Section 2500.10  Purpose

 

This Part sets forth processes implementing assessment and payment of fees, taxes and other charges pursuant to Sections 408, 409, 410, 412, 444 and 444.1 of the Illinois Insurance Code [215 ILCS 5] and Section 12 of the Fire Investigation Act [425 ILCS 25].

 

(Source:  Amended at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.20  Applicability (Repealed)

 

(Source:  Repealed at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.30  Severability (Repealed)

 

(Source:  Repealed at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.40  Definitions

 

Except as stated and unless a different meaning of a term is clear from its context, the definitions of terms used in this Part that are not defined in this Section shall be the same as those used in any of the Acts in Chapter 215 of the Illinois Compiled Statutes.

 

"Affiliated group" means a group of companies affiliated, as of the preceding calendar year end, pursuant to Article VIII½ of the Code entitled Insurance Holding Company Systems [215 ILCS 5/131.1 through 131.28].

 

"Annual return" means the information filed pursuant to Section 410 of the Illinois Insurance Code.

 

"Check" means corporation check, personal check, money order or cashier's check.

 

"Code" means the Illinois Insurance Code [215 ILCS 5].

 

"Corporate and replacement income tax" means the income tax described in Section 201(a), (b), (c) and (d), and paid pursuant to Sections 601 and 803, of the Illinois Income Tax Act [35 ILCS 5].

 

"Department" means the Department of Insurance.

 

"Director" means the Director of Insurance.

 

(Source:  Amended at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.50  Audit

 

Any person or company who has paid a fee, charge or tax pursuant to this Part may request an audit pursuant to Section 412(1)(a) of the Code for the purpose of determining if the amount paid was in excess of the amount legally chargeable against it.

 

a)         A request for audit shall be in writing and shall include:

 

1)         The name and address of the requester;

 

2)         The contested fee, charge or tax amount;

 

3)         Facts sufficient to support one of the grounds set forth set forth in Section 412 of the Code and subsection (a)(7) of this Section;

 

4)         The Department invoice number, if applicable;

 

5)         The name, address and phone number of a contact person;

 

6)         Any other information and/or documents useful in determining if the amount paid was correct; and

 

7)         The grounds, among the following, on which the requester believes the amount paid is incorrect:

 

A)        A mistake of fact, including, but not limited to:

 

i)          Applying a previous year's income tax overpayment in the current year's corporate and replacement income tax return; or

 

ii)         Using the premium written in the state of incorporation to determine the state of incorporation's basis for retaliatory tax purposes;

 

B)        An error in calculation, including, but not limited to:

 

i)          An incorrect decimal assignment; or

 

ii)         An erroneous sum, result or total arising out of a mathematical function, operation or equation; or

 

C)        An erroneous interpretation of a statute of this or any other state, including, but not limited to:

 

i)          A misapplication of a statute; or

 

ii)         A misunderstanding of an equivocal term or phrase used in a statute.

 

D)        However, an erroneous interpretation of a statute of this or any other state does not include a finding of unconstitutionality of the statute in question.  Additionally, a mistake in fact shall not include the assertion that a statute is unconstitutional on its face. 

 

b)         The Director shall review the request for audit and all attached information, request additional information as necessary, and send written notification to the requester of the Director's decision.  That decision is subject to court review under Section 407 of the Code.

 

(Source:  Amended at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.60  Computation of Time and Time of Filing

 

a)         Computation of Time.  The time within which any act provided by law is to be done or a payment is due shall be computed by excluding the first day and including the last. However, if the last day is a Saturday, Sunday or State holiday, or is the day succeeding a Saturday, Sunday or State holiday, that day shall be excluded.

 

b)         Time of Filing.  Documents shall be considered filed or received, as set forth in subsections (b)(1) and (2), when they are in conformance with the requirements of this Part.

 

1)         If filed in person, by messenger service, or mail delivery other than U.S. Postal Service, documents are considered filed when they are received by the Department.  Documents received by the Department after 12:00 p.m. (noon) shall be considered received on the following business day.  Documents received by the Department after 12:00 p.m. on the due date will not be considered late.

 

2)         If filed by U.S. Mail, documents are deemed filed as of the date of the U.S. postmark.

 

(Source:  Amended at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.70  Payment, Forms and Returns

 

a)         The payment of fees or charges shall be made by separate check, or other payment method approved by the Director, for each invoice issued by the Department pursuant to Section 408 of the Code.

 

b)         The payment of taxes owed pursuant to Sections 409, 444 and 444.1 of the Code and Section 12 of the Fire Investigation Act [425 ILCS 25] shall be made by the payor by separate check, or other payment method approved by the Director, for each company and for each tax return.

 

c)         All tax returns required by this Part must be signed by an officer of the company, the surplus line producer, or an officer of the Illinois Fair Plan, as may be appropriate for that tax return.

 

d)         Cash shall not be sent as payment for any fee, charge or tax owed pursuant to this Part.

 

e)         All payments shall identify the person, company or business entity on whose behalf the payment is being made and indicate the Department invoice number, if applicable.

 

f)         Any fee or charge assessed pursuant to this Part in which a payment due date has not been established must be paid within 30 days after the date of the Department's invoice.

 

g)         Copies of standard forms and returns referenced in this Part can be found on the Department's website or by contacting the Tax and Fiscal Services Section of the Department.

 

h)         Failure to pay fees, taxes and other charges assessed pursuant to Sections 408, 409, 410, 412, 444 and 444.1 of the Code and Section 12 of the Fire Investigation Act [425 ILCS 25] may result in regulatory action.

 

(Source:  Amended at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.80  Calculation Guidelines

 

a)         All calculations shall be rounded to whole numbers by rounding down if the first decimal place is five or less and rounding up otherwise.

 

b)         For all calculated amounts owed, a whole dollar amount shall be reported and any amount calculated should be rounded down if $0.50 or less and rounded up otherwise.

 

(Source:  Amended at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.90  Fees and Charges

 

a)         The Director shall charge and collect the payment of fees and charges pursuant to Section 408(1) and 500-35(d) of the Code.

 

b)         If any person, company or business entity issues a check or other draft to the Director as required by the Code, and that check or draft is not honored, the Director may charge a fee or other charges as authorized by Section 3-806 of the Uniform Commercial Code [810 ILCS 5].

 

1)         The Department will send a written demand by certified mail, return receipt requested, to the last known address of the person, company or business entity having issued the dishonored check or other draft. 

 

2)         Within 14 days following payment of both the Code fee and the Not Sufficient Funds (NSF) check fee, the Director may issue to the named person, company or business entity a license or other authority or may take regulatory action.

 

3)         Any person, company or business entity who fails to satisfy the written demand may be subject to regulatory action.

 

c)         The Director may charge the expenses incurred in any performance examination authorized by law to be paid by the company or person being examined pursuant to Section 408(3) of the Code.

 

d)         An annual financial regulation fee shall be charged and collected from every domestic company for examination and analysis of its financial condition pursuant to Section 408(6) and (8) of the Code.

 

1)         Every affiliate group that intends to utilize the maximum aggregate annual financial regulation fee charged to its domestic companies pursuant to Section 408(6)(c) of the Code must notify the Department of its intention, in writing to the attention of the Tax and Fiscal Section, by April 1 of the following year and must designate one domestic member of the group to be billed by the Director for the entire domestic affiliated group's financial regulation fee.  

 

2)         Only domestic group members can be included in aggregating the annual financial regulation fee pursuant to Section 408(6)(c); foreign or alien group members cannot be included.

 

e)         An annual financial regulation fee shall be charged and collected from every foreign or alien company, except fraternal benefit societies, for the examination and analysis of its financial condition pursuant to Section 408(7) of the Code.

 

1)         Every affiliate foreign or alien group that intends to utilize the maximum aggregate annual financial regulation fee charged to foreign or alien companies pursuant to Section 408(7) of the Code must notify the Department of its intention, in writing to the attention of the Tax and Fiscal Section, by April 1 of the following year and must designate one foreign or alien member of the group to be billed by the Director for the entire affiliated group's financial regulation fee.  

 

2)         Only foreign and alien group members can be included in aggregating the annual financial regulation fee under Section 408(7); domestic group members cannot be included.

 

3)         For purposes of calculating the retaliatory tax under Section 2500.110(a)(1)(C), the foreign or alien affiliated group's aggregate annual financial regulation fee shall be allocated to the included individual group members proportionately based on the percentage of Illinois direct premiums earned by each included individual group member compared to the total Illinois direct premiums of all included group members.

 

(Source:  Added at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.100  Annual Privilege Tax

 

a)         The Department shall collect an annual privilege tax from companies that write certain types of insurance pursuant to Section 409 of the Code.

 

b)         The "aggregate income taxes paid", calculated pursuant to Section 409(2)(a), shall be reduced by any corporate and replacement income tax cash refunds received in that same calendar year if that cash refund had been considered part of the aggregate income taxes paid for an offset calculation taken in a preceding calendar year.  If no deduction was taken in which the corporate and replacement income tax cash refund received was part of the aggregate income taxes paid, then the aggregate income taxes paid for the calendar year in which that corporate and replacement income tax cash refund is received shall not be reduced by that tax cash refund amount.

 

c)         Pursuant to Section 409(5) of the Code, if the company is part of a State income tax unitary group, each individual company's State aggregate income taxes paid shall be calculated as follows:

 

1)         The income tax offset allocation of each individual unitary member will be based on the percentage of that unitary member's net income compared to the total net income of all unitary members within that unitary group.  "Net income", for purposes of this calculation, means net sales within Illinois, non-unitary or combined partnership business income or loss, and net income or loss of members who are not C Corporations, as reported on the Schedule UB Step 4 of the IL 1120 filed for the preceding year.  That net income percentage is then multiplied by the unitary group's amount of the corporate and replacement income taxes paid in the calendar year, less the unitary group's tax cash refunds received in that same calendar year, if that tax cash refund had been considered part of the aggregate income taxes paid for an offset calculation and resulted in a deduction taken in a preceding calendar year multiplied by that company's allocation percentage.

 

2)         Each company may only use its allocated portion for the determination of the aggregate income tax deduction and may not transfer any allocated aggregate income taxes to another company or carry forward to another year.

 

d)         In cases in which annual privilege taxes are allocated under Sections 409(3) of the Code, no tax deduction, credit or offset shall be transferred as a result of a merger, consolidation, reorganization or reincorporation if the company who holds the tax deduction, credit or offset still exists after the merger, consolidation, reorganization or reincorporation.  Additionally, no tax deduction, credit or offset shall be considered transferred or owned by another taxpayer simply as the result of an assumption reinsurance agreement or as a result of a restructuring of a company or companies.

 

e)         Each company required to file an annual privilege tax return pursuant to Section 409 of the Code must file its annual return, even if no tax is owed, with the following information:

 

1)         The applicable information set forth in the privilege/retaliatory tax return as annually sent and updated by the Department;

 

2)         Proof of payment of all privilege tax deductions taken, such as copies of canceled checks;

 

3)         If filing as part of a unitary group, the Department's Unitary Schedule must be completed and attached; and

 

4)         The applicable premium information from the Direct Business pages filed with the annual statement established by the National Association of Insurance Commissioners (NAIC).

 

f)         A company may request in writing that the Director defer, waive or abate the annual privilege tax pursuant to Section 409(5) of the Code.  The written request shall contain all financial information necessary for the Director to make his/her determination.

 

(Source:  Added at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.110  Annual Retaliatory Tax

 

a)         Pursuant to Section 444 of the Code, foreign and alien companies are required to pay a retaliatory tax in the amount of the difference between the sum of the state of incorporation's basis minus the sum of the State of Illinois' basis, if the resulting amount is a positive number.

 

1)         For calendar years starting January 1, 1998 and thereafter, the State of Illinois' basis is the sum of the amounts actually paid for the following items:

 

A)        Annual Statement Filing Fee;

 

B)        Certificate of Authority Fee;

 

C)        Financial Regulation Fee;

 

D)        Policy Form Filing Fee;

 

E)        The amount of Illinois corporate and replacement income tax, decreased by the amount, if any, of any corporate and replacement income tax cash refund received in the same calendar year, if that cash refund had been considered part of the amount of Illinois corporate and replacement income tax paid in the calculation of the annual retaliatory tax in a preceding year;

 

F)         Fire Department tax;

 

G)        Annual Privilege tax;

 

H)        State Fire Marshal tax paid pursuant to Section 12 of the Fire Investigation Act; and

 

I)         Other insurance fees paid pursuant to Section 408 of the Code.

 

2)         For calendar years starting January 1, 1998 and thereafter, the state of incorporation's basis is the sum of the amounts that an Illinois domiciled company would have paid in the foreign or alien domiciliary state or country if it transacted similar operations there as did the foreign or alien company in Illinois, for the following items or their equivalent:

 

A)        Annual Statement Filing Fee;

 

B)        Certificate of Authority Fee;

 

C)        Financial Regulation Fee;

 

D)        Policy Form Filing Fee;

 

E)        Fire Department tax;

 

F)         Annual Privilege tax, Premium tax or Franchise tax;

 

G)        State Fire Marshal tax paid pursuant to Section 12 of the Fire Investigation Act; and

 

H)        Other insurance taxes and fees paid in the foreign or alien company's state of domicile, similar to those listed in subsection (b), that may have the following characteristics:

 

i)          The basis of the calculation of the tax or fee is a portion of premiums written;

 

ii)         The tax or fee is assessed pursuant to state authority; and

 

iii)        The tax or fee is assessed on a basis in which the liability for the tax, fee or assessment is intended as an adjustment of past premium charges or as a means of disposing of a deficit in any state mandated insurance program in which premium rates were regulated by the state.

 

3)         For the purposes of this Section, the State of Illinois' basis and the state of incorporation's basis do not, among others, include the following items, or their equivalent:

 

A)        Cost Containment Fees or fees principally for collecting underwriting data;

 

B)        Workers' Compensation Rate adjustment, Second Injury adjustments, or other assessments of a workers' compensation system;

 

C)        Interstate Insurance Receivership Commission assessments;

 

D)        Illinois Guaranty Fund assessments;

 

E)        Auto Theft assessment; and

 

F)         Assessments not referenced by or contained in Article XXV of the Code.

 

b)         The fact that a foreign or alien company is domiciled in a state or country in which franchise and/or premium taxpayers may be granted an extension of time to pay their franchise and/or premium taxes in that state shall not affect the requirements of Section 444.1 of the Code that the foreign or alien company must file an annual return and pay its retaliatory tax on or before March 15.

 

c)         Supplemental retaliatory tax returns shall be filed as required by Section 444.1(4) of the Code.

 

(Source:  Added at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.115  State Fire Marshal Tax

 

The Annual State Fire Marshal Tax assessed by the Department pursuant to Section 12 of the Fire Investigation Act [425 ILCS 25] shall be 1% of a company's or other entity's taxable fire premium. "Taxable fire premium" means the gross fire, sprinkler leakage, riot, civil commotion, explosion, and motor vehicle fire risk premium receipts from business done in the State of Illinois during the preceding year (see Section 12 of the Fire Investigation Act).

 

a)         The taxable fire premium for a year is calculated for insurance companies by totaling the direct premium calculation for the following lines of business as reported in the Annual Statement filed pursuant to Section 136 of the Code:

 

1)         100% Fire direct premium less any Illinois FAIR Plan premiums;

 

2)         25% of the sum of Allied Lines direct premium less any Illinois FAIR Plan premiums;

 

3)         1% of Private Crop direct premium;

 

4)         40% of Farm Owners M.P. direct premium;

 

5)         40% of the sum of Homeowners M.P. direct premium less any Illinois FAIR Plan premiums;

 

6)         40% of Commercial M.P. (Non-Liability Portion) direct premium;

 

7)         15% of Ocean Marine direct premium;

 

8)         15% of Inland Marine direct premium;

 

9)         25% of Earthquake direct premium;

 

10)        5% of Private Passenger Auto Physical Damage direct premium;

 

11)        5% of Commercial Auto Physical Damage direct premium; and

 

12)        10% of Aircraft (All Perils) direct premium.

 

b)       The taxable fire premium for a year is calculated for Farm Mutuals by totaling the direct premium for the lines of business as determined in subsection (a) and reported to the Department pursuant to Section 13 of the Farm Mutual Insurance Company Act of 1986 [215 ILCS 120].

 

c)        The taxable fire premium for a year is calculated for the Illinois FAIR Plan by totaling the direct premium for the lines of business as determined in subsection (a) and reported to the Department pursuant to Section 143.25 of the Code.

 

d)       The taxable fire premium for a year is calculated for surplus line producers by totaling the direct premium for the lines of business as determined in subsection (a) and reported to the Department pursuant to Section 445 of the Code.

 

(Source:  Added at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.120  Overpayments and Amendments

 

a)         Pursuant to Section 412(1)(a) of the Code, persons and companies are only entitled to a refund or offset if the overpayment occurred during the 6 year period immediately preceding the discovery of the overpayment.  The discovery of the overpayment is the date when an amended tax return is filed with the Department pursuant to subsection (b), or when a written detailed description regarding the overpayment is filed with the Department pursuant to subsection (c).

 

b)         An overpayment of tax shall be reported by the filing of an amended tax return.

 

1)         An amended return shall be made by filing a copy of the original return that shows the amendments and includes explanations for those amendments.

 

2)         Adjustments (e.g., cash refunds or additional cash payments of prior income or fire department taxes paid) shall be accounted for in the year paid or when issued a cash refund and shall not be the basis for amending a previous privilege or retaliatory tax return.

 

3)         Any overpayment adjustment requested for the amount of fire department taxes or aggregate income taxes paid may not exceed the amount of privilege or retaliatory tax owed in the year the aggregate income tax or fire department tax was paid and for which the overpayment adjustment is now being sought.

 

c)         An overpayment of a fee or other charge shall be reported in a written detailed description of the fee calculation, stating the differences between the Department's and company's or person's calculation, sent to the attention of the Tax and Fiscal Services Section of the Department.

 

d)         If the Department determines that the reported overpayment is incorrect or does not meet the statutory requirements of Section 412(1)(a) of the Code, the Department shall notify the company or person in writing.  The company or person may contest in writing the Department's stated adjustment. The written statement shall include the following information:

 

1)         The company's name and Federal Employer Identification Number (FEIN);

 

2)         The reasons why the stated adjustment is incorrect; and

 

3)         A contact person for the company.

 

e)         If, after the filing of a written response pursuant to subsection (b), the company or person and the Department cannot resolve the matter, the company or person may request an audit pursuant to Section 2500.50.

 

f)         If verified by the Director, overpayment of a tax, fee or charge will automatically be applied toward the payment of any other taxes, fees or charges already due or that will become due, unless the company or person makes written request that the Department issue a cash refund pursuant to Section 2500.130 or transfer the overpayment to another account balance pursuant to Section 2500.140.

 

g)         Upon written notice to the company or person at its last known address, any overpayment that has not been used and has not been transferred may be removed from the Department's records after 7 years and will be considered unclaimed monies under the Revised Uniform Unclaimed Property Act [765 ILCS 1026].

 

(Source:  Added at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.130  Cash Refunds

 

a)         The written request for a cash refund must include the following information in addition to any other appropriate supporting documentation:

 

1)         The company's name, including the company's FEIN;

 

2)         The cash refund amount being requested;

 

3)         A statement of reasons why the overpayment was generated; and

 

4)         A certification of an officer of the company that the provided information in the written request is true and accurate to the best of his/her knowledge.

 

b)         In addition to subsection (a), a cash refund may be available if the overpayment was part of a protested payment under the State Officers and Employees Money Disposition Act [30 ILCS 230], and is allowed by the court having jurisdiction of the protest action.

 

c)         A cash refund will only be provided when the requirements of Section 412(1)(a) of the Code are met.

 

(Source:  Added at 44 Ill. Reg. 3419, effective February 24, 2020)

 

Section 2500.140  Transfer of Overpayments

 

An overpayment may be transferred in whole or in part to another company upon written approval of the Director.  The approval may be an adjustment invoice, letter of credit, or signed Notice of Transfer of Overpayment form.  The company or person shall provide a written notice to transfer that includes the following information:

 

a)         The name of the company that is transferring the overpayment, including that company's FEIN;

 

b)         The amount of the overpayment being transferred;

 

c)         The name of the company to which the transfer is being made and the company's FEIN;

 

d)         The monetary amount, if any, exchanged between the entities; and

 

e)         A certification of an officer of the company that the provided information is true and accurate to the best of his/her knowledge.

 

(Source:  Added at 44 Ill. Reg. 3419, effective February 24, 2020)