Montana will shift from a flat-rate tax structure to a tiered premium tax system for captive insurance companies following the signing of new legislation by Gov. Greg Gianforte (pictured above).
The law also introduces a minimum annual tax and expands tax provisions for reinsurance premiums.
Beginning Dec. 31, direct premiums will be taxed at 0.4% on the first $20 million. Premiums exceeding that threshold will be taxed at a 0.3% rate. Captive insurers will be required to submit premium taxes to the Montana insurance commissioner by March 1 each year.
The law also applies a tiered tax to assumed reinsurance premiums. The first $20 million in assumed premiums will be taxed at 0.225%, followed by a 0.150% rate on the next $20 million, and 0.05% for any amounts beyond $40 million.
Captive insurers will now be subject to a $5,000 minimum tax. This amount will be prorated based on the quarter in which a company receives or surrenders its certificate of authority.
The legislation retains a $100,000 cap on aggregate premium taxes for captive insurers. However, the cap does not apply to protected cell captives. The new law extends this exemption to include special purpose captives structured as limited liability companies with a series of members.
A fiscal analysis conducted in support of the bill found that only one series LLC captive reached the $100,000 cap since 2022. No other similar entities are projected to exceed the cap during the 2026 through 2028 tax years.
While the legislation is not expected to generate revenue for the state in 2026, Montana’s general fund is projected to receive an additional $253,280 in 2027 and $405,680 in 2029. The law is not anticipated to impose any additional costs on the state.
At the federal level, the Internal Revenue Service (IRS) finalized regulations in January 2025 concerning micro-captive insurance arrangements. These regulations reintroduce certain micro-captive transactions to the list of "listed transactions," requiring increased disclosure and compliance measures.
Delaware has also enacted legislation granting the insurance commissioner greater flexibility in approving financial institutions authorized to hold the required capital and surplus of captive insurance companies.
Vermont continues to refine its captive insurance laws, with proposed legislation in 2025 focusing on technical corrections and clarifications related to controlled-unaffiliated risk, conversions of captive insurance companies into protected cells, parametric contracts, and confidentiality.
Other states like Missouri and Oklahoma are also making strides. Missouri emphasizes a regulatory approach that balances oversight with flexibility, aiming to support the growth of captives while ensuring compliance. Oklahoma has introduced legislation effective November 2024, allowing for more streamlined processes in captive insurance operations.
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