Instructions – 2018 Form IB-4A3 Gross Premium Tax Return Captive Insurance Companies Filing as a Consolidated Group
General Information
All captive insurance companies as defined in G.S. 58-10-340 doing business in this state are subject to gross premiums tax pursuant to G.S. 105-228.4A. Every captive insurance company licensed to do business in North Carolina is considered to be doing business and is required to file a gross premiums tax return and pay gross premiums tax, regardless of whether premiums have been written, unless it is declared “inactive” pursuant to G.S. 58-10-490. If a captive insurance company holds an active license for any portion of a tax year, then it is required to file a gross premiums tax return and pay gross premiums tax. In the case of a branch captive insurance company, the tax is levied only on the branch business of the company. Two or more captive insurance companies under common ownership and control that meet the requirements for filing as a consolidated group of captives are allowed to file as a single captive insurance company.
The gross premiums tax return for captive insurance companies is due on or before March 15. The return covers the activities of all captives in the group during the preceding calendar year. If a captive insurance company has a fiscal year-end, the return must include a schedule showing premiums for the calendar year. For example, a captive with a fiscal year ending July 31 would include activity for the period January 1 through July 31, and the period August 1 through December 31.
The premium amounts reported on the captive insurance company premiums tax form must agree with amounts reported in the financial reports filed with the North Carolina Department of Insurance (“NCDOI”) for each member of the group. A schedule that includes the names of each captive insurance company, identifying numbers of each captive, the type of captive each company in the group is authorized by the NCDOI to operate as, and direct premiums and assumed reinsurance premiums for each captive must be attached to the return when filed. The premium information for each member of the consolidated group and the aggregate totals for all members of the consolidated group should be in the same format as Parts 2 and 3 of the return. Copies of all appropriate pages in support of premiums from the financial statements of each captive insurance company included in the consolidated group filed with the NCDOI must be attached. Information on requirements for filing the annual financial report is available on the Department of Insurance’s website.
The information contained in these instructions is to be used as a guide in the preparation of the North Carolina gross premiums tax return and is not intended to cover all provisions of the law pertaining to consolidated groups of captive insurance companies under common control and ownership filing as a single captive. For specific information on the formation of captive insurance companies in the state, refer to Chapter 58, Article 10, Part 9 of the General Statutes. For specific information on the taxation of captive insurance companies, refer to Chapter 105, Article 8B of the General Statutes
Form IB-4A3 is to be filed by two or more captive insurance companies filing as a consolidated group of captives under common ownership and control. The form is not to be used by a captive insurance company that is filing as a stand-alone captive insurance company or by a protected cell captive insurance company. Stand-alone captives must file Form IB-4A1. Protected cell captive insurance companies must file Form IB-4A2. The forms are available on the Department’s website.
Qualification to file as a consolidated group is determined by the NCDOI. It is recommended that approval for filing as a group be obtained from the Department of Insurance prior to filing as a group. Approval documentation should be attached to the return filed for each group.
Specific Instructions for Filing Form IB-4A3
Legal Name, Address, and Identification Numbers: Enter the legal name, mailing address, federal identification number/social security number, the National Association of Insurance Commissioners (“NAIC”) number, and the North Carolina Department of Insurance (“NCDOI”) license number of the controlling captive insurance company as it appears on the license issued by the NCDOI on the appropriate lines. Enter the principal place of business in North Carolina and the date licensed to do business in North Carolina on the appropriate lines.
Name of Contact Person: Enter the name of the person to contact for all matters pertaining to the tax return.
Legal Name of Captive Manager Firm: Enter the name and mailing address of the approved captive manager firm responsible for all financial reporting and tax matters.
Part 1. Members Included in Consolidated Group
Complete the information in its entirety. Include the name, identifying number, principal place of business, date licensed to do business in North Carolina, NCDOI license number and type of captive for each captive insurance company included in the group. Attach additional pages if needed.
Part 2. Computation of Tax on Direct Premiums for ALL Members of Consolidated Group
Direct premiums are premiums contracted for or collected on policies or contracts of insurance written by the company during the preceding calendar year. Gross direct premiums collected or contracted for is the Total Direct Premiums Written reported on the premium information schedules in the annual financial forms filed with the NCDOI. All direct premiums written by a captive insurance company licensed in North Carolina are subject to tax in North Carolina.
Enter the name and identifying number of each captive insurance company in the group. Complete the premium information in its entirety for each captive insurance company. Attach additional pages if needed.
To complete Column D, “Combined Totals”, add the amount on Line 4, “Tax on Direct Premiums”, for each of the captives in the group and enter the aggregate total on Line 4 of Column D.
Line 1. Gross Direct Premiums Collected or Contracted For: For all captive insurance companies, other than association captives, branch captives, and risk retention group captives, enter the “Total All Lines” amount in the “Direct Written” column of “Schedule 2 Premiums” from Form C-200, Captive Annual Report Form, filed with the NCDOI. Copies of appropriate financial reporting pages must be attached to the return.
For association captives and risk retention group captives, enter the amount from Line 35 (Totals) on the “Totals” line in the “Direct Business” column of the “Part 1B - Premiums Written” schedule from the “Underwriting and Investment Exhibit” of the National Association of Insurance Commissioners (“NAIC”) Annual Report filed with the NCDOI. Copies of appropriate financial reporting pages must be attached to the return.
For branch captives, enter the amount of total direct premiums for business done in North Carolina from the audited financial statement filed with the NCDOI. Copies of appropriate financial reporting pages must be attached to the return.
Line 2a through Line 2c. Adjustments: Line 1 may be reduced by amounts paid to policyholders as return premiums and by dividends on unabsorbed premiums or premium deposits returned or credited to policyholders. Premiums attributed to multi-year policies or contracts must be prorated among the years covered by the policy or contract. A schedule showing calculations must be attached to the return.
Follow instructions on the return to complete Computation of Tax on Direct Premiums (Lines 1 through 4) for each captive insurance company in the consolidated group. The amount to be entered on Column D, Line 4 is the aggregate total of the tax on direct premiums for all members included in the consolidated group.
Part 3. Computation of Tax on Assumed Reinsurance Premiums for ALL Members of Consolidated Group
Assumed Reinsurance Premiums are total premiums written for reinsurance assumed from affiliates and non-affiliates during the preceding calendar year.
Line 5. Assumed Reinsurance Premiums: For all captive insurance companies, other than association captives, branch captives, and risk retention group captives, enter the “Total All Lines” amount in “Reinsurance Assumed” column of “Schedule 2 Premiums” from Form C-200, Captive Annual Report, filed with the NCDOI. Copies of appropriate financial reporting pages must be attached to the return.
For association captives and risk retention group captives, enter the sum of the amounts from Line 35 (Totals) on the “Totals” line in the “Reinsurance Assumed From Affiliates” column and the ”Reinsurance Assumed From Non-Affiliates” column of the “Part 1B - Premiums Written” schedule from the “Underwriting and Investment Exhibit” of the NAIC annual report filed with the NCDOI. Copies of appropriate financial reporting pages must be attached to the return.
For branch captives, enter the amount of total assumed reinsurance premiums for business done in North Carolina from the audited financial statement filed with the NCDOI. Copies of appropriate financial reporting pages must be attached to the return.
Line 6a and Line 6b. Adjustments: Allowable deductions are 1) premiums for risks or portions of risks that are subject to taxation on a direct basis under N.C. Gen. Stat. § 105-228.4A(e) and 2) premium amounts in connection with the receipt of assets in exchange for the assumption of loss reserves and other liabilities of one insurer by another insurer if the two insurers are under common control and the Commissioner of Insurance verifies that the transaction between the insurers is (1) part of a plan to discontinue the operations of one of the insurers, and (2) the intent of the insurers is to renew or maintain business with the captive insurance company. A detailed schedule of deductions must be attached.
Follow instructions on the return to complete “Computation of Tax on Assumed Reinsurance Premiums” (Lines 5 through 8) for each captive insurance company in the consolidated group. The amount to be entered on Column D, Line 8 is the aggregate total of the tax on assumed reinsurance premiums for all members included in the consolidated group.
Part 4. Total Premiums Tax for Members of a Consolidated Group that DOES NOT include a Special Purpose Financial Captive
This section is to be completed by a consolidated group of captives that does not include a special purpose financial captive. Follow the instructions on the return in completing this Part.
Part 5. Total Premiums Tax for Members of a Consolidated Group that DOES include a Special Purpose Financial Captive
This section is to be completed by a group of captives that DOES include a special purpose financial captive. Follow the instructions on the return in completing this Part.
Part 6. Total Amount Due with This Return
Line 21. Total Amount of Premiums Tax for Consolidated Group: Enter the amount from Part 4, Line 10 or Part 5, Line 20.
Line 22. Tax Credits: Information on tax credits that can be claimed against captive insurance gross premiums tax can be accessed on the Department’s website. Instructions for claiming credits and the forms (Form CD-425 and appropriate forms in the NC-478 series) to be completed and filed with the premiums tax return for captive insurance companies claiming credits against premiums tax are also available on the Department’s website. Failure to substantiate a tax credit may result in the disallowance of that credit.
Line 23a and Line 23b. Penalties: Returns filed after the statutory due date are subject to a failure to file penalty of 5% of the tax for each month, or part of a month, the return is late (maximum 25% of the tax due). In addition, returns filed after the statutory due date are subject to a late payment penalty of 10% of the tax due.
Line 24. Interest: Interest is due on any tax not paid by the due date. Interest accrues on tax not paid from the due date set by statute for payment of the tax until the tax is paid. Applicable interest rates are available on the Department’s website.
Line 25. Total Amount Due: Add Lines 23, 24a, 24b, and 25. This is the total amount of tax, penalties, and interest due. Make your check or money order payable to the North Carolina Department of Revenue. Payment of tax due must be in the form of U.S. currency from a domestic bank and included with the return. Returns and payments should be mailed to NC Department of Revenue, Insurance Premium Tax Unit, Post Office Box 25000, Raleigh, NC 27640-0300. Payment of taxes may be made electronically using ACH Debit or ACH Credit electronic funds transfer after receiving approval from the Department. For additional information, contact the Insurance Premium Tax Unit at 919-754-2600. Electronic filing of tax returns for captive insurance companies is not available.