Laws, Regulations and Annotations
Search
Business Taxes Law Guide—Revision 2024
Tax on Insurers Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 7. Insurance Taxation
Chapter 2. Ocean Marine Insurance
Article 1. Definitions
Article 2. Basis of Tax for Ocean Marine Insurance
Article 1. Definitions
12071. Application of definitions. The definitions contained in this article apply with respect to ocean marine insurance.
History—Stats. 1961, p. 1980, operative January 1, 1962, substituted "with respect to ocean marine insurance" for "only to this chapter".
12072. "Current calendar year." "Current calendar year" means the calendar year for which underwriting profit is computed pursuant to Section 12073.
12073. "Underwriting profit." "Underwriting profit," as respects any one calendar year, means the amount arrived at by deducting from the net earned premiums of that calendar year on ocean marine insurance contracts written within the United States:
(a) Losses incurred.
(b) Expenses incurred.
In arriving at "underwriting profit" there shall not be deducted as expenses incurred an amount exceeding 40 percent of the gross premiums on ocean marine insurance contracts written during the current calendar year.
12074. "Net earned premiums." "Net earned premiums" means the amount arrived at by:
(a) Deducting all return premiums, premiums on policies not taken, and premiums paid for reinsurance, from
(b) Gross premiums on ocean marine insurance contracts written during the current calendar year, to which remainder is added
(c) Unearned premiums on outstanding ocean marine business at the end of the preceding calendar year, and from which sum is deducted
(d) Unearned premiums on outstanding ocean marine business at the end of the current calendar year.
"Gross premiums" and "return premiums".—See annotations under Section 12221.
12075. "Losses incurred." "Losses incurred" means gross losses incurred during the current calendar year under ocean marine contracts written within the United States, less reinsurance claims collected or collectible and salvages or recoveries collectible from any source applicable to the losses.
12076. "Expenses incurred." "Expenses incurred" includes specific and general expenses incurred in the current calendar year on ocean marine contracts written within the United States.
12077. "Specific expenses." "Specific expenses" means expenses incurred directly and specifically in connection with earned ocean marine premiums, including all commissions, agency expenses, taxes, licenses, fees, and loss-adjustment expenses, less recoveries or reimbursements on account of or in connection with the commissions or other expenses collected or collectible because of reinsurance or from any other source.
12078. "General expenses." "General expenses" means the portion of expenses not chargeable specifically to a particular class of insurance which is allocated to earned ocean marine premiums, consisting of that proportion of general or overhead expenses, including salaries of officers and employees, printing and stationery, and taxes of this State and of the United States, which the net premiums of ocean marine insurance written by the insurer bear to the total net premiums from all classes of insurance written by it during the current calendar year.
Article 2. Basis of Tax for Ocean Marine Insurance*
* Stats. 1961, p. 1980, operative January 1, 1962, amended the title of Article 2 by substituting "Basis of Tax" for "Tax Base".
12101. Tax levy; rate. Every insurer transacting the business of ocean marine insurance in this State shall annually pay to the State a tax measured by that portion of the underwriting profit of the insurer from ocean marine insurance written in the United States, which the gross premiums of the insurer from ocean marine insurance written in this State bear to the gross premiums of the insurer from ocean marine insurance written within the United States, at the rate of 5 percent.
12102. In lieu of other taxes; exceptions. The tax is in lieu of all other state, county and municipal taxes and licenses upon the marine insurer, except taxes upon real estate, any retaliatory exactions imposed by paragraph (3) of subdivision (f) of Section 28 of Article XIII of the Constitution, motor vehicle and other vehicle registration license fees and any other tax or license fee imposed by the state upon vehicles, motor vehicles or the operation thereof, and taxes assessed or levied against the insurer on account of any other class of insurance written by it.
History—Stats. 1961, p. 1980, operative January 1, 1962, added the language beginning with "any retaliatory" and ending with "operation thereof." Stats. 1967, p. 2599, in effect November 8, 1967, deleted "the Legislature pursuant to" following "retaliatory exactions imposed by." Stats. 1974, p. 619, operative November 6, 1974, substituted "Section 28" for "Section 144/5".
In lieu tax.—Although in lieu of taxes on personal property, it is not, like the former public utility gross receipts tax, a direct tax on property, but is a franchise tax exacted for the privilege of doing business in the state. Thus, ownership by the insurance company, and not the use to which the property is being put, is the factor determining freedom of personal property from local taxation. Consolidated Title Security Co. v. Hopkins (1934) 1 Cal.2d 414.
A revenue ordinance imposing a tax on a person engaged in the business of soliciting, effecting and negotiating undertakings of bail as agent of an insurance company is invalid. Groves v. City of Los Angeles (1949) 93 Cal.App.2d 17; Groves v. City of Los Angeles (1953) 40 Cal.2d 751.
12103. Basis for computation. Except as otherwise provided in Section 12105, the tax shall be computed each year upon the average annual underwriting profit of the insurer from ocean marine insurance during the preceding three calendar years.
History—Added by Stats. 1961, p. 1980, operative January 1, 1962. Derived from former Section 12151.
12104. Computation on three-year basis. If the insurer has transacted ocean marine insurance in this State in each of the three calendar years immediately preceding the year in which a tax return is required to be filed, the tax shall be computed as follows:
(a) Divide the average annual premiums of the insurer from ocean marine insurance written by it in this State during the preceding three calendar years by the average annual premiums of the insurer from all ocean marine insurance written in the United States during such calendar years.
(b) Multiply the insurer's average annual underwriting profit from ocean marine insurance written within the United States during the preceding three calendar years by the figure derived in (a).
(c) Multiply the amount derived in (b) by 5 percent.
History—Added by Stats. 1961, p. 1980, operative January 1, 1962. Derived from former Section 12154.
12105. Computation on less than three-year basis. If the insurer has not transacted ocean marine insurance in this State in each of the three calendar years immediately preceding the year in which a tax return is required to be filed, its tax shall be computed on the basis of its premiums and underwriting profits in the last completed calendar year. As soon as the insurer comes within the terms of Section 12104, the taxes computed under the provisions of this section for the two preceding calendar years shall be adjusted to equal the amount of the first tax computed under Section 12104. The adjustment shall be shown as an addition to, or a credit against, the tax computed upon business done in the third calendar year or as soon thereafter as possible.
History—Added by Stats. 1961, p. 1981, operative January 1, 1962. Derived from former Section 12153.
12106. Refunds to policyholders not included. In computing the tax of a marine insurer issuing participating policies, there shall not be included in underwriting profit the amounts refunded by the insurer on account of premiums previously paid by its policyholders.
History—Added by Stats. 1961, p. 1981, operative January 1, 1962. Derived from former Section 12155.
12107. Date for interest, penalties, and periods of limitation. Whenever in this part the date, April 1st, is used as the beginning date for the computation of interest, attachment of penalties, or the fixing of periods of limitation, the date, June 15th, shall be substituted in lieu thereof with respect to taxes for ocean marine insurance.
History—Added by Stats. 1969, p. 1473, in effect August 14, 1969, operative January 1, 1970.