Article

Montana has recently enacted significant changes to its captive insurance law through Senate Bill 60 (SB 60), signed into law in May 2025. The legislation was introduced at the request of the State Auditor and amends Section 33-28-201 of the Montana Code Annotated.The key updates center on how captive insurers are taxed, moving from a flat-rate system to a tiered premium tax structure that takes effect for tax years beginning after December 31, 2025.  While not expected to generate state revenue in 2026, Montana’s general fund is projected to see increased revenue in subsequent years, with an estimated $253,280 in 2027 and $405,680 in 2029, without imposing additional costs on the state. Since 2001, Montana has licensed over 700 captive insurance companies, contributing over $20 million in premium tax revenues. As of a recent report, Montana has nearly 300 domiciled captive insurance companies that have brought in over $17 million in premium tax payments since 2001.

Key Changes in Montana Captive Insurance Law

1. Tiered Premium Tax Structure

• Direct premiums are now taxed at 0.4% on the first $20 million and 0.3% on amounts above that threshold.
• Assumed reinsurance premiums are taxed at 0.225% on the first $20 million, 0.15% on the next $20 million, and 0.05% on amounts above $40 million.

2. Minimum and Prorated Taxes

• A minimum annual tax of $5,000 is required, with the amount prorated depending on the quarter in which a captive is authorized or surrenders its authority during the year.

3. Tax Cap Adjustments

• The $100,000 annual tax cap is retained for most captive insurance companies.
• However, this cap is removed for protected cell captives and special purpose captives organized as LLCs with a series of members, meaning these entities could pay more than $100,000 in annual premium taxes.

4. Aggregation for Common Ownership

• Captive insurers under common ownership and control will be taxed as a single entity, ensuring fairness and consistency in tax obligations.

5. Annual Tax Calculations

• Taxes are to be calculated on an annual basis, even for multi-year policies. Only the branch business of a branch captive is subject to taxation5.

6. Effective Date

• These changes apply to tax years beginning after December 31, 2025, giving captive insurers time to adjust

Domicile Comparison

The following chart compares the new MT scheme to that of other established US captive domiciles. 

Key Observations

• Montana, Tennessee, South Carolina, and North Carolina all use similar tiered tax rates for direct and assumed premiums.
• Montana is unique in removing the tax cap for protected cell and certain special purpose captives, which could significantly increase tax liability for large cell structures compared to capped jurisdictions.
• North Carolina stands out with a $200,000 maximum tax cap for protected cell or series structures with more than 10 cells, making it attractive for large cell structures and the leading US domicile for captive cell formations.
• Tennessee imposes an additional per-cell charge for protected cell captives with more than ten cells, while Vermont calculates the cap by aggregating each cell’s tax but limits the maximum per cell.
• Vermont offers slightly lower rates at higher premium bands and a higher maximum tax cap ($200,000), which can benefit very large captives or cell structures.
• North Carolina also offers a premium tax holiday for captives redomesticating to the state through 2025, further enhancing its appeal for new formations or relocations.

While the expanded comparison demonstrates that while Montana’s new law is highly competitive for smaller captive insurance companies, North Carolina, Vermont, and Tennessee may offer more favorable tax treatment for large protected cell structures due to their capped tax regimes.