The New Jersey Appellate Division held that New Jersey’s insurance premium tax (IPT) for self-procured insurance coverage is based only on the risks insured in the state, and not based on risk insured throughout the United States. In reversing the New Jersey Tax Court, the appellate court noted the differences between self-procured insurance and surplus lines insurance noting that the plain language of the IPT statute applies a “home state rule” imposing the IPT on the premiums paid on all risks in the United States, while self-procured insurance is only subject to tax on risks within New Jersey. Because the taxpayer self-procured the insurance from a subsidiary captive insurance company, the court concluded that the insurance was not a surplus lines policy and not subject to IPT on all of its risks in the United States. Although the four relied on the plain language of the statute to resolve the case, the court noted that even if the IPT statute’s reference to surplus lines policies was ambiguous, any ambiguity would need to be resolved in the taxpayer’s favor.

Johnson & Johnson v. Dir., Div. of Taxation, & Comm’r, No. A-5423-17T3 (N.J. Super. Ct. App. Div. Sept. 25, 2019)