Estimated Premium Tax Filing

Bulletin No. 00-10

TO:

All Insurers

RE:

Estimated Premium Tax Filing

DATE:

March 29, 2000

Some insurers have in the past substantially underpaid their quarterly premium tax for

premiums written in Maryland. This has occurred because some insurers have mistakenly believed

that estimated premium taxes are to be estimated quarterly. Under Maryland law, however, insurers

are required to estimate their annual tax liability and pay 25% of the annual estimate each quarter.

In addition, some insurers have greatly underestimated their annual tax liability and have

accordingly underpaid on a quarterly basis.

Maryland statutes impose substantial interest and penalties where premium taxes are not paid

when due. It is this Administration’s view that the underestimation of annual taxes, and the

corresponding failure to pay 25% of the liability each quarter, constitutes a failure to pay taxes when

due.

In order to avoid the imposition of penalties and interest, insurers must reasonably estimate

their total tax liability for the coming year and pay 25% of that reasonable estimate each quarter. The

Insurance Commissioner considers, as reasonable, any estimate that is at least:

(a) 100% of premium taxes due for the prior year as shown on the prior year’s

Final Report; or

(b) 90% of the amount of the current year tax liability.

If the estimated tax meets either of these tests and the insurer pays at least 25% of the total

annual estimate each quarter, on April 15, June 15, September 15, December 15, no penalty or interest

will be imposed. In the event an insurer’s estimated annual tax does not meet either of these tests or if

the insurer fails to pay the proper quarterly payment when due, the Administration will impose

penalties and interest pursuant to MD. CODE ANN., Insurance § 6-108.

Insurers are directed to conform their April 15, 2000 tax filing to this Bulletin.

___________________

Steven B. Larsen

Insurance Commissioner