Everyone in Louisiana who buys property insurance will lose 28 percent of a tax credit they can get for covering the debt of the state’s property insurer of last resort.
In addition, the reduction is retroactive, meaning those who failed to file for the tax credit over the last four years — and still could claim that money — are also out 28 percent of the rebate. As a result, the state can immediately grab about $60 million of the unclaimed rebates, Insurance Commissioner Jim Donelon said.
The haircut was part of a package of tax credit reductions passed by the Legislature on June 11, the last day of the session.
As a result of the new law, the average homeowner’s rebate from the annual assessment tied to Louisiana Citizens Property Insurance Corp. will be trimmed by a little more than $21, based on Louisiana Department of Insurance figures for 2014. The average homeowner paid about $76 last year to cover the assessment.
Insured homeowners pay the Citizens fee regardless of whether they are customers of Citizens.
The fee came about because state-backed Citizens — which insures property that private insurers won’t — had to borrow close to $1 billion to pay Hurricane Katrina damage claims. Property insurance policyholders across the state were assessed a fee to help cover those costs. But the state Legislature, flush with federal hurricane recovery funds at the time, passed a law that rebated the full amount of the fee to taxpayers starting in 2006. Those days obviously have passed.
Still, the lower tax credit is not expected to affect many taxpayers.
That’s because only a little more than half of Louisiana’s property insurance policyholders bother to claim the tax credit when they file their annual state tax returns. Despite a provision that still gives them four years to claim the rebates, half of the assessment goes unclaimed and eventually into the state’s general fund.
For example, from 2006 to 2009, the assessment generated $478 million, but property owners left more than $269 million on the table that went back to the state. The percentage of people and companies claiming the rebate has stayed at a little more than 50 percent in subsequent years.
Donelon said the Legislature’s action doesn’t affect property insurance prices.
“It’s really, in effect, a tax on consumers. It’s the reduction of a tax credit,” Donelon said.
Follow Ted Griggs on Twitter, @tedgriggsbr.