Insurance Premiums Tax

In accordance with Kentucky State law, Louisville Metro (Jefferson County) levies a premium tax of 5% on providers of all insurance such as life, health, vehicle, casualty liability, inland marine, and fire & allied perils. Local governments (i.e., cities) within a county are also authorized by State Law to levy such tax. When a city levies this tax, the provider may claim a credit against its county tax in the amount of the tax paid to the city. Accordingly, the City of Indian Hills has authorized a 5% premium tax. The effect is not that of an additional tax but is to direct the tax which must be paid regardless, to City government. Seventy-seven of the eighty-three cities within Louisville Metro collect insurance premium taxes. Seven of those seventy-seven assess a rate higher than Metro's 5%, e.g., as much as 8%.

Over 10% of the annual revenue of our City results from insurers paying this tax to Indian Hills. This saves each City taxpayer annually about 2 cents per $100 of assessed value on property tax.

In the past, the City received this payment only if residents advised their insurance providers to remit the tax to the City of Indian Hills. If not notified, the providers made the payment to Louisville Metro.

Legislation passed in 2008 (Kentucky Revised Statute 091A.0810) authorized consolidation of collection and disbursement of these taxes on a state basis, but proper distribution is dependent on the Kentucky Department of Insurance properly determining the "location of risk". Another key component of this statute is the requirement that, effective December 31, 2008, insurance providers who include a municipal tax in their premium charge must identify the amount of the charge, and the name of the taxing jurisdiction.

The City believes that this new statute provides an opportunity for increasing Indian Hills revenue without additional cost to its residents, as all residents should now be able to verify that premium tax payments are properly being remitted to the City of Indian Hills. While the City has taken steps to insure the Department of Insurance has accurate location information, the magnitude of the data does present some potential for error.

WHAT YOU CAN DO:

Each time you receive an insurance premium notice, please verify that any local government premium tax listed therein is clearly identified as being paid to Indian Hills.

If Indian Hills is not listed on your premium notice ...

  1. When you pay the insurance premium, place the following note on your premium payment:

    MUNICIPAL TAX IS TO BE PAID TO
    CITY OF INDIAN HILLS
    P O BOX 6289
    LOUISVILLE, KY 40206-6289

  2. Contact your agent and/or insurer and advise them of the statutory requirement to identify the taxing jurisdiction by name (Reference KRS 091A.0810). A properly licensed insurer in Kentucky should have already been notified by the Kentucky Department of Insurance.
  3. Contact a member of the city council so that we may investigate and ensure that the "location of risk" (i.e., your address) has been properly associated with the City of Indian Hills by the Department of Insurance.
[If you have access to Microsoft WORD you may download a WORD document that will print a full sheet of remittance notification labels on Avery 8160 labels (or equivalent) by clicking here and saving the WORD file to your PC]

Posted February 9, 2009