8 December 2020Accounting & tax analysis

Supreme Court of New Jersey upholds $56m tax refund for Johnson & Johnson

The Supreme Court of New Jersey has upheld a decision to refund $56 million in insurance premium tax (IPT) to Johnson & Johnson (J&J), related to coverage written by its captive, Middlesex Assurance.

The court was upholding an Appellate Division decision in September 2019, which found that J&J was only liable to pay IPT in New Jersey, its home state, for risk taken in that state. Between 2011 and 2015 J&J had paid IPT in New Jersey for all non-admitted insurance written by Middlesex Assurance on a national basis.

The Nonadmitted and Reinsurance Reform Act (NRRA) in 2011 provides that, in cases where non-admitted insurance covers multi state risks, premium tax can only be collected by an insurer’s home state. The case hinged on whether this means a home state should collect IPT for coverage written nationally, or only in the home state.

In November 2015 J&J had filed a claim with the Department of Banking and Insurance and the Director of the Division of Taxation seeking a $56 million refund for IPT related to coverage for risks outside New Jersey. The Division of Taxation denied this claim in August 2016, but this decision was later reversed by the Appellate Division.