Task force explores simplifying Louisianas insurance premium tax, centralizing collections

At a November meeting, the Insurance Premium Tax Force examined proposals to simplify Louisianas insurance premium tax, study the fiscal impact of rolling back investment tax credits and consider centralizing municipal collections.

Representative Chance Henry, chair of the task force, opened the meeting and said staff would return with updated analysis from Dr. Berry to clarify how any statutory rate change would affect retaliatory collections and municipal receipts.

Lance Heron, deputy undersecretary at the Department of Insurance, told the panel that "the premium tax collections are roughly 1,300,000,000.0" and that the largest portion of that total is dedicated to Medicaid-related managed-care funding, which is paid into the Louisiana Medical Assistance Trust Fund. He reviewed statutory lines that together produce the total collection, including a roughly 2% fire department tax, a 1.25% fire marshal tax, a 2.25% life/accident/health tax and a 4.85% surplus-lines tax. Heron noted which lines are eligible for credits and which are not.

Brian, speaking for the fire marshals office, said the 2% allocation is distributed to hundreds of local departments and supports volunteer companies that rely on the money for operations: "we started giving training to all the fire departments across the state for free because we have that source," he said, describing how the fire-training center is funded.

Committee members focused on the difference between nominal (gross) statutory rates and effective net rates after credits and caps. Heron reported that, for property-and-casualty insurance in 2024, the net effective tax rate was about 1.79% while the gross rate would have been roughly 3%, because firms receive credits and small-account minimums apply. That led members to ask why the state does not simply set the statutory rate closer to the observed effective rate.

Heron and Secretary Nelson explained that a straight cut to the nominal rate would affect the states retaliatory-tax calculations and that those calculations depend on how other states structure add-on taxes, municipal caps and credits. Heron cited neighboring-state nominal rates (Alabama 3.6; Arkansas 2.5; Florida 1.75; Georgia 2.25; Mississippi 3; Tennessee 2.5; Texas 1.6) and said Mississippis investment tax-credit program caps at 50% in some circumstances while Louisianas credit parameters are comparatively generous.

Members discussed potential reforms: centralizing collection, simplifying statutory add-ons, removing or adjusting municipal caps and phasing down investment tax credits to reduce complexity while avoiding sudden premium increases. Lance Heron recommended better data harmonization (calendar vs. fiscal reporting) and a coordinated study with Dr. Berry to estimate retaliatory effects and specific revenue impacts across municipalities.

No formal vote was taken on substantive changes during the session. Chair Henry asked staff to draft a bill to centralize collections and study phased rate reductions and asked that Dr. Berry update the comparative study and retaliatory-tax projections for a future meeting. Member Brett Bamberg moved to adjourn and the meeting was closed.

Next steps: staff will provide updated analyses from Dr. Berry on interstate comparisons and retaliatory-tax estimates; the task force signaled interest in drafting legislation to centralize collection and simplify the premium-tax structure.