New York Advisory Opinion TSB-A-17(2)C: Do an alien life insurer's premiums tied to Insurance Law section 2117(k) broker activities become 'New York premiums' for the Article 33 premiums allocation factor?

Plain-English summary

A foreign-based (alien) life insurance group asked a narrow allocation question. Unauthorized alien insurers in the group let a New York-licensed broker perform certain activities permitted by Insurance Law § 2117(k) — all involving insurance for multinationals resident outside the United States, not covering New York property or risks. The insurers wanted to know whether premiums tied to those § 2117(k) activities would be pulled in as "New York premiums" in the Article 33 premiums allocation factor (which would raise the numerator and increase New York tax).

The Department said no. To allocate, a foreign or alien insurer builds a premiums factor whose numerator is its "New York premiums" and denominator its "total premiums" (Tax Law § 1504(a)(1)). "Total premiums" must be reported consistently with the annual statement filed with the Superintendent of Financial Services under Insurance Law § 307 (Tax Law § 1504(b)(3)). But unauthorized alien insurers do not file those annual statements and do not report these premiums to Financial Services, and the § 2117(k) risks reside outside the United States. So the § 2117(k) premiums don't even qualify as "total premiums" — and if they aren't total premiums, they can't be "New York premiums" under § 1504(b)(2)(A).

What this means for you

Alien and unauthorized insurers operating through New York brokers

Letting a New York broker conduct Insurance Law § 2117(k) activities for you does not, by itself, convert the related premiums into New York premiums for allocation. The gateway is the "total premiums" definition, which is tied to the annual statement you (as an unauthorized alien insurer) don't file — and to risks that here sit outside the U.S.

Accountants and tax professionals

Work the definitions in order: a premium can be a "New York premium" only if it is first a "total premium," and "total premiums" tracks the Insurance Law § 307 annual statement. For unauthorized alien insurers with non-U.S. risks, that threshold isn't met. Note the analysis applies to tax years beginning on or after January 1, 2015 (when § 2117(k) took effect).

Common questions

Q: Do section 2117(k) broker activities create New York premiums for an alien insurer?
A: No. Those premiums are not even "total premiums," so they cannot be "New York premiums" in the allocation factor.

Q: Why aren't they "total premiums"?
A: "Total premiums" tracks the Insurance Law § 307 annual statement, which unauthorized alien insurers don't file, and the § 2117(k) risks here reside outside the U.S.

Q: Can my company rely on this opinion?
A: No. It binds the Department only as to this petitioner and these facts.

Citations and references

• Tax Law § 1504(b)(2)(A) (definition of "New York premiums")
• Tax Law § 1504(b)(3) ("total premiums" reported consistently with the annual statement)
• Tax Law § 1504(a)(1) (premiums factor); Tax Law §§ 1501–1503 (insurance franchise tax and entire net income)
• Insurance Law § 307 (annual statement; alien insurer reports only U.S. business)
• Insurance Law § 2117(k) (permitted broker activities for unauthorized insurers, effective July 2, 2015)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_2017.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a17_2c.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-17(2)C
Corporation Tax
October 4, 2017

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C160401A

The Department of Taxation and Finance received an amended Petition for an Advisory
Opinion from REDACTED REDACTED REDACTED RE (“Petitioner”), REDACTED RE DA
REDACTED REDACTED REDACTED REDACTED R. Petitioner asks whether premiums
that otherwise would not be New York premiums for purposes of Tax Law § 1504(b) become
treated as New York premiums if they are related to activities permitted by Insurance Law §
2117(k).
The Department concludes that the premiums related to the § 2117(k)1 activities do not
qualify as “New York premiums” as that term is defined in Tax Law § 1510(b).
FACTS
Petitioner is wholly-owned by REDACTED. Petitioner is not licensed to conduct an
insurance business in New York.
Foreign branches of Petitioner and some of its related alien insurers are not authorized to
conduct insurance businesses in New York (collectively, “Alien Insurers”). The Alien Insurers,
however, will authorize a New York licensed broker to engage in certain of the activities allowed
under Insurance Law § 2117(k) on their behalf. These activities “will all involve insurance
provided to multinational entities that are resident outside the United States. The insurance will
not cover property or risks located or resident in New York State. The coverage provided will
not apply to any activities that are conducted by the entities in New York State, except to the
extent of covering employees who might be temporarily present in the State but who are based
outside the State.”
Petitioner states that “no premiums will be allocated to New York for purposes of”
Insurance Law § 9102.2 It also claims that the Alien Insurers do not insure property or risks
located or resident in New York State for purposes of Tax Law § 1504(b)(2). The only activities
Insurance Law § 2117(k) became effective as of July 2, 2015. L. 2015, c 64, § 1. Therefore, the Division’s analysis
pertains to tax years beginning on or after January 1, 2015.
1

Insurance Law § 9102 provides that “[i]n determining the amount of direct premiums taxable in this state, all such
premiums written, procured or received in this state shall be deemed written on property or risks located or resident
in this state except such premiums properly allocated and reported as taxable premiums of any other state or states.”
2

-2-

TSB-A-17(2)C
Corporation Tax
October 4, 2017

that the licensed broker will engage in on behalf of the Alien Insurers are those permitted under
Insurance Law § 2117(k).
ANALYSIS
For the privilege of doing business in New York, foreign and alien life insurance
corporations are subject to Tax Law § 1501 and thereby compute their respective tax liabilities
pursuant to Tax Law § 1502. The tax imposed is the greatest amount of that computed on their
allocated entire net income (Tax Law § 1502[a][1]), or their allocated business and investment
capital (Tax Law § 1502[a][2]), or a percentage of their entire net income plus certain wage
expenses and issued capital stock (Tax Law § 1502[a][3]) or a minimum of $250.00 (Tax Law §
1502[a][4]) plus a tax computed on their subsidiary capital (Tax Law § 1502[b]).
To determine its allocated entire net income or allocated business capital, a foreign or
alien unauthorized life insurance corporation must first compute its entire net income or business
capital. Tax Law § 1503. That amount is then allocated to New York by a percentage consisting
of two factors, a premiums factor worth 90% and a wage factor worth 10%. Tax Law § 1504(a).
The numerator of the Alien Insurers’ premiums factor would be their “New York premiums” and
the denominator would be their “total premiums.” Tax Law § 1504(a)(1).
The term “New York premiums” is defined, in part, as “that portion of total premiums,
written, procured or received on … risks located or resident in New York and shall include
premiums written, procured or received on … risks located or resident in New York and shall
also include premiums written, procured or received in this state on business which cannot be
specifically assigned as located or resident in any other state or states …”. Tax Law §
1504(b)(2)(A).
The threshold question then is whether the Alien Insurers’ premiums related to the
brokers’ § 2117(k) activities qualify to be treated as “total premiums.” For purposes of Tax Law
§ 1504(a)(1), “‘[t]otal premiums’ shall be reported on a written basis or on a paid-for basis
consistent with the basis required by the annual statement filed with the [Superintendent of
Financial Services] pursuant to section three hundred seven of the insurance law.”3 Tax Law §
1504 (b)(3).

3

Effective October 3, 2011, with the merger of the Department of Insurance and the Banking Department into the
new Department of Financial Services, insurance companies are now regulated by the Superintendent of Financial
Services (see chapter 62 of the Laws of 2011, part A).

-3-

TSB-A-17(2)C
Corporation Tax
October 4, 2017

Insurance Law § 307(a)(1) directs that:
Every insurer … that is authorized to do an insurance business in this state
… shall file in the office of the [Superintendent of Financial Services],
annually on or before the first day of March, a statement, to be known as
its annual statement … Such statement shall be in such form and shall
contain such matters as the superintendent shall prescribe.
Insurance Law § 307(a)(3) provides that:
The annual statement of an alien insurer … shall be a … statement … of
the business done in the United States and of the assets held by or for it
within the United States for the protection of policyholders and creditors
within the United States … and shall not contain any statement in regard
to its assets and business elsewhere.
The Alien Insurers are not authorized insurance corporations and, as such, do not file
annual statements with the Superintendent of Financial Services nor do they report premiums to
the Department of Financial Services. Moreover, the life insurance risks associated with the
§ 2117(k) activities reside outside the United States. Insurance Law § 2117 (k)(1)(A). The
Alien Insurers’ premiums associated with the § 2117(k) activities do not qualify to be treated as
“total premiums” and, therefore, cannot be treated as “New York premiums.” Tax Law §
1504(b)(2)(A).
DATED: October 4, 2017

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

NOTE:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.