State catches up on taxes owed by insurers
Audit alleged millions in underpayments
SANTA FE — A New Mexico agency has collected nearly all of the unpaid premium taxes — a total of nearly $50.6 million — that were owed to the state by insurance companies, top officials told legislators on Tuesday.
While one insurance company is still contesting the Office of the Superintendent of Insurance’s claim, 12 other companies already have made payments to the state.
The issue of underpaid premium taxes first flared up two years ago, when state lawmakers were facing a massive budget crunch. Several audits were conducted to try to pinpoint the exact amount of unpaid taxes and identify internal flaws in the agency’s tax collection efforts.
Since then, the state’s budget situation has improved dramatically, with surging oil production levels in southeast New Mexico boosting projected revenue levels to an all-time high.
And some legislators appeared less concerned Tuesday with the situation than they were two years ago.
Rep. Jason Harper, R-Rio Rancho, said the issue had been blown out of proportion and that the amount of unpaid premium taxes represented only a small percentage of the total taxes collected over the time period in question.
“A 1 percent underpayment in any tax program is wonderful,” Harper said.
The final dollar amount collected by the insurance agency will likely end up being smaller than the $65 million figure identified in a special audit released in October 2017 by then State Auditor Tim Keller. That audit looked at underpaid premium taxes from 2003 to 2016.
That’s because the insurance agency at times agreed to settlements
with companies for slightly less than the amount identified in last year’s audit.
The Office of the Superintendent of Insurance began sending invoices a year ago to the companies identified as owing additional premium taxes. That came after State Insurance Superintendent John Franchini told lawmakers that some companies may have “gamed” the state’s tax collection system.
On Tuesday, Deputy Insurance Superintendent Robert Doucette told members of the Legislative Finance Committee the scrutiny over the unpaid taxes was uncomfortable at times, but ended up being beneficial to taxpayers.
“It made us look at all policies and procedures,” Doucette said.
Under legislation approved during this year’s 30-day session, premium tax collection responsibilities will shift from the insurance agency to the Taxation and Revenue Department, which already collects most other types of state taxes, starting in January 2020.