In a per curiam opinion, the New Jersey Supreme Court affirmed an insurance premium tax (IPT) decision of the Appellate Division “substantially for the reasons expressed” in the Appellate Division’s opinion. The New Jersey Appellate Division held that New Jersey’s IPT for self-procured insurance coverage is based only on the risks insured in the state, and not based on risks insured throughout the United States. The appellate court considered a 2011 “home state rule” amendment to the IPT that provided that if a surplus lines policy covers risks in New Jersey and other states and New Jersey is the home state, then the tax payable shall be based on the total United States premium for the applicable policy. The appellate court noted the differences between self-procured insurance and surplus lines insurance. With respect to surplice lines insurance, the plain language of the IPT statute applies a “home state rule” imposing the IPT on the premiums paid on all risks in the United States, while self-procured insurance is only subject to tax on risks within New Jersey. Because the taxpayer self-procured the insurance from a subsidiary captive insurance company, the appellate court concluded that the insurance was not a surplus lines policy and thus, the taxpayer was not subject to IPT on all of its risks in the United States. The appellate court relied on the plain language of the statute to resolve the case however, the appellate court noted that even if the IPT statute’s reference to surplus lines policies was ambiguous, any ambiguity would need to be resolved in the taxpayer’s favor. The New Jersey Supreme Court noted in its two sentence opinion affirming the appellate court’s decision that “[t]he Legislature, of course, may amend the statute if it chooses to do so.”
Johnson & Johnson v. Dir., Div. of Taxation, 2020 N.J. LEXIS 1387 (Dec. 7, 2020)