Surplus Lines Tax Changes

To: TEXAS SURPLUS LINES AGENTS

From: Kathy Wilcox
Company Licensing & Registration, MC305-2C
Texas Department of Insurance

Date: January 3, 2000

Subject Surplus Lines Tax Trust Accounts

HB3211 passed by the 76th Texas Legislature, amended Texas Insurance Code Article 1.14-2, Sec. 12 (a) and (b). The amendments are as follows:

Art. 1.14-2, Sec. 12 (a) – requires surplus lines agents to file a report and pay taxes to the comptroller on or before March 1 of each year on forms prescribed by the comptroller. The amount of taxes shall be based on gross premiums written or received. A tax prepayment shall be required any time accrued taxes due equal or exceed $70,000. The prepayment of the accrued taxes, with a form prescribed by the comptroller, shall be due by the 15th day of the month following the month in which accrued taxes total $70,000. The prepayment form number is 25- 105.

Art. 1.14-2, Sec. 12 (b) – eliminates the requirement for the surplus lines agent to maintain a separate account for the surplus lines taxes. This also eliminates the requirements of TAC 34 §3.823 for the surplus lines agent to furnish the Texas Department of Insurance with a copy, or have the bank furnish a copy, of the monthly bank statement for the account. The Department is requesting that all surplus lines agents submit the December monthly bank statement, to be generated and distributed in January to close out the year-end 1999 records.

Let this also serve as a reminder to the surplus lines agents that you are still responsible for collecting the surplus lines taxes, and that those taxes are trust funds in your hands, as stated Article 1.14-2, Sec. 12(b). The surplus lines agent may not absorb the tax or rebate all or any part of the tax.

If you have any questions regarding these changes you may contact the Texas Department of Insurance, Company Registration at 512/322-3522, or the Comptroller of Public Accounts at 800-531-5441 Ext. 3-4068 or Ext. 3-4074.