A state-commissioned audit report revealed that New Mexico failed to collect at least $193 million in taxes on insurance premiums over the past five years.
The news comes as the state is currently struggling to close a major budget shortfall. New Mexico ended the fiscal year in June in a fiscal deficit and revenue is anticipated to fall more than $400 million short of covering 2016’s $6.2 billion general fund spending plan, reported Daily Journal
The state-commission audit review was conducted by accounting firm CliftonLarsonAllen.
According to New Mexico State Auditor Tim Keller, the unpaid premium taxes can still be recovered, with the total likely to exceed $200 million based on a sampling of underpaid taxes by five insurance companies. Keller and other state officials have suggested that pursuing the unpaid taxes might ease pressure to cut programs or raise taxes.
“This is probably the largest accessible piece of money that the state has identified in several years,” Keller commented. “There’s more money out there. We don’t even know how much.”
The Office of the Superintendent of Insurance oversees tax collections on health, property, life and other insurance premiums. Keller criticized the agency for relying too much on taxpayers and the honor system for accurate payments.
On Wednesday, Insurance Superintendent John Franchini said that his agency is set to perform a close audit of “certain portions” of the state’s premium tax collections within 30 days, as well as bill unpaid balances.
Franchini also revealed that a civil investigation launched Dec. 2015 by his agency’s fraud bureau that looked into insurance companies and premium taxes is still underway.
The superintendent admitted that the division that oversees insurance premium tax collections is only staffed by three people, when it should be composed of six. He also said that his agency hopes to stop underpayments by adopting a system of tax-collection standards, rules and web-based computer software supervised by NAIC and used by over 40 other states.
“I think our system is broken and we’re trying to fix it,” Franchini remarked.
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