Tax Break For Small P-Cs Proposed In Congress

By Steven Brostoff, Washington Editor

NU Online News Service, June 7, 9:56 a.m. EDT,Washington?A legislative provision that would give smallproperty-casualty companies an enhanced federal tax break has beenintroduced in the House of Representatives.[@@]

The provision, which is one part of a broader tax bill, relatesto an existing law which allows certain small p-c companies toelect to be taxed solely on their investment income, as opposed toboth their premium and investment income.

Under current law, companies with up to $1.2 million in annualpremium income are eligible to make the election.

The provision introduced today by House Ways and Means CommitteeChairman Bill Thomas, R-Calif., would increase the limit to $1.89million. Moreover, that figure would be indexed for inflation.

An almost identical provision appears in similar legislationpassed by the Senate in May. Thus, if the House passes itslegislation, the new small-company tax rules have a good chance ofbeing enacted into law.

The provision was strongly backed by the Indianapolis-basedNational Association of Mutual Insurance Companies. David Winston,senior vice president of federal affairs for NAMIC, said the changeis very important for small p-c companies.

The existing $1.2 million limit has been in effect since 1986,he noted. Many small companies are coming up against the limit, Mr.Winston said, and will be adversely affected if it is notraised.