Insurance companies owe the state nearly $65 million in taxes. That’s according to an audit of premium taxes paid by insurance companies to New Mexico over more than a decade.
The audit looked at 30 health, life and property insurers’ tax payments from from 2003 to 2016. Of those, 17 companies underpaid the taxes, with one insurer underpaying by nearly $30 million.
Most of the underpaid money came because companies misapplied or claimed tax credits for which they did not actually qualify.
The Office of the Superintendent of Insurance (OSI) is responsible for collecting the premium taxes from insurers.
“This audit brings much needed clarity to decades of longstanding disagreements about amounts collected and owed when it comes to premium taxes,” State Auditor Tim Keller said in a statement. “Now it’s time for OSI to do its job and collect these monies owed to our state, and for the companies to promptly pay up, and both to prevent this from happening in the future.”
The Office of the State Auditor also received help from the state Legislative Finance Committee and the state Department of Finance and Administration.
In addition to outlining the amount of unpaid taxes, the report gives OSI advice on how to collect the taxes.
Three state agencies previously questioned the Office of the Superintendent of Insurance’s plans to collect the money owed to the state.
“We have been working towards this resolution since 2014 when we asked for the process to be evaluated,” Superintendent of Insurance John G. Franchini said in a statement. “Although it has been a long, bumpy road to get here, we are encouraged by the results of the Special Audit and corresponding examinations as they highlight for all of us, the state of NM and the insurance companies, exactly how premium tax collection should be reconciled and areas for improvement.”
The largest portions of the underpayments came because of the improper application of medical insurance pool credits and erroneously applied overpayment credits.
“Make no mistake, $65 million is a lot of money for New Mexico, this amount could have filled most of the gap during the last budget crisis, prevented the need for a special session, service cuts or tax increases,” Keller said. “That’s why it matters for New Mexicans that agencies fulfill their duty to collect taxes in an accurate and timely way and do not leave money on the table.”
“Attorney General Balderas’ lawsuit against Presbyterian involves only approximately $14 million of the $29 million in the audit,” spokesman James Hallinan said in a statement. “We will continue settlement talks with Presbyterian and look forward to evaluating the audit’s full findings as we consider further enforcement and collection actions.”
An audit in 2016 found the state failed to collect nearly $200 million in taxes from insurance companies between 2010 and 2015. That audit was based on a sample of premium taxes in the time period.
This most recent audit was more accurate and was able to pinpoint the exact amount.
The $65 million total did not include penalties or interest on the underpayments.
Update: Added quotes by John Franchini and James Hallinan.