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Panel hears how Louisiana investment tax credits sharply reduce insurers' premium-tax bills
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Summary
Officials and industry representatives described how Louisiana’s investment tax-credit tiers and other credits can cut insurers' gross premium-tax liability and discussed potential effects if credits were reduced or removed.
Study-group members examined the structure and scale of Louisiana’s investment tax credits and other offsets that reduce insurers’ gross premium-tax liability. Lance Heron, deputy undersecretary at the Louisiana Department of Insurance, described the credit tiers and their practical effect on tax liability.
Heron said qualifying Louisiana investments include bonds of the state and municipal issuers, mortgages and loans to Louisiana residents or domiciled corporations, and in-state common and preferred stock. "If you do a third of your qualifying investments are in Louisiana, then you get a 95% tax [abatement]," he said, describing how tiered thresholds reduce gross liability rather than applying only to the invested dollar amount.
Industry representatives said the credit materially alters investment choices. A Blue Cross executive said her company keeps premiums lower because the company factors expected premium-tax credits into rate setting: "If our premium tax credits went away, our general across-the-board rate increase would be 3%." Other panelists said many insurers accept lower returns on municipal investments because the premium-tax credit makes those investments economically attractive.
Speakers warned that removing or reducing the credit would change insurer portfolios and could reduce demand for municipal bonds. Mark Carter, founder of Coast States Insurance Company, and other insurers urged the study group to analyze how credit reform would affect municipal capital availability. The Life and Health Insurance Guaranty Association’s board chair, Corey Harvey, explained how LIGA assessments produce a separate long-term tax credit mechanism to spread insolvency costs across member companies.
The group asked staff to assemble historic data on how and when the investment tax credit evolved, the degree to which insurers currently hold qualifying investments, and whether municipalities rely materially on insurer demand for their bonds. Study-group members agreed this topic will be a focus of future hearings and requested comparative data from other states.
