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The Florida Current: Scott, business groups speak out against eliminating tax break for reinsurers

Monday, July 29, 2013

Gov. Rick Scott is joining insurance industry groups, consumer advocacy organizations, business lobby groups and other trade organizations opposing a move in Congress to eliminate tax breaks for insurance companies.

Domestic insurance companies are allowed to deduct taxes on premiums they pay to affiliated foreign reinsurance companies. Scott and the groups contend that if those deductions are no longer allowed, the cost of homeowners insurance in Florida will rise by $266 million, or 4.6 percent, and the costs for commercial properties will rise $264 million, or 12.6 percent. Also, private capital will shy away from insuring in Florida, dumping more risk into state-backed entities such as Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund, they say.

In a letter to U.S. Rep. Vern Buchanan, R-Sarasota, a member of the House Ways and Means Committee which will review the proposal, Scott also cited concern about the effect of increased premiums on Florida’s housing market, currently undergoing a fragile but steady recovery after the implosion of the market five years ago.

“As you know, access and availability of property insurance is an issue of great concern in Florida, and a tax increase on reinsurance would limit U.S. insurance capacity and increase insurance costs for our homeowners and small businesses,” the letter states.

The Florida Insurance Council, the Florida Chamber of Commerce, Associated Industries of Florida, the Florida Concrete Products Association, and Associated Builders and Contractors have all sent similar letters to Buchanan and U.S. Sen. Bill Nelson, D-Orlando, in recent weeks.

In addition, former state Chief Financial Officer and Democratic gubernatorial candidate Alex Sink wrote an op-ed in the Tampa Tribune against similar legislation last year.

The Florida Legislature passed a memorial in 2011 (SB 484) urging Congress not to adopt the measure.

Bills to eliminate the tax breaks have been introduced in both houses of Congress by U.S. Rep. Richard Neal, D-Mass., and U.S. Sen. Robert Menendez, D-N.J., but likely won’t be considered until after the August recess. The bills could be part of tax reform talks between Republicans and Democrats, who also face a looming battle over the debt ceiling this fall.

The elimination of tax loopholes and carve-outs — favored by liberals — with the simultaneous reduction in overall tax rates — favored by conservatives — is seen as a possible compromise to perennial budget and tax fights between the two parties. Any such deal could include the elimination of the tax break for insurance companies, which was part of President Barack Obama’s budget proposal this year.

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