What's happening
This bill imposes an additional 50% franchise tax on companies receiving proceeds from life insurance policies on employees or retirees.
Why it matters
Targets “janitor” or “dead peasant” insurance practices. The bill specifically taxes companies that take out life insurance policies on employees or retirees and collect the payout, a practice often criticized as exploitative or ethically questionable.
Significant financial deterrent. By imposing a 50% tax on gross receipts from these insurance proceeds, the bill would make it far less profitable for companies to insure employees for their own financial gain, potentially curbing the practice altogether.
Aims to alter corporate incentive structures. The tax could push companies to reconsider whether to obtain such policies, as the financial advantage of doing so would be sharply reduced, possibly leading to better alignment between employee welfare and corporate behavior.
Increases compliance and reporting requirements. Companies subject to this tax would have to keep detailed records of their insurance-related business for at least three years, increasing administrative oversight and accountability.
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Who cares
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Tax Life Insurance Payouts
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to investigations and government operations
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Tax Life Insurance Benefits
In Assembly Committee · Ways And Means · Sponsor Marcos Crespo
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
4856
2017-2018 Regular Sessions
IN SENATE
March 3, 2017
Introduced by Sen. DIAZ -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Government Operations
AN ACT to amend the tax law, in relation to providing an additional franchise tax on certain life insurance policies
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The tax law is amended by adding a new section 182-b to read as follows:
§ 182-b. Additional franchise tax on certain life insurance policies. 1. Notwithstanding any other provision of this chapter, or of any other law, for taxable years beginning on or after January first, two thousand twenty, an annual tax is hereby imposed upon every company receiving benefits from life insurance policies it has obtained on its employees and/or retirees equal to fifty per centum of its gross receipts from all proceeds from such life insurance policies, for the privilege of exercising its corporate franchise, or of doing business, or of employing capital, or of owning or leasing property in this state in a corporate or organized capacity, or of maintaining an office in this state, for all or any part of each of its taxable years.
2. Every company subject to tax under this section shall keep such records of its business in such form as the commissioner may require, and such records shall be preserved for a period of three years, except that the commissioner may consent to their destruction within that period or may require that they be kept longer.
§ 2. This act shall take effect immediately and shall apply to taxable years beginning on or after January 1, 2020.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD07188-01-7
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the tax law, in relation to providing an additional franchise tax on certain life insurance policies
Purpose
Provides for an additional 50% tax on certain life insurance policies.
Summary of provisions
Section 1 Amends the Tax Law by adding a new Section 182-b. Imposes a fifty-percent (50%) tax on every company that has a corporate franchise, or does business, or has employees or owns or leases property, or maintains an office in this state and that receives benefits from life insurance policies obtained on its employees and/or retirees. Requires records to be kept in a form as the Commissioner of Taxation and Finance may require. Provides that the Commissioner of Taxation and Finance may consent to the destruction of such records within three years or require that such records be kept longer than three years.
Section 2. Effective Date
Existing law
None.
Justification
While the worst of the Great Recession seems to be over, New York State continues to face budget deficits. Spending cuts to many worthy programs in the State Office for the Aging, the Department of Health, SUNY and CUNY are likely. Unfortunately, little has been done to find sources of revenue to mitigate New York State's serious financial circumstances.
Despite this bleak economic picture, corporations are reaping huge financial benefits from life insurance policies they take out on their employees and or retirees. Corporate owned life insurance, better known as "dead peasants" or "janitors" insurance, is a life insurance policy that is taken out on low-level employees, often without the knowledge or consent of the employee, and whose families are not named as beneficiaries when the employee or retiree dies. When the employee or retiree dies, these tax free benefits are collected by the employer. Furthermore, companies frequently use these policies to pay for retirement benefits and other perks for their top executives. Companies that supposedly engage in the practice of purchasing these policies include Wal-Mart, Dow Chemical, Proctor & Gamble and Walt Disney. One tragic example of this practice is that of a 48 year old assistant manager at Wal-Mart who died of a massive heart attack. The man's widow became the lead plaintiff in a class action suit after she learned that Wal-Mart collected $300,000 from a life insurance policy it owned on him.
This bill would impose a 50% tax on all benefits received by companies in New York State who take out life insurance policies on their employees or retirees.
Legislative history
2016: S.141A -AMEND AND RECOMMIT TO INVESTIGATIONS AND GOVERNMENT OPERATIONS 2015: S.141 - REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS 2014: S.388A - Amend and Recommit to Investigations and Government Operations/A.3896A - Held for consideration in Ways and Means 2013: S.388 - Referred to Investigations and Government Operations/A. 3896 - Referred to Ways and Means 2012: S.262-A - Amend and recommit to Investigations and Government Operations/A.1111-A Amend and recommit to Ways and Means 2011: S.262 - Defeated in Investigations and Government Operations/A.1111 - Referred to Ways and Means 2010: S.6236A - Amend and Recommit to Investigations and Government Operations/A.9439Amend and Recommit to Ways and Means 2009: S.6236 - Referred to Rules
Fiscal implications
None.
Effective date
This act shall take effect immediately and shall apply to taxable years beginning on or after January 1, 2020.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.