What is the Insurance Tax?
Ordinance 220.4, as presented in the McCreary County Fiscal Court meeting last week would establish a tax on premiums for certain types of insurance policies on McCreary County residents and businesses, with an effective date of July 1, 2017.
The tax would be assessed against insurance companies providing the policies, but those companies would most likely pass that cost to the policyholder.
All revenue generated from the tax, which is estimated to be about $1 million annually, would be directly placed in the dedicated Jail budget established by the Fiscal Court, and conceivably not be able to be used for any purpose other than covering expenses related to the operation of a jail or the housing and transport of prisoners in other facilities.
A one-time 7 percent tax on first year premiums collected for life insurance policies would be assessed. That tax, Judge Executive Stephens stated, would only be charged on new policies written, and would not affect already established life insurance policies.
The second portion of the ordinance establishes a 7 percent tax on all premiums on other types of insurance such as casualty, automobile, inland marine, fire and allied perils and health.
Certain types of insurance policies are exempted from the tax. Some of those exemptions include: health insurance policies provided for state and county employees, health insurance issued to citizens through Kentucky Access (which is no longer active), workers’ compensation insurance, annuities, federal flood insurance, insurance on bonds or leases issued by or on the behalf of McCreary County (unless those are issued for profit or on behalf of for-profit or private organizations.)
All fees generated from the ordinance would be due to the County no later than 30 days after the end of each calendar quarter, or every three months.
Any fee not paid by the due date would have interest charged (at the rate established by the Department of Revenue for unpaid or underpaid taxes), as well as a penalty of 10 percent of the tax due.
While the Fiscal Court took no action on the proposed ordinance at the last meeting, the ordinance as presented, or with changes, can be proposed again at a future meeting. The ordinance would need two readings in Fiscal Court to be enacted in to law.