The Kentucky Insurance Premiums Tax Return (Captive Insurer) is a form required by the Commonwealth of Kentucky for captive insurance companies to report their premium receipts and calculate their tax liability. A captive insurer is a specialized insurance company established to insure the risks of its parent company or related entities. This form must be filed annually by March 1st, and it is used to determine the tax based on premium receipts and assumed reinsurance premium receipts. The return involves reporting the total premium receipts, calculating the associated tax, and submitting the payment to the Kentucky Department of Revenue. This form also requires attaching a copy of the Captive Annual Statement filed with the Kentucky Commissioner of Insurance. In this guide, we will explain each section and line of the form to ensure that you understand how to complete it correctly.
How to File the Kentucky Insurance Premiums Tax Return (Captive Insurer)
Filing the Kentucky Insurance Premiums Tax Return (Captive Insurer) involves completing the required sections, calculating your premium tax, and submitting the form to the Kentucky Department of Revenue. Below are the steps you need to follow to ensure proper filing:
- Complete the Form: Fill out all sections of the form, ensuring all data is accurate, especially regarding the premium receipts and reinsurance premiums.
- Attach Supporting Documents: Attach a copy of the Captive Annual Statement filed with the Kentucky Commissioner of Insurance.
- File by March 1st: Submit the completed form and tax payment before the deadline to avoid penalties.
- Make Payment: You can make the payment either online or via check. Ensure to submit the payment confirmation page if paying online.
- Submit the Form: Mail the completed return and payment to the Kentucky Department of Revenue at the provided addresses.
How to Complete the Kentucky Insurance Premiums Tax Return (Captive Insurer)
Below is a detailed, line-by-line guide to completing the Kentucky Insurance Premiums Tax Return (Captive Insurer) form. Follow these instructions carefully to avoid errors.
Section A: Insurance Premiums
- Line 1 – Total Premium Receipts
Report the total amount of premium receipts for the year, including all premiums earned for the insurance policies written by your captive insurer. This figure represents the total premiums received from all business activities conducted during the year. - Line 2 – Returned Premiums
Enter the amount of premiums that were returned to policyholders. This can include cancellations or adjustments made to policies that were originally written during the tax year. - Line 3 – Net Premium Receipts
Subtract the amount of returned premiums (Line 2) from the total premium receipts (Line 1) to calculate the net premium receipts for the year. This value will be used in the tax calculation.
Computation of Tax on Premium Receipts
- Line A – 0.4% on the first $20 million of Premium Receipts
Calculate the tax on the first $20 million of premium receipts by multiplying $20 million by 0.004 (0.4%). Enter this amount in the line. - Line B – 0.3% on the next $20 million of Premium Receipts
If your net premium receipts exceed $20 million, calculate 0.3% tax on the next $20 million. This amount will be added to the tax on the first $20 million. - Line C – 0.2% on the next $20 million of Premium Receipts
For premium receipts beyond $40 million and up to $60 million, apply a tax rate of 0.2%. Calculate the tax accordingly. - Line D – 0.075% on each dollar of Premium Receipts thereafter
For any premium receipts above $60 million, apply a tax rate of 0.075% to the amount over $60 million. This value is added to the previous calculations. - Line E – Total Tax on Premium Receipts
Add the tax amounts from Lines A, B, C, and D to calculate the total tax on premium receipts. This will be the amount you owe based on your premium receipts for the year.
Section B: Assumed Reinsurance Premium Receipts
- Line A – 0.225% on the first $20 million of Assumed Reinsurance Premium Receipts
Calculate the tax on the first $20 million of assumed reinsurance premium receipts at a rate of 0.225%. Enter the result on the form. - Line B – 0.15% on the next $20 million of Assumed Reinsurance Premium Receipts
If the assumed reinsurance premium receipts exceed $20 million, calculate 0.15% tax on the next $20 million. - Line C – 0.05% on the next $20 million of Assumed Reinsurance Premium Receipts
For assumed reinsurance premiums beyond $40 million and up to $60 million, apply a 0.05% tax rate. - Line D – 0.025% on each dollar of Assumed Reinsurance Premium Receipts thereafter
For assumed reinsurance premium receipts above $60 million, apply a tax rate of 0.025%. - Line E – Total Tax on Assumed Reinsurance Premium Receipts
Add up the tax amounts from Lines A, B, C, and D to find the total tax on assumed reinsurance premium receipts.
Section C: Total Net Tax Liability
- Line 1 – Total Net Tax Liability Due
Add the total taxes from Section A (premium receipts) and Section B (assumed reinsurance premiums) to determine your total tax liability for the year. Ensure this amount is at least $5,000, as this is the minimum amount due.
Payment Information
- Paid Online
If you made your payment online, check the box and provide the confirmation number. Attach the “Payment Schedule Confirmation” page to the form for proof of payment.
Signature Section
- Signature of President or Chief Accounting Officer
The president or chief accounting officer must sign and date the form, certifying the accuracy of the return. - Signature of Chief Accounting Officer
The chief accounting officer must also sign and date the form, confirming the details provided. - Print Name, Title, and Contact Information
Print the names, titles, telephone numbers, and email addresses of both signatories. Ensure that the information is accurate for any follow-up communication.