Franchini expects insurers’ back taxes will be easy to collect

Nov. 18--New Mexico Superintendent of Insurance John Franchini said the state already has received a check from an insurance company for more than $356,000 in unpaid premium taxes, but he told lawmakers other firms have questions about an audit that shows millions of dollars are still owed to taxpayers.

The check from one insurer is in addition to some $15 million paid by Presbyterian Health Plan to the state as part of an ongoing effort to collect what an auditing firm maintains is $65 million owed from two dozen companies going back to 2oo3.

The 3 percent tax on insurance premiums is paid by companies who sell all types of insurance from health and property to auto and property coverage. But the bulk of the taxes comes from a handful of health insurers, with Presbyterian owing a total of $29 million at the time of the audit.

"I don't believe we're going to have to do a lot of litigation," Franchini told members of the Legislative Finance Committee Wednesday. "I do believe we will collect most of this."

Lawmakers, however, are facing another year of relatively flat general fund revenue projections and want to be able to use any back-tax collections in planning spending for fiscal year 2019, which begins July 1, 2018. The $6 billion state budget pays for everything from courts and prisons to education and economic development.

The Legislature will convene in January to set the spending levels, but lawmakers have started hearing agency budget requests about their priorities

"Of the $65 million, how much can we bank on going into the session, so we can figure out whether we can spend it or not?" asked Sen. Carlos Cisneros, a Democrat from Questa who sits on the Senate Finance Committee.

Controversy over the premium tax collections goes back to 2013, when the Office of the Insurance Superintendent became an independent agency from the Public Regulation Commission. At one time, State Auditor Tim Keller thought there might be $190 million in uncollected taxes. The audit, released last month, pinned the figure at $65 million, but it also pointed to overpayments of some $8 million, which will have to be credited back to the companies.

Presbyterian so far has paid $15 million as part of a settlement with Attorney General Hector Balderas, who filed legal action to collect a portion of what was owed.

Franchini said his office has sent out collection notices to 28 companies. They now have an appeals period to either challenge the audit or write a check to pay the back amount billed.

One company has paid $356,800, Franchini said, while others have raised some questions about how far back the state is allowed to go for unpaid taxes.

"We do anticipate some companies challenging their findings and the invoice accompanying their findings," said Vicente Vargas, general counsel for the Office of the Superintendent of Insurance. "If these companies decide to litigate the issue, it could go into District Court, and at that point, it's out of our hands."

Lawmakers also are backing a bill that would transfer the collection of premium taxes to the Taxation and Revenue Department as well as the six or seven employees who now do that work at the Office of the Superintendent of Insurance. But that change would not happen until 2019, and it would only happen if lawmakers and the governor agree to change state law.

Franchini said he supports the effort because he has to regulate insurance companies, and having them pay his office tax money creates the wrong impression. Insurance premium tax collections reached $257 million in fiscal year 2017, up from $141 million in 2013, and have been a steady source of revenue growth for the state.

"It isn't wise for a regulator to be a regulator and take in all the money," Franchini said. "There is an appearance of impropriety there."

Contact Bruce Krasnow at [email protected].

___

(c)2017 The Santa Fe New Mexican (Santa Fe, N.M.)

Visit The Santa Fe New Mexican (Santa Fe, N.M.) at www.santafenewmexican.com

Distributed by Tribune Content Agency, LLC.