(Southern Pines)…..The N.C. General Assembly has given final approval to legislation that exempts “foreign” captive insurance companies from all state taxes. Currently, North Carolina does not tax captives chartered in other states that do business or write coverage in the state. This is in contrast to states, like Tennessee, which impose a “procurement” tax on captives chartered outside their domicile but insure risks for companies doing business in the state. The exemption law changes are contained in SB 99, codified as SL 2018-5 and can be found at Sections 38.2(f), (g), page 234. See www.ncgeneralassembly.com
Specifically, the exemption language would prohibit NCDOR from taxing premiums earned, for example, by a South Carolina chartered or licensed captive doing business and insuring a risk located in North Carolina. The specific tax exemptions are for premium taxes, corporate income taxes, franchise taxes, privilege taxes and insurance regulatory charges imposed by NCDOI. Raising fairness and equal protection issues, your Association sought unsuccessfully to have the legislative proposal amended to also provide the same exemption for “alien” captives insuring North Carolina risks. We believe that further amendments will be sought in the 2019 Regular Session when other technical amendments to the NC captive law are considered.
Since the original Captive Insurance Act was passed in 2013, it has been the stated policy of our domicile to encourage both “foreign” and “alien” captives to re-domesticate to the state