Maryland Insurance Companies Taxes Maryland insurance company exemption

The Maryland Court of Special Appeals has affirmed the Maryland Tax Court ruling that a Vermont licensed insurance company is exempt from Maryland corporate income tax. In Maryland, Title 4 of the Insurance Article provides that an insurance premium tax is imposed on unauthorized insurers in lieu of all other state taxes. The Maryland Comptroller contended that the exemption is ambiguous and the rules of statutory construction require resolving ambiguities over tax exemptions in its favor. The comptroller argued that the tax court erred in interpreting the phrase, “instead of all other state taxes,” as creating an exemption of all other state taxes imposed on unauthorized insurers and failed to view the provision as part of a larger statutory scheme. However, the natural and ordinary meaning of the language in the provision clearly and unambiguously states that the premium receipts tax must be instead of “all” other state taxes, including the corporate income tax. Further, there was substantial evidence to support the factual findings, reasoning, and conclusion of the tax court and, therefore, the court of special appeals must uphold the tax court’s determination. However, the court of special appeals noted that it is possible that the plain meaning interpretation of the provision may not have the practical effects on unauthorized insurers that align with the Maryland General Assembly’s intended outcome, and only the general assembly has the power to make any statutory amendments if deemed appropriate. (Comptroller of the Treasury v. Leadville Insurance Company, Md. Ct. Spec. App., No. 563, September Term, 2021, 08/29/2022 (unreported opinion not to be cited as precedent).)