The following is a brief summary for eligible NORCAL Insurance Company policyholders regarding tax issues related to the NORCAL and ProAssurance transaction consideration. Please note that you should refer to the U.S. FEDERAL INCOME TAX CONSIDERATIONS section of the Member Information Statement for detailed information about taxes. If you have additional questions, please consult your tax advisor.
Is the consideration payment taxable?
You should refer to the Member Information Statement (see above or below) for information about this issue. If you have additional questions, please consult your tax advisor.
Will taxes be withheld from the consideration distribution?
Policyholders were required to submit a Form W-9 for tax certification. If your account was tax certified, then taxes (federal or state) will not be withheld from your consideration payment. Note that if you submitted your election online, a PDF Form W-9 was automatically attached to your account for certification. If your submission was made by mail, inclusion of a Form W-9 was required for certification.
What happens if an account was not tax certified?
If your account was unable to be tax certified, a federal tax withholding of 24% and, if a California resident, a state tax withholding of 7%, will be deducted from the consideration payment. To seek a refund of the deducted taxes, you need to contact the Internal Revenue Service (IRS) (federal taxes) and California Franchise Tax Board (CA state taxes). Note: State taxes for residents of states other than California have not been withheld.
Will the IRS or policyholders receive any tax documents?
A Form 1099 will be issued to notify the IRS of the consideration distribution. In addition, a copy of Form 1099 will be mailed early next year (2022) to all policyholders other than those that did not have any backup withholding (i.e. they were tax certified) and received $20.00 or less. Please note that if you are impacted by the withholding for the state of California, you will be mailed a Form 592-B in the first quarter of 2022 as well.
What is the tax basis for the consideration?
You should refer to the Member Information Statement for information about this issue. If you have additional questions, please consult your tax advisor.