New Jersey Assembly Bill A5586

New Jersey 2022-2023 Regular Session

• Introduced: 6/8/23
• Refer: 6/8/23

Caption

Increases insurance premium tax credit for certain insurance companies to reduce retaliatory tax liability imposed by other states.

Impact

The bill's increase in the insurance premium tax credit is expected to strengthen New Jersey's position in the insurance market, making the state more attractive to insurers when compared to neighboring states with lower tax rates or higher tax credits. Currently, the retaliatory tax can deter companies from doing business or relocating to New Jersey. By providing a more favorable tax treatment, this legislation could help retain existing insurers and encourage out-of-state firms to move to New Jersey.

Summary

Assembly Bill A5586 aims to amend the current New Jersey insurance premium tax regulations by significantly increasing the tax credit for domestic insurance companies. The proposed change raises the percentage of the retaliatory tax credit from 15% to 90% for taxes filed in 2024 and subsequent years. This adjustment is intended to alleviate the tax burden on New Jersey-based insurers who also pay retaliatory taxes to other states. By enhancing this tax credit, the bill fosters a more competitive insurance marketplace within New Jersey, potentially attracting more insurance companies to operate in the state.

Contention

While proponents of A5586 assert that this legislation will create a more viable business environment for insurance companies, critics may argue that it represents a significant shift in tax policy that favors the insurance industry over other sectors. There are concerns around the long-term fiscal implications of such a substantial tax credit and whether this could lead to future tax revenue challenges for the state. The balance between maintaining competitive insurance rates and ensuring adequate revenue for public services will likely be a point of contention as discussions progress.