NU Online News Service, June 16, 2:08 p.m. EST

WASHINGTON—Legislation has been introduced in the House designed to update a tax break for small property and casualty insurers to provide for inflation.

The legislation, H.R. 2198, would update the current tax code to account for inflation. It was introduced by Rep. Erik Paulsen, R-Minn. and co-sponsors Rep. Joe Donnelly D-Ind. and Aaron Schock R-Ill.

The bill would increase the alternative tax liability limitation for small p & c insurance companies.

Over 600 companies across the country could be affected without this adjustment, including 85 in Minnesota, 30 in Indiana and 62 in Illinois.

Jimi Grande, senior vice president of federal affairs for the National Association of Mutual Insurance Companies, says, "Mutual companies like these exist solely to serve the insurance needs of their policyholders, and especially for these smaller companies, play a vital role in their communities." 

Under the provision, certain small p & c insurers with direct or net written annual premiums not exceeding $1.2 million may elect to be taxed on their net investment incomes.

This provision was enacted in 1986, but has not been adjusted to reflect the last 25 years of inflation.

"This legislation simply corrects a flaw in the tax code," Grande says, "By not indexing this election threshold to inflation, the current code will make it more and more difficult for these small companies who rely on the alternative option to stay in business and protect their policyholders."