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Tax Law

Every Word Matters – Maryland Tax Court Holds Expansive Statutory Terms Exempt Unauthorized Insurance Company From Maryland Corporate Income Tax

On remand from the Maryland Court of Special Appeals, the Maryland Tax Court held that an unauthorized insurance company owned by Macy’s, was exempt from Maryland corporate income tax. During the years at issue, Leadville, a Vermont captive, did not earn any Maryland insurance or reinsurance premiums but had substantial interest income from intercompany loans with Macy’s. Under Maryland law, unauthorized insurance companies are subject to a premium receipt tax under title 4 instead of “all other state taxes.” The Maryland Comptroller argued that even if Leadville had paid Maryland premiums tax, it should be taxed on all its income as a financial institution because the insurance company exclusion for “all other state taxes” applied only to premiums related income, or alternatively, only to sales and use taxes. However, the Tax Court determined that it was commonplace for insurance companies to earn nonpremium related investment income and disagreed with the Comptroller, holding that the phrase “all or any” in tax statutes is meant to be broad and expansive rather than qualified or restrictive.

Leadville Ins. Co. v. Comptroller of the Treasury; Appeal No. 13-IN-OO-0035 (M.D.Tax.Ct. July 13, 2020).