Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2010
 

Tax on Insurers Law

Chapter 3. All Insurance Other Than Ocean Marine.

Article 1. General*

Section 12201

Text of section operative December 31, 2010

12201. Annual tax. (a) Every insurer and Medi-Cal managed care plan doing business in this deletionstate shall annually pay to the deletionstate a tax on the bases, at the rates, and subject to the deductions from the tax hereinafter specified. For purposes of the tax imposed by this chapter, "insurer" shall be deemed to include a home protection company as defined in Section 12740 of the Insurance Code.

(b) Notwithstanding Section 13340 of the Government Code, the revenues derived from the imposition of the tax by this chapter on Medi-Cal managed care plans are hereby continuously appropriated as follows:

(1) To the State Department of Health Care Services for purposes of the Medi-Cal program in an amount equal to 38.41 percent of the total revenues derived from the imposition of the tax by this chapter on Medi-Cal managed care plans.

(2) To the Managed Risk Medical Insurance Board for purposes of the Healthy Families Program in an amount equal to 61.59 percent of the total revenues derived from the imposition of the tax by this chapter on Medi-Cal managed care plans

(c) For purposes of imposing the tax on Medi-Cal managed care plans during the 2009 calendar year, the tax shall be based on total revenue for the period of January 1, 2009, to December 31, 2009, inclusive.

(d) The Insurance Commissioner shall report the amount of revenue derived from the tax imposed on Medi-Cal managed care plans pursuant to this section to the California Health and Human Services Agency, the Joint Legislative Budget Committee, and the Department of Finance.

(e) This section shall remain in effect only until January 1, 2011, and as of that date is repealed.

History.—Stats. 1961, p. 1981, operative January 1, 1962, renumbered former Section 12251 as Section 12201 without other change. Stats. 1981, Ch. 820, in effect January 1, 1982, added the second sentence. Stats. 2009, Ch. 157 (AB 1422), in effect September 22, 2009, added "and Medi-Cal managed care plan" after "Every insurer" in subdivision (a); and added subdivisions (b), (c), (d) and (e).

Excise tax.—The tax imposed upon insurance companies is not a property tax but an excise tax for the privilege of doing business in the year preceding that in which the tax is assessed. Consequently, an insurance company is liable for a tax based upon its gross premiums received during a calendar year, notwithstanding the fact that on the first Monday of March of the following year the company was not doing business. Penalties accruing after the appointment of a liquidator are properly charged to the company. Carpenter v. Peoples Mutual Life Insurance Co. (1937) 10 Cal.2d 299.

Doing business.—Foreign insurers who solicited business by mail from outside the state were "doing business" in California. The insurers' resident agents, even though designated as independent contractors, performed functions in this state on behalf of the insurers sufficient to form the "definite link" and "minimum connection" required to justify imposition of the tax on the insurers. Illinois Com. Mens Assn. v. State Board of Equalization (1983) 34 Cal.3d 839, appeal dismissed (1984) 466 U.S. 933.

Text of section operative January 1, 2011

12201. Annual tax. (a) Every insurer doing business in this state shall annually pay to the state a tax on the bases, at the rates, and subject to the deductions from the tax hereinafter specified. For purposes of the tax imposed by this chapter, "insurer" shall be deemed to include a home protection company as defined in Section 12740 of the Insurance Code.

(b) This section shall become operative on January 1, 2011.

History.—Added by Stats. 2009, Ch. 157 (AB 1422), in effect September 22, 2009.

* The title of Article 1. Tax Base, commencing with former Section 12251 was amended to its present form by Stats. 1961, p. 1981, operative January 1, 1962.