A tax overhaul task force is looking into whether Arkansas should change two tax credits authorized for insurance companies that cost the state about $77 million a year.
Members of the Tax Reform and Relief Legislative Task Force on Sept. 27 questioned the benefits of a decades-old law that allows life, health and disability insurers to get a home office credit against their insurance premium taxes, the Arkansas Democrat-Gazette reported. It’s the task force’s latest attempt to scrutinize existing tax credits in an attempt to finance a larger income tax cut than the state could otherwise afford.
The home office credits cost the state more than $60.5 million in 2017, according to the Arkansas Insurance Department. The credits can’t reduce insurance premium taxes by more than 80 percent for health and disability insurers or more than 70 percent for life insurers, according to the department.
Task force members are also questioning a 2013 law that authorizes a tax credit to certain insurers against premium insurance taxes for investments made by qualified community development entities in low-income areas. The community development entities sell these so-called new market jobs credits to insurers. The credits can’t exceed the insurance premium taxes and may be carried forward for nine years.
The credits cost the state about $16.4 million in 2017, according to the insurance department.
The department said that the home office and new market jobs credits are the two largest out of the $79.6 million cost of all tax credits against insurance premium taxes.
Arkansas collected $212 million in premium taxes from insurers in fiscal year 2018, according to the department’s findings.
Kurt Naumann, research director for the Arkansas Economic Development Commission, promised to provide information to the task force in October about the investments and jobs created through the new market jobs tax credit program.
Arkansas Blue Cross and Blue Shield spokesman Max Greenwood called the home office tax credit “an economic development tool” that allows insurance companies to stay in Arkansas and create jobs.
“If they take away the credit, it is going to increase our premiums and increase the tax burden,” Greenwood said. “It will become a business decision whether we can expand our workforce locally or look to more favorable (locations).”
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