91A.0804 Exclusive remedy for adjustments relating to license fees or taxes
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imposed under KRS 91A.080.
(1)The provisions of this section shall provide the sole and exclusive method for the
filing of amended returns and requests or assessments by any insurance company,
local government, or policyholder for nonpayment, underpayment, or overpayment
of any license fees or taxes imposed pursuant to KRS 91A.080 and the appeals from
the denial or refusal thereof.
(2)All amended returns, requests for refunds or credits, and assessments shall be made
within two
(2)years of the due date of the annual reconciliation provided for in
KRS 91A.080(8) for the tax period during which the error was made, except that in
the case of fraudulent failure to file a return or the filing of a fraudulent return, the
underpayment may be assessed at any time.
(a)Any insurance company that has paid a license fee or tax imposed by a local
government pursuant to KRS 91A.080 may request a refund or credit for any
overpayment of a license fee or tax or any payment when no tax was due
within the time provided in subsection
(2)of this section.
(b)A request for a refund or credit by an insurance company shall be made by
mailing an amended return and supporting documentation to the local
government to which the fee or tax was paid. A complete refund request shall
include the amended return and supporting documentation showing the total
amount of overpayment of license fee or tax that the insurance company
believes was erroneously paid and a breakdown of information for each policy
upon which a refund or credit is requested, including the location of the risk
by street address or, if a street address is unavailable, another appropriate
identifier of the physical location, the amount of the erroneous payment, the
premium charged, the amount of tax or fee actually collected, the type or types
of risk insured, and the period the policy was in force during the taxable year
or years.
(c)The insurance company shall produce proof that it employed risk location
systems or programs meeting the requirements of KRS 91A.0806 during the
time for which the refund or credit is requested or a copy of a Department of
Insurance order issued pursuant to the administrative regulation promulgated
under KRS 91A.0806(3). If the insurance company fails or is unable to
produce such proof or a copy of the Department of Insurance order, the local
government shall be entitled to keep a penalty in the amount of ten percent
(10%) of the refund or credit that would have otherwise been due the
insurance company. Any dispute regarding the imposition of a penalty shall be
resolved under paragraph
(d)of this subsection.
(d)A local government shall notify the insurance company within ninety
days whether or not an amended return or request for refund has been
accepted. If a local government fails to accept the completed amended return
or refuses to issue the requested refund or credit within ninety
(90)days of its
receipt, the insurance company may make application to the Department of
Insurance to review the claim. The application shall be filed with the
Department of Insurance within thirty
(30)days of receipt of the response
from the local government or, in the case of a local government's failure to
respond, within thirty
(30)days of the end of the ninety
(90)day period
provided in this paragraph. The Department of Insurance shall, within sixty
(60)days of the receipt of the complete application, issue an order of final
agency action that the request for refund or credit is or is not warranted in
whole or in part. The commissioner of the Department of Insurance may grant
one
(1)extension of thirty
(30)days for the issuance of the order. As provided
in KRS 304.2-310, either party may file an administrative appeal from the
order of the Department of Insurance within sixty
(60)days of the issuance of
the order.
(e)1. After it has been determined that a refund or credit is owed, insurance
companies shall have a right to a full refund of a credit balance no later
than one
(1)year after the latest of the following:
a. The due date of an original quarterly return;
b. The filing date of an original quarterly return; or
c. The filing date of an amended return.
2. A local government may require an insurance company to carry forward
a credit balance to subsequent quarters during this one
(1)year period,
but shall not require an insurance company to carry forward a credit
balance past this one
(1)year period. The credit balance carried forward
may be used to offset amounts that would otherwise be due. The local
government shall issue a refund of any credit balance remaining after the
carryforward to the insurance company at the conclusion of the one
year period.
(f)If an insurance company submits an affidavit demonstrating that it is unlikely
the insurance company will write additional insurance policies in the
jurisdiction of the local government in the next twelve
(12)month period,
refunds or credits for any overpayment of a license fee or tax or any payment
when no tax was due shall be distributed by the local government according to
the following schedule:
1. If the credit balance is ten percent (10%) or less of the total LGPT
revenue receipts of the local government for the most recent full fiscal
year, then the refund shall be issued within sixty
(60)days of the due
date of the return for an original return or within sixty
(60)days of the
filing date of an amended return. If an amended return has not been
accepted within the sixty
(60)day period, the refund shall be issued no
later than thirty
(30)days after the acceptance date, or after the
completion of the process described in paragraph
(d)of this section,
whichever is later;
2. If the credit balance is greater than ten percent (10%) but less than or
equal to twenty-five percent (25%) of the total LGPT revenue receipts of
the local government for the most recent full fiscal year, then the refund
shall be issued within one hundred twenty
(120)days of the due date of
the return for an original return or within one hundred twenty
(120)days
of the filing date of an amended return;
3. If the credit balance is greater than twenty-five percent (25%) but less
than or equal to fifty percent (50%) of the total LGPT revenue receipts
of the local government for the most recent full fiscal year, then the
refund shall be issued within two hundred forty
(240)days of the due
date of the return for an original return or within two hundred forty
days of the filing date of an amended return; and
4. If the credit balance is greater than fifty percent (50%) of the total LGPT
revenue receipts of the local government for the most recent full fiscal
year, then the local government may take the full one
(1)year period to
issue the full refund, with at least one-half (1/2) of the refund to be paid
within two hundred forty
(240)days and the other half by the conclusion
of the one
(1)year period.
(g)A local government and an insurance company may enter into a written
agreement providing for an alternative payment plan.
(h)The total LGPT revenue received by the local government shall be
documented and certified by the local government if a tiered payment plan is
used under paragraph
(f)of this subsection.
(i)No insurance company shall apply a credit to taxes or fees imposed by KRS
91A.080 without written agreement from the local government, without an
order of final agency action from the Department of Insurance order that the
refund is due, or without an administrative ruling from the Department of
Insurance order that a refund is due. Each violation of this paragraph shall be
punishable as provided in KRS 91A.080(7)(b) and (c).
(a)Any policyholder who has paid to an insurance company a license fee or tax
imposed by a local government pursuant to KRS 91A.080 may request a
refund or credit for an overpayment of a license fee or tax or any payment
when no tax was due within the time provided in subsection
(2)of this
section.
(b)A request for a refund or credit by a policyholder shall be made by mailing the
request to the insurance company to which the fee or tax was paid. The
request shall include the name of the policyholder, the address of the location
of the risk insured, the amount of overpayment of license fee or tax that was
erroneously paid, the dates of coverage, the amount of the fee or tax that was
paid, and the type of risk insured.
(c)If an insurance company fails to make payment or to grant credit to a
policyholder as requested within ninety
(90)days of its receipt, the
policyholder may make application to the Department of Insurance to review
the request. The application shall be filed with the Department of Insurance
within thirty
(30)days of receipt of the response from the insurance company
or, in the case of an insurance company's failure to respond, within thirty
days of the end of the ninety
(90)day period provided in this paragraph. The
Department of Insurance shall, within sixty
(60)days of the receipt of the
complete application, issue an order of final agency action that the request for
refund or credit is or is not warranted in whole or in part. The commissioner
of the Department of Insurance may grant one
(1)extension of thirty
(30)days
for the issuance of the order. As provided in KRS 304.2-310, either party may
file an administrative appeal from the order of the Department of Insurance
within sixty
(60)days of the issuance of the order.
(a)If a local government has a reasonable basis to believe that a license fee or tax
imposed by it in accordance with KRS 91A.080 has not been paid or has been
underpaid, the local government shall request the Department of Insurance to
conduct an audit pursuant to the provisions of KRS 91A.080(7) within the
time provided in subsection
(2)of this section.
(b)If the findings of the audit show that an insurance company did not pay or
underpaid the local government, the local government may send an
assessment by mail to the insurance company. The notice of assessment shall
state the total amount of payment due from the insurance company based upon
the findings of the audit conducted pursuant to KRS 91A.080(7), the
geographic area affected, and the applicable license fee or tax rate.
(c)The insurance company may respond to the assessment by either paying the
assessment in full within ninety
(90)days of its receipt or by filing an appeal
of the findings of the audit and the assessment with the Department of
Insurance within ninety
(90)days of the receipt of the assessment. An
insurance company appealing the audit findings and assessment shall make
application to the Department of Insurance and provide notice of the challenge
to the local government by certified mail. The Department of Insurance shall,
within sixty
(60)days of the receipt of the completed application, issue an
order of final agency action upon the findings of the audit and a determination
that the assessment is or is not warranted in whole or in part. The
commissioner of the Department of Insurance may grant one
(1)extension of
thirty
(30)days for the issuance of the order. As provided in KRS 304.2-310,
either party may file an administrative appeal from the order of the
Department of Insurance within sixty
(60)days of the issuance of the order.
(d)If the insurance company fails to make the full payment as requested by the
local government or fails to file an application of appeal with the Department
of Insurance within ninety
(90)days of receipt of the assessment, the findings
of the audit and the assessment shall be deemed final, and the local
government may provide notification to the Department of Insurance to
impose a penalty in accordance with KRS 91A.080(7)(c). Any penalty
imposed because of an insurance company's failure to timely pay the
assessment shall be in addition to any penalties imposed as a result of the
audit. The notification shall be filed with the Department of Insurance within
thirty
(30)days of the end of the ninety
(90)day period provided in paragraph
(c)of this subsection. The Department of Insurance shall issue an order to the
insurance company to pay the assessment and any additional penalties
imposed within thirty
(30)days of the order, or the Department of Insurance
may revoke the license of the insurance company under the provisions of KRS
91A.080(7) and KRS Chapter 304.
(e)The Department of Insurance may determine the scope of any audit requested
under this subsection and KRS 91A.080. Nothing in this chapter shall
preclude the Department of Insurance from exercising its discretion to conduct
an audit or examination of any insurance company under its authority as
otherwise provided in KRS Chapter 304.
(6)An administrative hearing held pursuant to this section shall be conducted pursuant
to KRS Chapter 13B. The hearing officer may compel any information necessary to
make a determination. Information concerning rates, the names and addresses as of
policyholders, and the expiration date of policies shall be proprietary and
confidential, shall not be divulged to any person or organization not a party to the
hearing, shall not be subject to disclosure or to the provisions of KRS 61.870 to
61.884, and the record shall be sealed at the conclusion of the hearing.
(a)If a refund or credit is received by an insurance company that passed the fee or
tax on to the policyholder, and the amount refunded or credited is not owed to
another local government, the insurance company shall pass the full amount of
the refund or credit, including any collection fee that has been retained by the
insurance company pursuant to KRS 91A.080(4), on to the policyholder from
whom the fee or tax was collected within ninety
(90)days of receipt of the
refund or credit.
(b)For a refund or credit received by an insurance company that is not owed to
another local government, the insurance company shall pay a penalty fee of
ten percent (10%) of the total amount of the refund or credit due to the
policyholder if the insurance company is unable to produce proof of the use of
a risk location system as required under subsection (3)(c) of this section.
(c)For all refunds or credits passed on to policyholders under this subsection, the
insurance company shall document that the refund or credit has been passed
on to the policyholder, including any collection fee or penalty, and shall
provide the documentation to the local government upon request by the local
government. The insurance company shall retain this documentation for a
period of two
(2)years.
(8)No legal action shall be filed by any party prior to the exhaustion of all
administrative remedies provided under this section.
(a)Information on specific policies and policyholders provided to local
governments pursuant to subsection
(3)of this section shall be considered
confidential and proprietary information of an insurance company and shall
not be disclosed or subject to disclosure under KRS 61.870 to 61.884. No
present or former official or employee of a local government or any other
person shall, intentionally and without authorization, inspect or divulge any
information acquired by him or her of the affairs of any insurance company, or
information regarding specific policies, policyholders, tax schedules, returns,
or reports required to be filed with a local government, or any information
produced by a hearing or investigation, insofar as the information may have to
do with the proprietary information of the insurance company. All county
judges/executive, mayors, local government legislative body members, and
local government employees whose duties include the fiscal affairs of their
local government, shall be deemed to have the necessary authorization to
inspect such information. Any person who violates the provisions of this
paragraph shall be guilty of a Class A misdemeanor for each offense and the
disclosure of information on each policyholder shall constitute a separate
offense.
(b)Except for local governments that have been certified by the Internal Revenue
Service or its agent as being in compliance with IRS safeguard requirements
and authorized to receive federal tax information, any proprietary information
provided to a local government for the purposes of compliance with
subsection
(3)of this section and all copies or other records related to such
information shall be destroyed in an irreversible, secure, and confidential
manner in accordance with KRS 171.410 to 171.740 and the administrative
regulations promulgated or approved thereunder. A local government failing
to destroy proprietary information in accordance with this paragraph shall be
subject to a civil penalty payable to the insurance company of five hundred
dollars ($500) for each offense, and the disclosure of information on each
policyholder shall constitute a separate offense. An insurance company may
commence a civil action in a court of competent jurisdiction for payment of
the civil penalty. The total civil penalty shall not exceed ten thousand dollars
($10,000) per incident.
(c)This subsection shall not preclude the disclosure of information to the
Department of Insurance or to the legal representative of the local government
for purposes of administrative hearings or legal appeals therefrom, nor shall it
prohibit the local government from verifying the accuracy of the information
with an individual policyholder to whom the information pertains.
(10)The filing of amended returns, requests for refunds or credits, assessments, and all
applications and notification by any party to the Department of Insurance for review
under this section, shall be sent to the designated party or parties by certified mail,
return receipt requested.