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Premium tax on IWIF is 1 step closer

ANNAPOLIS — The Maryland Senate voted down an attempt to extend the quasi-public Injured Workers’ Insurance Fund’s exemption from the insurance premium tax Tuesday evening during a wide-ranging debate on budget issues.

That move leaves the two chambers of the General Assembly in the same posture on the IWIF measure, which would be subject to the same 2 percent premium tax paid by other insurers, bringing it one step closer to passage.

The House of Delegates approved the measure on Thursday after it was included in Gov. Martin O’Malley’s budget proposal.

Sen. Edward R. Reilly, an insurance agent and Anne Arundel County Republican, pushed an amendment Tuesday that would have kept IWIF’s exemption in place.

“It allows these high-risk companies to maintain their coverage,” Reilly said of his amendment. “It allows businesses to stay in business.”

The move was voted down, 36-10.

The application of the tax to IWIF’s premiums, the costs of which will be passed along to its customers, is expected to bring in about $2 million to the state’s general fund. That move coincides with an additional accounting shift that would send $4 million from IWIF to Maryland’s coffers, and separate legislation that would remove IWIF’s employees from the state personnel system.

“They were fine with the premium tax in exchange for getting out of the state personnel system,” said Senate Finance Committee Chairman Thomas M. “Mac” Middleton, D-Charles.

Groups that represent many of IWIF’s customers have offered mixed reactions to the premium tax plan. The National Federation of Independent Business opposed the additional burden on small businesses while the Maryland Chamber of Commerce supported leveling the playing field for insurers.

IWIF has been exempted from the tax as the state’s quasi-public insurer of last resort. But, the company’s business extends well beyond that role. It has 21 percent of the state’s workers’ compensation insurance market and is the largest such insurer in the state, according to legislative analysts.

The 2 percent premium tax, which would be applied to little more than half of fiscal 2012, would bring in $1.9 million. In the years following, that tax is expected to bring in between $3.5 million and $4 million. IWIF has forecast about $160 million in taxable premiums in calendar 2011.