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Insurance companies are subject to a 2 percent tax on all new and renewal gross direct premiums that are derived from or reasonably attributable to insurance business in the state of Maryland. The laws relating to the imposition of premium tax, premium tax rates, premium tax credits and deductions, filing requirements, payment of premium taxes, penalty and interest assessments and appeal rights can be found in Title 6, Subtitle 1 of the Insurance Article of the Annotated Code of Maryland. In addition, foreign insurers are subject to retaliatory taxes, as delineated in Title 6, Subtitle 3 of the Insurance Article of the Annotated Code of Maryland.
Who must file?
In accordance with Section 6-101 of the Insurance Article of the Annotated Code of Maryland, for-profit Health Maintenance Organizations, Managed Care Organizations, and persons engaged in the business of writing insurance contracts, surety contracts, guaranty contracts and annuity contracts in the State of Maryland are subject to premium taxes and must file the appropriate returns with the Maryland Insurance Administration (herein referred to as the Administration). An attorney in fact for a reciprocal insurer, the Maryland Automobile Insurance Fund, and credit indemnity companies are also subject to premium taxes and must file the appropriate returns with the Administration. However, non-profit health service plan corporations and fraternal benefit societies are not subject to the aforementioned premium taxes nor are they subject to the premium tax filing requirements. In addition, surplus line brokers and unauthorized insurers are subject to a premium receipts tax of 3 percent in accordance with Title 3, Subtitle 3 and Title 4, Subtitle 4 of the Insurance Article of the Annotated Code of Maryland and are not subject to the aforementioned 2 percent premium tax and related filing requirements.
Filing Due Dates
Insurance companies, for-profit Health Maintenance Organizations and Managed Care organizations are required to file quarterly estimated tax returns and make quarterly payments if their total tax for the current calendar year is reasonably expected to exceed $1,000. At least 25 percent of the estimated tax for the full calendar year is to be paid with each quarterly report. The due dates are as follows:
On March 15 of each year, entities subject to taxation are required to file with the Administration an annual premium tax report for the preceding calendar year. Payment of the total amount of taxes due, after crediting the amount of quarterly estimated taxes paid, is also required by this date. Foreign insurers also report and pay any retaliatory taxes and fees due for the preceding calendar year on this report. Returns due on a Saturday, Sunday, or state or federal holiday will be considered timely filed if received the next work day.
Penalty and Interest Assessments on Late Payments:
Taxes not paid when due, or additional amounts found to be due after a tax report has been filed, are subject to a 5 percent penalty plus interest in accordance with Section 6-108 of the Insurance Article of the Annotated Code of Maryland. Interest is assessed from the date the tax was due until payment is made to the Commissioner at the rate specified in Section 13-604(b)(1) of the Tax-General Article of the Annotated Code of Maryland. The imposition of penalty and interest for underestimation of quarterly premium taxes is further addressed in the following Maryland Insurance Administration bulletin: