Redomestication: North Carolina’s Incentives, Your Opportunity
When the changing needs of a domicile align with the growth strategy of captives, the result can be a happy circumstance for both parties. For service providers licensed in other domiciles and considering expanding their business into other states, North Carolina’s objective to generate additional premium tax revenue could easily align with their own need to grow business revenue.
Recent legislation approved by the North Carolina Senate will give captive insurance companies new incentives to redomesticate to North Carolina, including a premium tax holiday or exemption from premium taxes. This measure, S.B. 347, passed on a 49-0 vote and is strongly supported by North Carolina insurance and captive regulators.
How does the premium tax holiday work?
It is important to realize that the tax exemption provision will only be available for a stated period of time, in the hopes that those considering redomestication to North Carolina will act within the next 18 months.
In this spirit, according to the terms of the bill, captives that redomesticate prior to December 31, 2022 would be exempt from state premium taxes for both the tax year in which they redomesticate as well as for the following tax year.
Another plus: expanding the annual audit exemption
In addition to the tax exemption for redomestication, S.B. 347 clarifies certain existing benefits of North Carolina’s captive insurance law regarding the state’s annual audit requirement. Specifically, it extends the annual audit exemption request to all captives regardless of size.
Under existing law, captives under $1.2 million in premium can request the annual exemption. Under the new legislation, any captive may request and be granted the exemption by the Commissioner, regardless of size. Each request would be heard on a case-by-case basis upon examination of the financial standing of the captive.
The Commissioner could grant the exemption if it was found that compliance “would cause the insurer a financial or organizational hardship.” Such exemption, it should be noted, would continue to be granted on an exception base only.
North Carolina: an enviable domestic domicile
While the new incentive is expected to boost revenue and future business growth for the state of North Carolina, don’t overlook the long-term benefits of redomestication to this mid-Atlantic state.
The state’s healthy business climate is complemented by a mild actual one, which supports an active four-season lifestyle. In addition, North Carolina’s robust infrastructure facilitates travel, both domestically and to overseas markets. Its position midway down the Eastern seaboard makes key markets in the Northeast, Midwest and Southeast equally accessible.
Having taken the initial step in enacting an attractive captive insurance incentive, “we look forward to final passage of the legislation later this year,” says NCCIA President and CEO Tom Adams.
For a confidential discussion about the new law, or about how to take your own steps toward redomestication, Atlas Insurance Management would welcome the opportunity to meet with you.
