Puerto Rico Insurance Excise Tax Exemption Act of 2023 This bill exempts from the foreign insurer excise tax certain insurance policies, indemnity bonds, annuity contracts, or reinsurance policies issued by partnerships or corporations created or organized under the laws of a U.S. territory or possession. The exemption applies unless any of the covered hazards, risks, losses, or liabilities are also covered by a reinsurance policy issued by a foreign insurer or reinsurer other than the partnership or corporation.
If enacted, HB 377 would provide significant financial relief for insurance providers in U.S. territories, particularly Puerto Rico. By exempting these local policies from the foreign insurer excise tax, the bill aims to encourage the growth of the local insurance industry, enhancing its competitiveness against foreign insurers. This legislative change could also promote more stable and accessible insurance coverage for residents and businesses within these regions, aligning them more closely with the states in terms of insurance options.
House Bill 377, titled the Puerto Rico Insurance Excise Tax Exemption Act of 2023, proposes an amendment to the Internal Revenue Code of 1986 specifically aimed at exempting certain insurance policies issued by insurers based in U.S territories and possessions from the foreign insurer excise tax. This exemption applies to various financial instruments including insurance policies, indemnity bonds, annuity contracts, and reinsurance policies, provided that these are issued by partnerships or corporations established under territorial laws and are not reinsured by foreign entities.
Debate surrounding HB 377 may center on the implications of such taxation policies and their effects on the insurance market. While supporters, including local legislators, may argue that the bill will fortify local insurance markets and spur economic development, opponents might express concerns over potential implications for tax equity and the prioritization of local insurers over larger national or international companies. Additionally, there could be discussions on whether the act sufficiently addresses any ramifications for policyholders relying on foreign reinsurers.