Citizens Insurance Tax Credit - Business
How do I determine the amount of the credit?
Premium notices that include LA Citizens assessments due to Hurricanes Katrina and Rita are eligible for the credit. The LA Citizens assessments are listed separately from the normal premium amount on the declaration page of your property's insurance premium notice. The declaration page names the policyholder, describes the property or liability to be insured, the type of coverage, and policy limits. Some insurance companies may include a supplemental schedule with the declaration page that itemizes the LA Citizens assessments.
LA Citizens assessment charges may include any or all of the following (your insurer's description may vary slightly from the references below):
- Louisiana Citizens FAIR Plan Regular Assessment Recoupment Surcharge
- Louisiana Citizens Coastal Plan Regular Assessment Recoupment Surcharge
- Louisiana Citizens FAIR Plan Emergency Assessment
- Louisiana Citizens Market Equalization Charge
To determine the amount of the credit that can be claimed, add the assessment charges for the four items above. If only one of the items appears on your insurance bill, that amount is the amount of assessment paid. The credit is a percentage of the assessment paid. Starting with assessments paid on or after January 1, 2016, the credit is equal to 25 percent of the assessment paid.
Before the credit can be claimed, the assessment amounts must have been paid to the insurance company directly by the property owner or by the property owner's escrow company.
When can the credit be claimed?
The credit may only be claimed in the year paid regardless of the due date of your premium. For example, Citizens assessments paid on January 1, 2016 thru December 31, 2016 may be claimed on the 2016 income tax return which is due in 2017. However, Act 382 of the 2007 Regular Legislative Session amended Revised Statute 47:6025 to allow LA Citizens assessments paid during 2007 and thereafter to be claimed on Form R-620INS at the time of payment.
What documents are required to be filed and retained?
A copy of the property's insurance declaration page and supplemental page, if needed, that shows the separate charges for the LA Citizens assessments must be attached to the paper corporation income tax returns. A substitute document issued by your insurance company that contains the line item LA Citizens assessments will be accepted if the original declaration page is not available.
Documents showing proof that the LA Citizens assessments were paid such as cancelled checks, an image of a check, or an itemized escrow statement should be retained for four years and produced in the case of an audit.
Returns filed electronically:
If the return was filed electronically, the declaration page and supplemental page that show the separate charges for the LA Citizens assessments and proof of payment must be retained for four years and produced in the case of an audit.
Tax returns prepared by a paid preparer:
If the return was prepared by a paid tax preparer, a copy of the property's insurance declaration page and supplemental page that shows the separate charges for the LA Citizens assessments and proof of payment must be provided to the preparer. A preparer may not claim this credit without documentation of payment of the assessment. If the return is filed electronically, the preparer must keep a copy of this documentation.
What form should be used to claim the credit?
The form that you use to claim the credit will depend on whether the entity is required to file a Louisiana Corporation Income and Franchise Tax return.
Corporation required to file Louisiana corporation income and franchise tax returns
For assessments paid on or after January 1, 2007, the credit can be claimed on the Corporation Income and Franchise Tax return, Form CIFT-620 or on Form R-620INS, Request for Refund of Louisiana Citizens Property Insurance Corporation Assessment at the time of payment.
Corporations not required to file Louisiana corporation income and franchise tax returns
The credit may be claimed on Form R-620INS, Request for Refund of Louisiana Citizens Property Insurance Corporation Assessment at the time of payment. If the corporation had more than one property for which the LA Citizens assessments were paid, Form INS-SUP Schedule must also be completed. Documentation, including proof of payment, for each property listed must be attached to the form when it is filed.
If the business that paid the LA Citizens assessments is a sole proprietorship, the credit must be claimed on the individual income tax return.
If the business that paid the LA Citizens assessments operated as an S corporation, the LA Citizens credit must be used at the corporation level unless the S corporation makes the annual flow through election provided for in R.S. 47:1675 (G)(2)(b).
An S corporation that is entitled to the LA Citizens credit may elect to flow through the entire amount of the credit to its shareholders. The election may be made separately for each credit received by the S corporation and is made annually. There is no special form required to make the election. The election is made when the S corporation does not claim the credit on the CIFT-620, but instead allows each shareholder to claim that shareholder's share of the credit on their own income tax return. Once made, the election may not be revoked for that tax year.
The S corporation that elects to flow through any credits, including the LA Citizens credit, must prepare and distribute to each shareholder a schedule detailing the shareholder's share of each credit for which the election is made. Shareholders claiming the credit should attach a copy of this schedule to the income tax return on which the credit is claimed. Corporate and individual shareholders claim the credit as prescribed by Revenue Information Bulletin (RIB) 07-006 .
Business entities not subject to Louisiana income tax - Flow-through of the credit
If the business that paid the LA Citizens assessments is an entity not subject to Louisiana income tax, such as a partnership, the LA Citizens credit will flow through to partners or members of the entity as provided in the operating agreement. In the absence of an operating agreement or if the operating agreement is silent with respect to the allocation of tax items, the LA Citizens credit will flow through to each partner or member in accordance to the partner or member's ownership interest in the entity. Corporate and individual partners claim the credit as prescribed by RIB 07-006.
Insurers that paid the 2005 regular assessment levied by the Louisiana Citizens Property Insurance Corporation before January 1, 2007, and did not pass on the entire assessment to their policyholders are eligible to receive a credit for the amount of the regular assessment that they did not recover.
Insurers that paid the 2005 regular assessment and levied a recoupment surcharge on the policyholders to recover the LA Citizens regular assessment are not entitled to receive a credit for the amount of the assessment they recovered.
Eligible insurers that are not subject to Louisiana income tax may claim the credit on Form R-620INS, Request for Refund of Louisiana Citizens Property Insurance Corporation Assessment. To claim the credit for the total LA Citizens regular assessment or for that portion not recovered, the insurer must provide a copy of the LA Citizens regular assessment payment notice and proof of payment. In addition, the insurer must provide a certified statement and audited summary of the final amount recovered from the insurer's policyholders. A copy of the certified statement, proof of payment, and audited summary must also be filed with the Louisiana Department of Insurance, Office of Property and Casualty.
Nonfilers - Entities not required to file a Louisiana income tax return
Exempt organizations and corporations such as churches, not-for-profit hospitals, charities, 501(C)(3) organizations, community foundations, banks that pay the local shares tax, public entities such as municipalities and school board, and other corporations exempt from the Louisiana corporate income tax under R.S.47:287.501 that paid the LA Citizens assessments are eligible for the LA Citizens credit.
If the exempt organization is not required to file a Corporation Income and Franchise Tax return, a claim for refund should be filed on the Request for Refund of Louisiana Citizens Property Insurance Corporation (LA Citizens) Assessment, Form R-620INS.
A copy of the entity's property insurance declaration page, supplemental pages, and proof of payment must be attached to the Form R-620INS.
Businesses that have not claimed the credit
Businesses that have not claimed the credit for previous years must follow the directions for their entity type as listed under “What form should be used to claim the credit?”.