Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2011

Tax on Insurers Law

Chapter 1. General Provisions.

Article 1 Definitions

Tax on Insurers Law

(Part 7, Insurance Taxation*)

Enacted Statutes 1941, Chapter 113; amended Statutes 1943, Chapters 461, 956; Statutes 1945, Chapter 1040; Statutes 1951, Chapters 806, 917; Statutes 1957, Chapters 139, 1179, 1189, 2314; Statutes 1959, Chapters 39, 2174; Statutes 1961, Chapters 44, 740; Statutes 1963, Chapters 1527, 1909; Statutes 1963 (Extra Session), Chapter 3; Statutes 1965, Chapters 510, 679; Statutes 1966 (First Extra Session), Chapter 144; Statutes 1967, Chapters 818, 1007; Statutes 1968, Chapter 1347; Statutes 1969, Chapters 736, 860, 1455; Statutes 1971, Chapter 1634; Statutes 1973, Chapter 665. Statutes 1974, Chapters 311, 610, 1516; Statutes 1975, Chapter 661; Statutes 1976, Chapter 534; Statutes 1977, Chapter 921; Statutes 1978, Chapter 827; Statutes 1980, Chapter 944. Statutes 1981, Chapter 820. Statutes 1982, Chapters 5 (First Extra Session), 327, 454, and 684. Statutes 1983, Chapters 142 and 1092. Statutes 1984, Chapters 39, 930, 1020.

* The provisions of this part, except as otherwise noted, became effective July 1, 1943. For cases relating to insurance taxation see annotations to Article XIII, Section 28 of the Constitution.

Chapter 1. General Provisions

Article 1. Definitions

12001. Construction. Unless the context otherwise requires, the definitions set forth in this article govern the construction of this part.

12002. "Ocean marine insurance." "Ocean marine insurance" means insurance written within this state upon hulls, freights, or disbursements, or upon goods, wares, merchandise, and all other personal property and interests therein, in course of exportation from, importation into any country, or transportation coastwise, including transportation by land or water from point of origin to final destination in respect to, appertaining to, or in connection with, any and all risks or perils of navigation, transit or transportation, any portion of which exportation, importation, transportation, navigation, transit, or shipment is upon any ocean, and upon the property while being prepared for and while awaiting shipment, and during any delays, storage, transshipment or reshipment incident to or in connection with the shipment or transportation. "Ocean marine insurance" includes marine builders and war risk insurance.

"Ocean marine insurance" does not, for the purpose of taxation of such insurance as provided in subdivision (g) of Section 28 of Article XIII of the Constitution, include insurance written upon:

(a) A hull, which is not a documented vessel registered with the Transportation Department of the United States; or

(b) Anything carried in, attached to, used in transportation of or any risk written in connection with any hull defined in (a) above, unless:

The insurance is upon a customary ocean marine form and such hull and the risks mentioned in (b) above are covered for one who is in the business of:

(1) Renting or chartering boats;

(2) Using boats himself for commercial purposes; or

(3) Building or repairing boats.

Insurance not included in "ocean marine insurance" by this section shall be taxed in accordance with the other provisions of subdivision (g) of Section 28 of Article XIII of the Constitution.

The 1969 amendment of this section shall be construed as a restatement and continuation of the law existing prior to such amendment.

History.—Stats. 1969, p. 1700, in effect November 10, 1969, added all language following the first paragraph. Stats. 1974, p. 619, operative November 6, 1974, substituted "subdivision (g) of Section 28" for "subsection (g) of Section 144/5" and "subdivision (g) of Section 28" for "Section 144/5".

12003. "Insurer." "Insurer" as used in this part includes each of the following:

(a) Insurance companies or associations.

(b) Reciprocal or interinsurance exchanges, together with their corporate or other attorneys in fact considered as a single unit.

(c) The State Compensation Insurance Fund.

As used in this section, "companies" includes persons, partnerships, joint stock associations, companies and corporations.

History.—Stats. 1943, p. 2832, in effect December 31, 1943, completely reworded the definition which formerly referred to business organizations organized to assume risks of loss. Stats. 1951, p. 2447, in effect September 22, 1951, added State Compensation Insurance Fund to the definition. Stats. 1963, p. 3904, operative January 1, 1964, divided the section into subdivisions (a), (b) and (c) and added "together with their corporate attorneys in fact considered as a single unit" to subdivision (b). Stats. 1967, p. 2599, in effect November 8, 1967, added "or other" to (b) and moved the language defining "companies" from (c) to the last sentence of the section.

Note.—Stats. 1951, p. 2447, amending Sections 202, 12003 and former Section 12264 of the Revenue and Taxation Code, provides that if any one of its provisions is held invalid the remainder of the act shall also be deemed invalid.

Construction.—The gross premiums tax applies to all insurance companies and associations, whether fire or life, and whether doing business as stock concerns or mutual concerns. Northwestern Mutual Life Insurance Co. v. Roberts (1918) 177 Cal. 540.

Operative date of 1963 amendments.—The 1963 amendment to this section and to Section 1530 of the Insurance Code, which added corporate attorneys in fact for reciprocal or interinsurance exchanges to the definition of "insurer," were effective as of the income year beginning January 1, 1964, and did not operate to relieve the taxpayer, a corporate attorney in fact for an interinsurance exchange, from franchise tax for the taxable year 1964, as measured by its net income in 1963. Farmers Underwriters Ass'n v. Franchise Tax Board (1966) 242 Cal.App.2d 589.

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12004. "Marine insurer." "Marine insurer" means an insurer transacting ocean marine insurance.

12005. "Taxes." "Taxes" means the taxes assessed and levied, or which may be assessed and levied, under the provisions of Section 28 of Article XIII of the State Constitution and of this part.

History.—Added by Stats. 1961, p. 1980, operative January 1, 1962. Stats. 1974, p. 619, operative November 6, 1974, substituted "Section 28" for "Section 144/5".

12006. "Board." "Board" means the State Board of Equalization.

History.—Added by Stats. 1961, p. 1980, operative January 1, 1962.

12007. "Commissioner." "Commissioner" means the State Insurance Commissioner.

History.—Added by Stats. 1961, p. 1980, operative January 1, 1962.

12008. "Controller." "Controller" means the State Controller.

History.—Added by Stats. 1961, p. 1980, operative January 1, 1962.

12009. "Medi-Cal managed care plan" defined. (a) "Medi-Cal managed care plan" or "plan" means any individual, organization, or entity, other than an insurer as described in Section 12003 or a dental managed care plan as described in Section 14087.46 of the Welfare and Institutions Code, that enters into a contract with the State Department of Health Care Services pursuant to Article 2.7 (commencing with Section 14087.3), Article 2.8 (commencing with Section 14087.5), Article 2.81 (commencing with Section 14087.96), Article 2.9 (commencing with Section 14088), or Article 2.91 (commencing with Section 14089) of Chapter 7 of, or pursuant to Article 1 (commencing with Section 14200) or Article 7 (commencing with Section 14490) of Chapter 8 of, Part 3 of Division 9 of the Welfare and Institutions Code.

deletion(b) This section shall become inoperative on July 1, 2011, and, as of January 1, 2012, is repealed, unless a later enacted statute, that becomes operative on or before January 1, 2012, deletes or extends the dates on which it becomes inoperative and is repealed.

History.—Added by Stats. 2009, Ch. 157 (AB 1422) in effect September 22, 2009. Stats. 2010, Ch. 717 (SB 853), in effect October 19, 2010, deleted former subdivision (b) which provided that "This section shall remain in effect only until January 1, 2011, and as of that date is repealed." and added a new subdivision (b).

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