Request By:
Mr. Patrick Watts, Esq.
Department of Insurance
P.O. Box 517
Frankfort, KY. 40602
Opinion
Opinion By: Steven L. Beshear, Attorney General; By Alex W. Rose, Assistant Attorney General
In your letter of May 6, 1983, you requested an opinion as to whether the insurance premiums tax levied by a city or urban-county government applies to annuities.
Kentucky cities and urban-county governments are authorized to assess taxes on insurance companies ". . . for the privilege of engaging in the business of insurance . . ." See KRS 91A.080(1). The tax is then assessed upon the appropriate base for the type of insurance as follows: Life insurance companies are taxed on premiums from the new policies written within the preceding calendar year upon the lives of persons residing within the corporate limits of such city or urban-county government. Fire insurance companies are taxed upon premiums received within the corporate limits of the city or urban-county government. All other insurance companies are taxed upon premiums received by such companies within the preceding calendar year on risks located within the corporate limits of the city or urban-county government.
Annuity premiums represent policies written neither on the lives of persons nor on property.
"An annuity is an obligation to pay a stated sum to a stated recipient . . . which terminates upon the death of the designated beneficiary." Insurance Law and Practice, Appleman, Chapter Four Sections 81-84.
"Annuity contracts do not insure against loss by reason of death of the insured, but rather constitute the investment of funds to be paid in installments during the life of an annuitant; annuity contracts are not a 'risk' based on the contingency of loss." Corporation Commission v. Equitable Life Assurance Society of U.S., 73 Ariz. 171, 239 P.2d 360 (1952).
Therefore, the annuity premium does not represent a premium paid upon a risk located within the corporate limits of the city or urban-county government since there is no risk of loss in an annuity contract.
Because the annuity contract is not included within either of the three categories of insurance which are subject to the city and urban-county insurance premiums tax of KRS 91A.080, annuity premiums are not included in the tax base for municipal premiums tax purposes.