On November 19, 2024, Virginia State Senator Pekarsky introduced Senate Bill No. 670, aimed at amending the existing provisions regarding the surplus line broker license tax in the Commonwealth. The bill seeks to update §38.2-4809 of the Code of Virginia, which governs the taxation and reporting requirements for surplus lines brokers.

The primary purpose of VA SB670 is to clarify and streamline the tax obligations of licensed surplus lines brokers. Key provisions include the requirement for brokers to report their direct gross premium income annually, with specific deadlines set for March 1 of each year. The bill also stipulates penalties for late reporting and payment, including a $50 daily fine for failure to file and a 10% penalty on overdue taxes. Additionally, it allows for the possibility of late payments without penalties under certain circumstances, although interest on overdue amounts would still apply.

Notably, the bill introduces a quarterly tax reporting requirement for brokers whose annual tax liability is expected to exceed $1,500. This change aims to enhance compliance and ensure timely tax collection from brokers engaged in significant business activities.

The introduction of VA SB670 has sparked discussions among stakeholders in the insurance industry, with some expressing concerns about the increased administrative burden that quarterly reporting may impose on smaller brokers. However, proponents argue that the bill will improve the efficiency of tax collection and provide clearer guidelines for compliance.

The economic implications of this bill could be significant, as it aims to ensure that the state collects appropriate taxes from surplus lines brokers, which could enhance state revenue. Socially, the bill may impact how brokers operate, particularly smaller firms that may struggle with the increased reporting requirements.

As the bill moves to the Committee on Commerce and Labor for further consideration, its future remains uncertain. Stakeholders are closely monitoring the discussions, anticipating potential amendments that could address concerns raised during initial reviews. The outcome of VA SB670 could set a precedent for how surplus lines brokers are regulated and taxed in Virginia moving forward.