Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Tax on Insurers Annotations

Reduced Rate—Internal Revenue Code Section 501(a)

The reduced rate does not apply to premiums from policies issued to plans which are exempt under Internal Revenue Code section 501(a) that are not pension or profit-sharing plans. Premiums from policies issued to such plans must be taxed at the full rate. Premiums from policies issued to plans meeting the two requirements of Revenue and Taxation Code section 12202 (pension or profit sharing plans that are exempt or qualified under the relevant Internal Revenue Code sections) qualify for the reduced rate even if the policy is not an annuity. Plans that come within the sections of the Internal Revenue Code listed in Revenue and Taxation Code section 12202, other than Internal Revenue Code section 501(a), virtually always qualify for the reduced rate.

Examples of premiums not meeting both tests under Revenue and Taxation Code section 12202 are: (i) premiums from policies issued to policyholders organized under Internal Revenue Code section 501(c)(3) and exempt under Internal Revenue Code section 501(a); or, (ii) premiums from policies issued to voluntary employees' beneficiary associations (VEBA) organized under Internal Revenue Code section 501(c)(9) and exempt under Internal Revenue Code section 501(a). 5/8/90. (Am. 2003–3).