GENERAL ASSEMBLY OF NORTH CAROLINA
1993 SESSION
CHAPTER 600
The General Assembly of North Carolina enacts:
Section 1. Article 7 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-7-16. Funding agreements authorized.
(a) As used in this section, 'funding agreement' means an agreement that authorizes a licensed life insurer to accept funds and that provides for an accumulation of funds for the purpose of making one or more payments at future dates in amounts that are not based on mortality or morbidity contingencies. A 'funding agreement' is not an 'annuity' as defined in G.S. 58-7-15; and is not a 'security' as defined in G.S. 78A-2.
(b) Any insurer that is licensed to write life insurance or annuities in this State may deliver, or issue for delivery, funding agreements in this State.
(c) Funding agreements may be issued to persons authorized by a state or foreign country to engage in an insurance business or to their affiliates, including affiliates of the issuer. Issuance to an affiliate of an issuer is not subject to the provisions of Article 19 of this Chapter. Funding agreements may be issued to persons other than those licensed to write life insurance and annuities or their affiliates in order to fund one or more of the following:
(1) Benefits under any employee benefit plan as defined in the federal Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., maintained in the United States or in a foreign country.
(2) The activities of an organization exempt from taxation under section 501(c) of the Internal Revenue Code or of any similar organization in a foreign country.
(3) A program of the government of the United States, the government of a state, foreign country, or political subdivision, agency, or instrumentality thereof.
(4) An agreement providing for one or more payments in satisfaction of a claim or liability.
(5) A program of an institution that has assets in excess of twenty-five million dollars ($25,000,000).
(d) Amounts shall not be guaranteed or credited under a funding agreement except upon reasonable assumptions as to investment income and expenses and on a basis equitable to all holders of funding agreements of a given class.
(e) Amounts paid to the insurer and proceeds applied under optional modes of settlement under funding agreements may be allocated by the insurer to one or more separate accounts pursuant to G.S. 58-7-95.
(f) The Commissioner has sole authority to regulate the issuance and sale of funding agreements on behalf of insurers. In addition to the authority in G.S. 58-2-40, the Commissioner may adopt rules relating to:
(1) Standards to be followed in the approval of forms of funding agreements.
(2) Reserves to be maintained by insurers issuing funding agreements.
(3) Accounting and reporting of funds credited under funding agreements.
(4) Disclosure of information to be given to holders and prospective holders of funding agreements.
(5) Qualification and compensation of persons selling funding agreements on behalf of insurers."
Sec. 2. G.S. 58-30-220 reads as rewritten:
"§ 58-30-220. Priority of distribution.
The priority of distribution of claims from the insurer's
estate shall be in accordance with the order in which each class of claims is
set forth in this section. Every claim in each class shall be paid in
full or adequate funds shall be retained for such payment before the
members of the next class receive any payment. No subcategories shall be
established within the categories in any a class. The order
of distribution of claims shall be:
(1) Claims for cost of administration and conservation of assets of the insurer.
(2) Compensation actually owing to employees other than officers of the insurer for services rendered within three months prior to the commencement of a delinquency proceeding against the insurer under this Article, but not exceeding one thousand dollars ($1,000) for each employee. In the discretion of the Commissioner, this compensation may be paid as soon as practicable after the proceeding has been commenced. This priority is in lieu of any other similar priority that may be authorized by law as to wages or compensation of those employees.
(3) Claims or portions of
claims for benefits under policies and for losses incurred, including claims of
third parties under liability policies, up to an amount of three hundred
thousand dollars ($300,000) per claim policies; claims for funds or
consideration held under funding agreements, as defined in G.S. 58-7-16; claims
under life insurance and annuity policies, whether for death proceeds, annuity
proceeds, or investment values; and claims of domestic and foreign guaranty
associations; but excluding claims of insurance pools, underwriting
associations, or those arising out of reinsurance agreements, claims of other
insurers for subrogation, and claims of insurers for payments and settlements
under uninsured and underinsured motorist coverages.
(4) Claims for unearned premiums.
(5) Claims of general
creditors, including claims of insurance pools, underwriting associations, or
those arising out of reinsurance agreements; claims of other insurers for
subrogation; those portions of claims for benefits under policies and for
losses incurred, including claims of third parties under liability policies, in
excess of three hundred thousand dollars ($300,000) per claim; and claims
of insurers for payments and settlements under uninsured and underinsured
motorist coverages."
Sec. 3. G.S. 78A-2(11) reads as rewritten:
"(11) 'Security' means any note; stock;
treasury stock; bond; debenture; evidence of indebtedness; certificate of
interest or participation in any profit-sharing agreement; collateral-trust
certificate; preorganization certificate or subscription; transferable share;
investment contract including without limitation any investment contract taking
the form of a whiskey warehouse receipt or other investment of money in whiskey
or malt beverages; voting-trust certificate; certificate of deposit for a
security; certificate of interest or participation in an oil, gas, or mining
title or lease or in payments out of production under such a title or
lease; or, in general, any interest or instrument commonly known as a
'security,' or any certificate of interest or participation in, temporary or interim
certificate for, receipt for guarantee of, or warrant or right to subscribe to
or purchase, any of the foregoing. 'Security' does not include any insurance or
endowment policy policy, funding agreement, as defined in G.S.
58-7-16, or annuity contract under which an insurance company promises to
pay (i) a fixed sum of money either in a lump sum or periodically for life or
for some other specified period, or (ii) benefits or payments or value which
that vary so as to reflect investment results of any segregated
portfolio of investments or of a designated separate account or accounts in
which amounts received or retained in connection with any of such contracts a
contract have been placed if the delivering or issuing insurance company
has currently satisfied the Commissioner of Insurance that it is in compliance
with G.S. 58-7-95."
Sec. 4. G.S. 105-228.5 reads as rewritten:
"§ 105-228.5. Taxes measured by gross premiums.
(a) Tax Levied.
- Every insurance company and every corporation subject to Article 65 Articles
65 and 66 of Chapter 58 corporation shall pay to the Commissioner of
Insurance, at the time and rates provided in this section, of the
General Statutes is subject to the tax imposed by this section. A person
who is subject to the tax imposed by this section is not subject to franchise
or income taxes imposed by Articles 3 and 4, respectively, of this Chapter.
(b) Tax Base. -
The tax imposed by this section on an insurance company shall be a tax measured
by gross premiums from business done in this State during the preceding
calendar year, or, for Articles 65 and 66 of Chapter 58 corporations, a tax year
and the tax on a corporation subject to Article 65 of Chapter 58 of the General
Statutes shall be measured by gross collections from membership dues,
exclusive of receipts from cost plus plans, received by such corporations the
corporation during the preceding calendar year. In determining the
amount of gross premiums from business in this State, all gross premiums
received in this State, credited to policies written or procured in this State,
or derived from business written in this State shall be deemed to be for
contracts covering persons, property, or risks resident or located in this
State unless one of the following applies:
(1) The premiums are properly reported and properly allocated as being received from business done in some other nation, territory, state, or states.
(2) The premiums are from policies written in federal areas for persons in military service who pay premiums by assignment of service pay.
Gross premiums from business done in this State in the case
of life insurance and annuity contracts, including any supplemental
contracts thereto providing for disability benefits, accidental death
benefits, or other special benefits, benefits that are not annuities,
shall for the purposes of the taxes levied in this section mean
any and all premiums collected in the calendar year (other year,
other than for contracts for reinsurance) of reinsurance, for
policies the premiums on which are paid by or credited to persons, firms firms,
or corporations resident in this State, or in the case of group policies
policies, for any contracts of insurance covering persons
resident within this State. State, with no deduction for
considerations paid for annuity contracts which are subsequently returned
except as below specified, and with no other deduction whatsoever except The
only deductions allowed shall be for premiums returned under one or more
of the following conditions: premiums refunded on policies rescinded for
fraud or other breach of contract; premiums which contract and
premiums that were paid in advance on life insurance contracts and
subsequently refunded to the insured, premium payer, beneficiary or estate;
and in the case of group annuity contracts the premiums returned by reason of a
change in the composition of the group covered. Said gross estate.
Gross premiums shall be deemed to have been collected for the amounts as
provided in the policy contracts for the time in force during the year, whether
satisfied by cash payment, notes, loans, automatic premium loans, applied dividend
dividend, or in by any other manner whatsoever, means
except waiver of premiums by in the case of premiums waived by
any of said companies pursuant to under a contract for waiver
of premium in case of disability.
An insurer, in computing its premium taxes, shall pay
premium taxes on a premium for the purchase of annuities at the time the
contract holder elects to commence annuity benefits, instead of at the time the
premium is collected.
Gross premiums from business done in this State for all other contracts of insurance, including contracts of insurance required to be carried by the Workers' Compensation Act, shall mean all premiums written during the calendar year, or the equivalent thereof in the case of self-insurers under the Workers' Compensation Act, for contracts covering property or risks in this State, other than for contracts of reinsurance, whether the premiums are designated as premiums, deposits, premium deposits, policy fees, membership fees, or assessments. Gross premiums shall be deemed to have been written for the amounts as provided in the policy contracts, new and renewal, becoming effective during the year irrespective of the time or method of making payment or settlement for the premiums, and with no deduction for dividends whether returned in cash or allowed in payment or reduction of premiums or for additional insurance, and without any other deduction except for return of premiums, deposits, fees, or assessments for adjustment of policy rates or for cancellation or surrender of policies.
(c) Exclusions.
- Every insurer, in computing the premium tax, shall exclude all of the
following from the gross amount of premiums premiums:
(1) all All
premiums received on or after July 1, 1973, from policies or contracts, contracts
issued in connection with the funding of a pension, annuity annuity,
or profit-sharing plan, plan qualified or exempt under
sections 401, 403, 404, 408, 457 or 501 of the Code as defined in G.S.
105-134.1(1) and the gross amount of all such premiums shall be exempt from the
tax levied by this section. G.S. 105-228.90.
(2) Premiums or considerations received from annuities, as defined in G.S. 58-7-15.
(3) Funds or considerations received in connection with funding agreements, as defined in G.S. 58-7-16.
The gross amount of the excluded premiums, funds, and considerations shall be exempt from the tax imposed by this section.
Gross premiums from business done in this State in the
case of contracts for fire insurance, casualty insurance, and any other type of
insurance except life and annuity contracts as above specified, including
contracts of insurance required to be carried by the Workers' Compensation Act,
shall for the purposes of the taxes levied in this section mean any and all
premiums written during the calendar year, or the equivalent thereof in the
case of self-insurers under the Workers' Compensation Act, for contracts
covering property or risks in this State, other than for contracts of
reinsurance, whether such premiums are designated as premiums, deposits,
premium deposits, policy fees, membership fees, or assessments. Gross premiums
shall be deemed to have been written for the amounts as provided in the policy
contracts, new and renewal, becoming effective during the year irrespective of
the time or method of making payment or settlement for such premiums, and with
no deduction for dividends whether returned in cash or allowed in payment or
reduction of premiums or for additional insurance, and without any other
deduction except for return of premiums, deposits, fees or assessments for
adjustment of policy rates or for cancellation or surrender of policies.
In determining the amount of gross premiums from business
in this State all gross premiums received in this State, or credited to
policies written or procured in this State, or derived from business written in
this State shall be deemed to be for contracts covering persons, property or
risks resident or located in this State except for such premiums as are
properly reported and properly allocated as being received from business done
in some other nation, territory, state or states, and except for premiums from
policies written in federal areas for persons in military service who pay
premiums by assignment of service pay.
(d) Tax Rates. -
The tax rate to be applied to gross premiums collected on contracts
applicable to liabilities under the Workers' Compensation Act shall be two and
five-tenths percent (2.5%). The tax rate to be applied to gross premiums
collected on annuities and all other insurance contracts issued
by insurers shall be one and eight hundred seventy-five thousandths percent
(1.875%) for taxable years beginning on or after January 1, 1991, and before
January 1, 1992, and one and nine-tenths percent (1.9%) for taxable
years beginning on or after January 1, 1992. (1.9%). The
tax rate to An additional tax shall be applied to amounts collected
on contracts of insurance applicable to fire and lightning coverage (except coverage,
except in the case of marine and automobile policies) policies, shall
be at the rate of one and thirty-three hundredths percent (1.33%)
in addition to the above tax. (1.33%). Twenty-five percent
(25%) of the net proceeds of the one and thirty-three hundredths percent
(1.33%) tax on amounts collected on contracts of insurance applicable to fire
and lightning coverage shall be deposited in the Rural Volunteer Fire
Department Fund established in Articles 84 through 88 of Chapter 58 of the
General Statutes. Effective July 1, 1988, the The tax rate
to be applied to gross premiums and/or gross collections from membership dues,
exclusive of receipts from cost plus plans, received by Articles 65 and 66
of Chapter 58 corporations corporations subject to Article 65 of Chapter
58 of the General Statutes shall be one-half of one percent (1/2 of 1%).
The taxes levied herein measured by premiums and/or membership
dues shall be in lieu of all other taxes upon insurance companies except:
fees, charges, and licenses under this Article, or as specified in Articles 1
through 64 of Chapter 58 of the General Statutes of North Carolina as amended;
taxes imposed by Articles 84 through 88 of Chapter 58 of the General Statutes
of North Carolina; taxes imposed by Article 5 of Chapter 105 of the General
Statutes of North Carolina as amended; and ad valorem taxes upon real property
and personal property owned in this State.
(e) Report and
Payment. -For the tax above levied as measured by gross premiums and/or
gross collections from membership dues exclusive of receipts from cost plus
plans the president, secretary, or other executive officer of each Each insurance
company and corporation subject to Article 65 Articles 65 and 66 of
Chapter 58 corporation of the General Statutes doing business in
this State shall shall, within the first 15 days of March March,
file with the Commissioner of Insurance a full and accurate report of the
total gross premiums as above defined in this section or the
total gross collections from membership dues exclusive of receipts from cost
plus plans collected in this State during the preceding calendar year. The
report shall be in such form and contain such information as the The Commissioner
of Insurance may specify, shall specify the form of the report and
the information to be contained in the report. and the The report
shall be verified by the oath of the company official transmitting the same it
or by some principal officer at the home or head office of the company or
association in this country. At the time of making such report the
taxes above levied with respect to the gross premiums or the gross
collections from membership dues shall be paid to the Commissioner of
Insurance. The taxes imposed by this section shall be remitted to the
Commissioner of Insurance with the report. The provisions above
shall likewise apply as This subsection applies to reports and taxes
for any firm, corporation, or association firms, corporations, or
associations exchanging reciprocal or interinsurance contracts, and said
those reports and taxes shall be transmitted by their
attorneys-in-fact.
(f) Installment
Payments Required. - Insurance companies and Articles 65 and 66 corporations
subject to Article 65 of Chapter 58 corporations of the General
Statutes that are subject to the tax imposed by this section with and
have a premium tax liability of ten thousand dollars ($10,000) or more for
business done in North Carolina during the immediately preceding year shall
remit three equal quarterly installments with each installment equal to at
least thirty-three and one-third percent (33 1/3%) of the premium tax liability
incurred in the immediately preceding taxable year. The quarterly
installment payments shall be made on or before April 15, June 15, and October
15 of each taxable year. The company shall remit the balance by the
following March 15 in the same manner provided in this section for annual
returns.
The Commissioner of Insurance may, by regulation, may
permit an insurance company to pay less than the required estimated payment
when the insurer reasonably believes that the total estimated payments made for
the current year will exceed the total anticipated tax liability for the year.
If a company does not meet the installment payment
requirement of this section, subsection, the Commissioner of
Insurance shall assess a penalty on underpayments that is equal to the interest
rate adopted by the Secretary of Revenue under G.S. 105-241.1(i). Any
overpayment shall be credited to the company and applied against the taxes
imposed upon the company under this Article.
(g) Exemptions.
-The provisions as to reports and taxes as measured by gross premiums
shall This section does not apply to farmers' mutual assessment fire
insurance companies or to fraternal orders or societies that do not operate for
a profit and do not issue policies on any person except members.
With respect to the taxes levied in this section on the
equivalent of premiums of self-insurers under the provisions of the Workers'
Compensation Act, the reports required herein shall be transmitted to and the
taxes collected by the Insurance Commissioner as provided in G.S. 97-100(j)."
Sec. 5. Section 4 of this act becomes effective January 1, 1995, and applies, with respect to annuities and funding agreements, to premiums or other considerations paid for annuities or funding agreements on or after that date as well as to annuity or funding agreement benefits commenced on or after that date pursuant to an annuity or funding agreement purchased before that date. The remaining sections of this act are effective upon ratification.
In the General Assembly read three times and ratified this the 1st day of July, 1994.
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Dennis A. Wicker
President of the Senate
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Daniel Blue, Jr.
Speaker of the House of Representatives