Did the insurer qualify for Florida's limited tax exemption for a property-and-casualty insurer owned at least 51% by minority persons?

Plain-English summary

The insurer did not qualify for the limited minority-owned property-and-casualty insurer exemption. It had received its initial Florida certificate of authority after the statutory cutoff, but it did not satisfy the separate requirement that at least 51% be owned by statutory minority persons.

The insurer's direct owner was another corporation. The governing statutes did not provide constructive-ownership or attribution rules allowing ownership to be traced through the corporate tiers to individuals, and a corporation itself was not a "minority person" under the definition used by the exemption.

What this means for you

A beneficial or indirect ownership calculation was not enough under this narrowly construed exemption. The claimant had to fit the statute's direct ownership language and every other condition.

Common questions

Q: Did the insurer meet the certificate-date requirement? Yes.

Q: Why was the exemption still denied? It failed the 51% ownership requirement.

Q: Could the insurer attribute its corporate owner's shares to individuals? No, not under the statutes applied in the ruling.

Citations and references

• Fla. Stat. §§ 175.101, 185.08, and 624.509 — taxes for which exemption was requested
• Fla. Stat. § 624.4072 — minority-owned property-and-casualty insurer exemption
• Fla. Stat. § 288.703(3) — minority-person definition
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01B8-001

Original ruling text

SUMMARY
QUESTION: Is the Taxpayer, a minority-owned property and
casualty insurer, exempt from the taxes imposed under ss.

175.101, 185.08, and 624.509, F.S.?

ANSWER - Based on Facts Below: - No. The Taxpayer is not a

minority-owned property and casualty insurer, and is not
exempt from the taxes imposed under ss. 175.101, 185.08,
and 624.509, F.S.

Dec 19, 2001

Re: Technical Assistance Advisement 01B8-001
Insurance Premium Tax
Request for Minority-Owned Property and Casualty Insurer
Exemption
Section 624.4072, F.S.
XXX - FEl# XX (hereinafter referred to as "Insurer A")
XXX - FEl# XX (hereinafter referred to as "Insurer B" or
"the Taxpayer")
XXX - FEl# XX (hereinafter referred to as "Insurer C")
XXX (hereinafter referred to as "Owner")
XXX (hereinafter referred to as "Insurance Group 1")

XXX (hereinafter referred to as "Insurance Group 2")

Dear:

Your letter of XX, asks whether the Taxpayer is a minority-owned
property and casualty insurer that qualifies for the limited
exemption from taxation and assessments contained in s.
624.4072, F.S. This response to your request constitutes a
Technical Assistance Advisement under Chapter 12-11, Florida
Administrative Code, and is issued to you under authority of s.

213.22, Florida Statutes.

FACTS SUPPLIED BY TAXPAYER

On XX, the Taxpayer underwent a merger and redomestication.
Insurer A was a XXX domiciled insurer operating as a surplus
lines insurer in Florida without a Florida certificate of

authority. Insurer A redomesticated to Florida and converted
from an approved surplus lines insurer to an authorized insurer
in Florida, and received its initial Florida certificate of

authority. Then the former Insurer B and Insurer C, both Florida
domiciled insurers with Florida certificates of authority, were
merged into Insurer A. Insurer A then changed its name to

Insurer B (the Taxpayer).

The Taxpayer is XX% owned by Insurance Group 1. Insurance Group
1 is XX% owned by Insurance Group 2. Insurance Group 2 is XX%
owned by Owner.

The shareholders of Owner are as follows:

Ownership Place of

Individual Percentage — Birth

XXX, Father XX% XXX
XXX, Mother XX% XXX
XXX, Son 1 XX% XXX
XXX, Son 2 XX% XXX

XXX, Daughter 1 XX% XXX
XXX, Daughter 2 XX% XXX

Father's father is XXX, who was born in XXX. Father's mother is
XXX, who was born in XXX. Mother's father is XXX, who was born

in XXX. Mother's mother is XXX, who was born in XXX.

LEGAL AUTHORITY

Section 624.4072, F.S., states:

(1) A minority business that is at least 51 percent owned
by minority persons, as defined in s. 288.703(3), initially
issued a certificate of authority in this state as an

authorized insurer after May 1, 1998, to write property and
casualty insurance shall be exempt, for a period not to
exceed 5 years from the date of receiving its certificate

of authority, from the following taxes and assessments:

(a) Taxes imposed under ss. 175.101, 185.08, and 624.509;

(b) Assessments by the Florida Residential Property and
Casualty Joint Underwriting Association or by the Florida
Windstorm Undermriting Association, as provided under s.
627.351, except for emergency assessments collected from
policyholders pursuant to s. 627.351(2)(b)2.d.(III) and
(6)(b)3.d. Any such insurer shall be a member insurer of
the Florida Windstorm Underwriting Association and the
Florida Residential Property and Casualty Joint
Underwriting Association. The premiums of such insurer
shall be included in determining, for the Florida Windstorm
Underwriting Association, the aggregate statewide direct
written premium for property insurance and in determining,
for the Florida Residential Property and Casualty Joint
Underwriting Association, the aggregate statewide direct
written premium for the subject lines of business for all

member insurers.

(2) Subsection (1) applies only to personal lines and
commercial lines residential property insurance policies as
defined in s. 627.4025, and applies only to an insurer that
has employees in this state and has a home office or a
regional office in this state. With respect to any tax

year or assessment year, the exemptions provided by
subsection (1) apply only if during the year an average of
at least 10 percent of the insurer's Florida residential
property policies in force covered properties located in

enterprise zones designated pursuant to s. 290.0065.

(3) The provision of the definition of "minority person" in
s. 288.703(3) that requires residency in Florida shall not
apply to the term "minority person" as used in this section

or s. 627.3511.
(4) This section is repealed effective July 1, 2003, and
the tax and assessment exemptions authorized by this

section shall terminate on such date. (Emphasis Supplied)

Section 288.703, F.S., states in part:

As used in this act, the following words and terms shall
have the following meanings unless the content shall

indicate another meaning or intent:

(3) "Minority person" means a lawful, permanent resident of

Florida who is:

(a) An African American, a person having origins in any of

the racial groups of the African Diaspora.

(b) A Hispanic American, a person of Spanish or Portuguese
culture with origins in Spain, Portugal, Mexico, South
America, Central America, or the Caribbean, regardless of

race.

(c) An Asian American, a person having origins in any of
the original peoples of the Far East, Southeast Asia, the
Indian Subcontinent, or the Pacific Islands, including the

Hawaiian Islands prior to 1778.

(d) A Native American, a person who has origins in any of
the Indian Tribes of North America prior to 1835, upon
presentation of proper documentation thereof as established
by rule of the Department of Management Services.

(e) An American woman. (Emphasis Supplied)

ISSUE PRESENTED

Is the Taxpayer a minority-owned property and casualty insurer
exempt from the taxes imposed under ss. 175.101, 185.08, and
624.509, F.S.?

DISCUSSION AND ANALYSIS

Section 624.4072, F.S., provides three basic requirements in
order for the Taxpayer to receive the minority-owned property
and casualty insurer limited exemption. These requirements are

as follows:

1. the insurer must receive its initial Florida certificate
   of authority to write property and casualty insurance after

May 1, 1998,

2. the insurer must be at least 51% owned by minority

persons, and

3. the minority persons must be one of the following:

(a) an African American, a person having origins in any of

the racial groups of the African Diaspora;

(b) a Hispanic American, a person of Spanish or Portuguese
culture with origins in Spain, Portugal, Mexico, South
America, Central America, or the Caribbean, regardless of

race;

(c) an Asian American, a person having origins in any of
the original peoples of the Far East, Southeast Asia, the
Indian Subcontinent, or the Pacific Islands, including the

Hawaiian Islands prior to 1778;

(d) a Native American, a person who has origins in any of
the Indian Tribes of North America prior to 1835, upon
presentation of proper documentation thereof as established

by rule of the Department of Management Services; or

(e) an American woman.

In regard to the first requirement noted above, the Taxpayer
received its initial Florida certificate of authority to write

property and casualty insurance on XXX. This was accomplished
when the Taxpayer redomesticated to Florida from XXX. Prior to
the redomestication, the Taxpayer wrote property and casualty
insurance premiums in Florida as a surplus lines insurer and was
not required to maintain a Florida certificate of authority.

Through the redomestication process, the Taxpayer converted from
a surplus lines insurer to an authorized Florida insurer and
received its initial Florida certificate of authority to write

property and casualty insurance. The Taxpayer then absorbed the

insurance business of XXX Florida insurers that were already

writing property and casualty premiums in Florida with Florida
certificates of authority to write property and casualty
insurance. Although the Legislature does not address a
situation where a taxpayer claims this exemption as a result of
a reorganization of its corporate structure, the language used
in the statute is quite specific that if an entity receives its

initial certificate of authority after May 1, 1998, itis

eligible for this exemption.

With regard to the second requirement, the Taxpayer asserts that

the 51% ownership requirement is met through the ownership of

the four children. The Taxpayer reasons that since the children

own XX% (Son 1 XX%, Son 2 XX%, Daughter 1 XX%, and Daughter 2
XX%) of the Owner which in turn owns XX% of Insurance Group 2,
which in turns owns XX% of Insurance Group 1, which in turn owns
XX% of the Taxpayer, the children own XX% (XX% xX XX% X XX% X
XX%) of the Taxpayer.

The Taxpayer is applying the attribution statutes, or
constructive ownership rules, in asserting that it meets the
minority ownership requirements of s. 624.4072, F.S. However,
s. 624.4072, F.S., and s. 288.703, F.S., do not provide for
attribution or constructive ownership to be used in determining
the minority ownership of the Taxpayer. The Taxpayer readily
admits that Insurance Group 1 owns XX% of the Taxpayer's shares
of stock. Insurance Group 1, as a corporation, is nota

"minority person” by definition, under s. 288.703, F.S.
Therefore, Insurance Group 1's ownership of the Taxpayer does
not qualify for the minority-owned property and casualty insurer

limited exemption under s. 624.4072, F.S.

It is a general rule of law that exemptions to taxing statutes

are special favors granted by the legislature and are to be

strictly construed against the taxpayer. See Green v. City of
Pensacola, 126 So.2d 566 (Fla. 1961); Wedgworth Farms, Inc. v.
Thompson, 101 So.2d 381 (Fla. 1958); Szabo Food Services, Inc v.
Dickinson, 286 So.2d 529 (Fla. 1973). Since the law is to be

strictly construed against the entity claiming the exemption and
in favor of the taxing power, the Taxpayer must clearly show
that it is entitled under the law to the exemption. See Green
v. Pederson, 99 So.2d 292 (Fla. 1957).

Based on the above discussion, the attribution statutes and
constructive ownership rules do not apply in this situation.

The Taxpayer is owned by a corporation, which, by definition, is
not a minority person. Therefore, the Taxpayer does not meet

the minority ownership requirements of s. 624.4072, F.S.

Since it has been determined that the Taxpayer is owned by a
corporation and does not meet the 51% minority ownership
requirement, there is no need to address the third requirement.
However, if it were determined that the attribution statutes

should apply to s. 624.4072, F.S., the Taxpayer still would not
meet the 51% minority ownership requirement because several of
the individuals owning the stock in Owner are not minorities as

defined in s. 288.703, F.S.

The Taxpayer readily admits that the father does not meet the
statutory definition of a minority, and we concur. The mother
and two daughters appear to meet the definition of a "minority
person” as "American Women". The Taxpayer asserts that the
brothers qualify as Hispanic Americans because they were born
and raised in XXX. Section 288.703(3)(b), F.S., defines an

Hispanic American as:

... [A] person of Spanish or Portuguese culture with
origins in Spain, Portugal, Mexico, South America, Central

America, or the Caribbean, regardless of race.

Culture refers to the customary beliefs, social forms, and
material traits of a racial, religious, or social group. See

Webster's New Collegiate Dictionary. Origin refers to that from

which anything derives its existence, a source or Cause, one's

parentage, ancestry, or derivation. See The American Heritage

Dictionary of the English Language.

The brothers, although born in XXX, are of XXX and XXX decent.
All of their grandparents were born outside XX; their father was
born outside XX; and their mother was born in XXX shortly after
her parents immigrated from XXX. The Taxpayer has not provided
any additional information or argument to support its assertion

that the brothers are Hispanic Americans. It appears that the

family moved to the United States when the older brother was a
teenager and the younger brother was a child. The facts

provided indicate that the brothers are not Hispanic Americans.

CONCLUSION

The Taxpayer does not meet the requirements of s. 624.4072,
F.S., to qualify as a minority-owned property and casualty
insurer and to be exempt from the taxes imposed under ss.
175.101, 185.08, and 624.509, F.S. Therefore, the Taxpayer's

request is denied.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
based on those facts and specific situation summarized above.
You are advised that subsequent statutory or administrative rule
changes or judicial interpretations of the statutes or rules

upon this advice is based may subject future transactions to a

different treatment than expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department

within 15 days of the date of this letter.
Sincerely,
Robert DuCasse
Technical Assistance and Dispute

Resolution

RCD/rd

Control No. 45864