By Jason Bramwell
Two Iowa lawmakers led a bipartisan group of five senators in introducing a bill on July 23 that would increase the alternative tax liability limitation for small property and casualty insurance companies.
The Small Mutual Inflation Update, which was introduced by Democratic Senator Tom Harkin and Republican Senator Chuck Grassley, would adjust the eligible premium index for inflation – for the first time since 1986 – to $2.012 million, increasing the current maximum limit and indexing it to inflation thereafter.
Currently, property and casualty insurers with annual premiums above $350,000 but less than $1.2 million can elect to be taxed on their net investment income as opposed to their annual operating income.
Harkin said the legislation would benefit Iowa's small insurance companies, which largely serve rural communities and rely on this adjustment to provide additional surplus and cash flow to pay customers' insurance claims.
"These companies have served Iowa communities for decades and are an integral part of Iowa's economy", he said in a written statement.
Grassley said some thresholds in tax law are not indexed for inflation, resulting in those thresholds becoming outdated.
"Our legislation updates a key threshold for small insurance companies so they can continue serving their rural customers", he added. "This legislation helps to ensure that small mutual insurance companies will continue to be able to serve rural residents who have unique circumstances, such as living far from a fire station, and so are often unable to obtain private property insurance through traditional insurance companies."
The legislation was cosponsored by senators Roy Blunt (R-MO), Amy Klobuchar (D-MN), and Jay Rockefeller (D-WV).