Senate Counsel, Research
and Fiscal Analysis
Minnesota Senate Bldg.
95 University Avenue W. Suite 3300
St. Paul, MN 55155
(651) 296-4791
Tom Bottern
State of Minnesota
S.F. No. 3201 - Application of tax to captive insurance companies
Author: Senator Roger C. Chamberlain
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
Date: March 20, 2018


This bill establishes a two-part test for determining whether an insurance company is a “disqualified captive insurance” company and therefore not exempt from income taxes. Generally, insurance companies are exempt from corporate franchise tax but instead pay the insurance premiums tax. If a company is a “disqualified captive insurance company,” it would be subject to the corporate franchise tax. Generally, a captive insurance company is a subsidiary of a parent company that provides insurance to the parent company, and can be used as an income shelter for the parent company to reduce its tax liability.

Section 1. Financial institution. Makes a technical amendment to the definition of “financial institution” to strike an unnecessary reference to the insurance premium tax chapter.

Section 2. Disqualified captive insurance company. Establishes a definition of “disqualified captive insurance company.” A company meets the definition if it is licensed as a captive insurance company or derives 80% or more of its total premiums from its unitary business members, and receives less than 50% of its gross receipts from premiums, or pays less than 0.25% of its total premiums under state insurance premium tax.

Section 3. Exempt entities. Excludes disqualified captive insurance companies from the general income tax exemption for insurance companies.

Section 4. Unitary business principle. Requires that the combined report for unitary businesses exclude the income and apportionment factors of a disqualified captive insurance company. Strikes language providing that insurance companies that are part of a unitary business and not licensed in Minnesota or another state that imposes retaliatory taxes must be included on the combined report.

The bill is effective retroactively beginning in tax year 2017.


Check on the status of this bill
Back to Senate Counsel and Research Bill Summaries page

This page is maintained by the Office of Senate Counsel, Research, and Fiscal Analysis for the Minnesota Senate.
Last review or update: 03/20/2018
If you see any errors on this page, please e-mail us at