Montana lawmakers have approved legislation that revises the tax code for captive and special purpose insurance companies, introducing a tiered premium tax system and clarifying provisions around minimum payments and corporate structure.
Senate Bill 60, enacted by the 69th Legislature, was introduced by Senator M. Noland at the request of the State Auditor. The legislation amends Section 33-28-201 of the Montana Code Annotated and applies to tax years beginning after December 31, 2025.
Under the revised law, captive insurance companies are required to pay a tax on direct premiums collected or contracted for on policies written during the preceding year. The rate is set at 0.4 percent on the first $20 million of direct premiums and 0.3 percent on each dollar thereafter.
The bill also imposes a tax on assumed reinsurance premiums, excluding premiums taxed on a direct basis and certain intra-group transfers. The tax is structured as follows: 0.225 percent on the first $20 million of assumed reinsurance premiums, 0.150 percent on the next $20 million, and 0.050 percent on each additional dollar.
If the total taxes calculated under the bill amount to less than $5,000 in a given year, the captive insurance company must pay a minimum tax of $5,000. For captives newly authorized within a calendar year, the minimum tax is prorated by quarter: $5,000 if authorized in the first quarter; $3,750 in the second; $2,500 in the third; and $1,250 in the fourth. If a company surrenders its certificate during the year, the same schedule applies in reverse.
Each protected cell within a protected cell captive insurance company is considered separately for tax purposes. The same applies to each series of members in a limited liability company formed as a special purpose captive insurance company, though the minimum tax is calculated in the aggregate.
A cap of $100,000 per year applies to total taxes owed by a captive insurance company, but this limit does not extend to protected cell captives or special purpose captives organized as LLCs with member series.
Captives under common ownership and control are to be taxed as a single entity. For stock corporations, this means direct or indirect ownership of 80 percent or more of outstanding voting stock by the same shareholder or shareholders. For mutual insurers, it refers to ownership of 80 percent or more of surplus and voting power by the same member or members.
The law also states that only branch business of a branch captive insurance company is subject to taxation. All taxes must be calculated annually, and premiums on multiyear contracts are to be prorated for the relevant tax year.
