Delaware Code
Chapter 7. FEES AND TAXES
§ 702. General premium tax; underwriting profits tax.

(a) Each authorized insurer and each formerly authorized insurer shall file with the Commissioner, on or before March 1 each year a report in form as prescribed by the Commissioner showing, except with respect to wet marine and transportation insurance, gross direct premium income, including policy, membership and other fees, assessments and all other considerations for insurance received by it during the next preceding calendar year on account of insurance contracts, other than as to workers' compensation and employer's liability, covering property, subjects or risks located, resident or to be performed in this State (with proper proportionate allocation of premiums as to such persons, property, subjects or risks in this State insured under policies covering persons, property, subjects or risks located or resident in more than 1 state), after deducting from such total direct premium income (1) the amount of returned premiums on cancelled policies (but not including the return of cash surrender values of life insurance policies) and (2) the unabsorbed portion of any deposit premium and the amount returned to policyholders as dividends and similar returns, whether paid in cash or credited or applied in reduction of premiums. The report shall be verified by the oath or affirmation of the president or secretary or other responsible officer of the insurer, duly administered by a person authorized to administer oaths. Considerations received for annuity contracts or funding agreements shall not be included in gross direct premium income or be subject to taxes imposed by this section or by § 707 of this title. Any premiums received for employer-owned life insurance policies, as defined in § 2704(e) of this title, and trust-owned life insurance policies, as defined in § 2704(c)(5) of this title, shall be itemized separately in the report, except that separate itemization for a trust-owned life insurance policy shall not be required if the insurer elects to pay tax on premiums received for such policy under paragraph (c)(1) of this section.
(b) For the purpose solely of the tax upon the premiums and at the rate provided under this section, a domestic insurer shall also include in the report provided for in subsection (a) of this section above, except with respect to wet marine and transportation insurance, the gross amount of premiums and other considerations for direct insurance received by it upon insurance business written pursuant to solicitation of business by mail directed to persons located in a state or province of Canada in which the insurer is not admitted to transact insurance with respect to persons, property and subjects or risks resident, located or to be performed in such state or province and on which a premium tax is not paid or surplus line tax is not payable to such state or province and shall deduct therefrom returned premiums, unabsorbed portion of deposit premiums, dividends, and similar returns paid or credited to policyholders as provided in such subsection.
(c) (1) There shall be paid a tax at the rate of 1.75% on net premiums as shown on reports required to be filed under subsection (a) of this section.
(2) In lieu of paragraph (c)(1) of this section, there shall be paid a tax on a graduated basis at the rates set forth in the following table on net premiums per case for employer-owned life insurance policies, as defined in § 2704(e)(3) of this title, and trust-owned life insurance policies, as defined in § 2704(e)(4) of this title, not taxed pursuant to paragraph (c)(3) of this section. For purposes of this paragraph, a “case” is:

a. All contracts issued to an employer, or a trust established by an employer or an individual, as appropriate; or
b. All contracts issued to all employers or trusts that participate in a private placement under federal securities laws and/or purchase with respect to at least 25 lives policies covered by registrations under such laws.
Said tax shall be paid on net premiums and other considerations received on account of insurance contracts issued for delivery in this State, except that no premium tax shall be paid with respect to persons resident or located outside of this State upon whom premium tax is paid to the State of residency or location.
The premium tax rate shall be calculated on the basis of net premiums (upon which taxes are payable to this State) received per case in each calendar year, except that in subsequent calendar years the premium tax rate shall not be higher than the rate established for the preceding year. A reduction in the premium tax rate for a subsequent calendar year shall not apply retrospectively to any previous calendar year. The following example illustrates calculation of the tax rates under this section:

The tax imposed by this subsection shall be the only tax imposed by this chapter on employer-owned life insurance policies and trust-owned life insurance policies.
(3) In lieu of paragraphs (c)(1) and (2) of this section, the premium tax rate shall be 2% on the first $100,000 of net premiums and 0.0% for the net premium exceeding $100,000 for trust-owned life insurance policies covering the life of an individual that participate in private placement under federal securities laws. Said tax shall be paid on net premiums and other considerations received on account of insurance contracts issued for delivery in this State, except that no premium tax shall be paid with respect to persons resident or located outside of this State upon whom premium tax is paid to the State of residency or location. The premium tax rate shall be calculated on the basis of net premiums (upon which taxes are payable to this State) received per policy in each calendar year. The tax imposed by this paragraph shall be the only tax imposed by this chapter on trust-owned life insurance policies covering the life of an individual that participate in private placement under federal securities laws.
(d) The taxes imposed under this section and §§ 703, 704, 707, 1917 and 6914 of this title shall be payable as follows:

Fifty percent of the estimated tax liability for the current year shall be paid on April 15 of the current year, and the balance of the estimated tax shall be paid in installments as follows:

(e) Tax on wet marine and transportation insurance underwriting profits:

(1) Each authorized insurer and formerly authorized insurer shall, with respect to all wet marine and transportation insurance written within this State, pay a tax of 5% upon its taxable underwriting profit, ascertained as, hereinafter provided, from such insurance written within this State;
(2) The underwriting profit on such insurance written within this State shall be that proportion of the total underwriting profit of such insurer from such insurance written within the United States which the amount of net premiums of such insurer from such insurance written within this State bears to the amount of net premiums of such insurer from such insurance written within the United States;
(3) The underwriting profit of such insurer on such insurance written within the United States shall be determined by deducting from the net earned premiums on such wet marine and transportation insurance written within the United States during the taxable year, meaning thereby the calendar year next preceding the date on which such tax is due, the following items:

a. Net losses incurred, meaning gross losses incurred during such calendar year under such wet marine and transportation insurance contracts written within the United States, less reinsurance claims collected or collectible and less net salvages or recoveries collected or collectible from any source applicable to the corresponding losses under such contracts;
b. Net expenses incurred in connection with such wet marine and transportation insurance contracts, including all state and federal taxes in connection therewith, but in no event shall the aggregate amount of such net expenses deducted exceed 40% of the net premiums on such wet marine and transportation insurance contracts, ascertained as hereinafter provided; and
c. Net dividends paid or credited to policyholders on such wet marine and transportation insurance contracts;
(4) In determining the amount of such tax, net earned premiums on such wet marine and transportation insurance contracts written within the United States during the taxable year shall be arrived at as follows:

From gross premiums written on such contracts during the taxable year deduct any and all return premiums, premiums on policies not taken, premiums paid for reinsurance of such contracts and net unearned premiums on all such outstanding contracts at the end of the taxable year and add to such amount net unearned premiums on such outstanding wet marine and transportation insurance contracts at the end of the calendar year next preceding the taxable calendar year;
(5) In determining the amount of such tax, net expenses incurred shall be determined as the sum of the following:

a. Specific expenses incurred on such wet marine and transportation insurance business, consisting of all commissions, agency expenses, taxes, licenses, fees, loss adjustment expenses and all other expenses incurred directly and specifically in connection with such business, less recoveries or reimbursements on account of or in connection with such commissions or other expenses collected or collectible because of reinsurance or from any other source;
b. General expenses incurred on such wet marine and transportation insurance business, consisting of that proportion of general or overhead expenses incurred in connection with such business which the net premiums on such wet marine and transportation insurance written during the taxable year bear to the total net premiums written by such insurer from all classes of insurance written by it during the taxable year. Within the meaning of this paragraph, general or overhead expenses shall include salaries of officers and employees, printing and stationery, all taxes of this State and of the United States, except as included in subparagraph a. above, and all other expenses of such insurer not included in paragraph (e)(5)a. of this section above, after deducting expenses specifically chargeable to any or all other classes of insurance business;
(6) In determining the amount of such tax, the taxable underwriting profit of such insurer on such wet marine and transportation insurance business written within this State shall be ascertained as follows:

a. In the case of every such insurer which has written any such business within this State during 3 calendar years immediately preceding the year in which such taxes were payable, the taxable underwriting profit shall be determined by adding or subtracting, as the case may be, the underwriting profit or loss on all such insurance written within the United States, ascertained as hereinbefore provided, for each of such 3 years, and dividing by 3;
b. In the case of every such insurer other than as specified in paragraph (e)(6)a. of this section, such taxable underwriting profit, if any, shall be the underwriting profit, if any, on such wet marine and transportation insurance business written within this State during the taxable year ascertained as hereinbefore provided; but after such insurer has written such wet marine and transportation insurance business within this State during 3 calendar years, an adjustment shall be made on the 3 year average basis by ascertaining the amount of tax payable in accordance with paragraph (e)(6)a. of this section above, but no refunds of all or any part of such payments shall be made, except as provided in § 707 of this title;
(7) The tax hereinbefore provided shall be paid annually, on or before June 1, by every insurer authorized to do in this State the business of wet marine and transportation insurance during any 1 or more of the next preceding 3 calendar years, and the calendar year next preceding such June 1 shall be deemed the taxable year within the meaning of this section;
(8) Every insurer liable to pay the tax hereinbefore provided under this subsection (e) shall, on or before June 1 of each year, file with the Commissioner a tax return in form prescribed by the Commissioner;
(9) The tax provided for in this subsection (e) shall apply to the business of the year ending December 31, 1968, and to subsequent years, and for such purpose the underwriting profits or losses of prior years shall be taken into account, as hereinbefore provided. Section 2702 of this title and in force immediately prior to November 1, 1968, shall continue to be effective with respect to all taxes due under such section, but this provision shall not be construed as imposing any duplication of taxes for any of such years.
(f) In case of any underpayment of estimated tax required by this section, there shall be added to the tax for the taxable year an amount determined at the rate of 11/2% per month, or fraction thereof, upon the amount of the underpayment for the period of the underpayment. The period of the underpayment shall run from the date the estimated tax or installment was required to be paid to the date on which actually paid. No penalty for underpayment shall be imposed if the quarterly estimated tax payments equal 100% of the total tax due and paid for the previous tax year.