Fiscal Note & Local Impact Statement
127 th General Assembly of Ohio
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BILL: |
DATE: |
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STATUS: |
SPONSOR: |
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LOCAL IMPACT
STATEMENT REQUIRED: |
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STATE FUND |
FY 2007 |
FY 2008 |
FUTURE YEARS |
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General Revenue Fund |
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Revenues |
$21 million loss |
$21 million loss |
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Expenditures |
- 0 - |
- 0 - |
- 0 - |
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Other State Funds |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
- 0 - |
- 0 - |
- 0 - |
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Note: The state
fiscal year is July 1 through June 30.
For example, FY 2007 is July 1, 2006 – June 30, 2007.
·
The
decrease in tax rate would reduce revenues from the tax. The amount of revenue loss would depend on
market conditions, but Department of Insurance officials estimate the loss to
be approximately $21 million per year.
·
No
direct fiscal effect on political subdivisions.
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Under current law, companies
located in Ohio that purchase insurance on risks located within Ohio from
insurers not authorized to do business in this state are assessed a tax on the
premiums they paid of 5% of the gross premium.
H.B. 35 would reduce the tax rate in such cases from 5% of gross
premiums to 1.4%.
Companies that are
authorized to do business in Ohio pay a tax on gross premiums that they
receive. Such companies may be
headquartered in Ohio, in which case they are referred to as
"domestic" insurance companies, or they may be headquartered in other
states, in which case they are referred to as "foreign" insurance
companies. Both domestic and foreign
insurance companies that are authorized to do business in Ohio pay a tax on
gross premiums at a rate of 1.4%.[1] Thus under current law, the tax rate imposed
on premiums paid to insurers authorized to do business in Ohio is less than the
rate paid by companies that purchase insurance from insurers not authorized to
do business in Ohio.
Am. Sub. H.B. 66 of the
126th General Assembly, the main operating budget bill, made changes to the tax
base being changed by H.B. 35. H.B. 66
removed an exemption that had been in place for certain "employer insureds"
and added an exemption for captive insurers.
The net effect of those changes has been to expand the tax base,
although it may be that future responses in the market, i.e., new formations of
captive insurers, could change the net effect.
Am. Sub. H.B. 699 of the 126th General Assembly also made changes to the
tax base, exempting certain professional or medical liability insurance and
certain insurance covering risks related to environmental remediation.
The reduction in tax rate
would reduce revenue from the tax, with the exact amount of revenue loss
depending on market conditions.
Department of Insurance officials estimate that the revenue loss would
be approximately $21 million per year.
The full revenue loss would be to the GRF.
LSC fiscal staff: Ross Miller, Senior Economist