,a broker does not have a problem. The broker just figures out the “Home State” (in the vast majority of cases, very easy, and if not, only moderately easy) and pays it there. That’s the beginning and the end for the broker. That’s federal law.
All this other nonsense is just about what happens afterwards involving tthe states themselves.
All of the states that have weighed in on NRRA have legislated to adopt a definition of “home state” that pretty much mirrors NRRA. Thus the taxes would be sent by the SL broker to that state. Stay tuned though. The devil is in the details of how much tax to charge. Some states are saying charge the home state tax rate on the entire policy premium (including multi-state risks). Some states are saying charge the location state tax rate, but send it to the home state. Some states are willing to share via a clearing house with other location states. Other states plan to retain 100% of the tax on multi-state risks. Things could get dicey when states that are cash strapped and scrimping for every tax dollar cry foul against states that plan to keep the windfall tax dollars that would otherwise have gone to the location state. It’s going to get messy. Typical legislative nightmare.
It’s going to take awhile to sort it all out. Yes, it will be ugly for all parties in the short-term, but I’m confident that it will all work out in the end. Unfortunately, the mess was partially created by the Dodd-Frank Act itself, as it did not force the states to enter into a compact.
Most states have adopted the NRRA “home state” definition, but that doesn’t simplify things that much on multi-state risks. Some states mandate the “home state” tax rate for the entire policy. Others say tax at the location state rate. Some states intend to retain 100% of the tax while others intend to share with the location states. Wait for the intense debate when a state loses tax revenue to a “home state”. Also, brokers will need to provide the premium splits by location state as part of the reporting. I don’t see this as simpler.