Notice - Insurance Premiums Tax Retaliatory Tax Credit
(N.J.S.A. 54:18A-2(c), 54:18A-3(c))
A retaliatory tax is an additional tax imposed by a state on out-of-state insurance companies operating in its jurisdiction. A state charges the retaliatory tax in exactly the same way that the out-of-state insurance company’s home state taxes domestic insurance companies operating within its borders. The retaliatory tax credit allowed pursuant to N.J.S.A. 54:18A-2(c) and 54:18A-3(c) allows a domestic insurance company to reduce its tax liability by a portion of the retaliatory tax incurred in other states.
Beginning with the 2013 tax return due on or before March 1, 2014, a domestic insurance company may reduce its insurance premiums tax liability by 5% of any retaliatory tax incurred for the same filing period. In each subsequent year the percentage reduction will increase an additional 1% until it reaches 15% for the 2023 return due on or before March 1, 2024, and for each annual return thereafter.
Taxpayers are to enter the amount of their tax liability reduction on Line 19 (“Other Credits”), Form DEXM, Schedule A.