Mass. P/C Insurers Ignore Tax Relief Options

November 30, 2000

Eight Massachusetts insurance companies have opted out of a state program that promises permanent tax cuts in exchange for five years of voluntary community investment, according to a report by the Massachusetts Association of Community Development Corporations.

Led by Commerce Group Inc., the state’s largest auto insurer, the group of property-casualty insurers has ignored the program created as part of a 1998 law spurred by intense lobbying by insurers. The law gives massive tax relief to Massachusetts’ property-casualty insurance companies if they adhere to community reinvestment standards similar to the ones governing the state’s banks.

Along with Commerce, the other insurers include Andover Cos. in Andover, Electric Insurance Co. of Beverly, Safety Insurance Co. of Boston and Eastern Casualty Insurance Co. of Marlborough.

Under the 1998 law, the state’s life insurance and property-casualty insurers pledge to earmark up to $100 million over five years for community development projects. In return, they receive the same share of an estimated $50 million annual tax cut. Companies decide whether to participate, and those that do are excused from paying premium income and gross investment income taxes.

The state’s insurance industry lobbied for years for the elimination of these surcharges, which demand a 2 percent annual tax on all new and renewing premiums and a 1 percent gross investment income tax. Under the law, the companies only had to contribute for five years, but the tax cut would be awarded forever.

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