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Tax system ‘gamed’ by insurance companies?

 John Franchini: Courtesy Public Regulation Commission

John Franchini: Courtesy Public Regulation Commission

SANTA FE – New Mexico Insurance Superintendent John Franchini is facing questions from legislators and other state officials about his office’s ability to collect taxes from insurance providers after a report released last week showed the state failed to collect at least $193 million in premium taxes from health insurance companies over a recent five-year period.

At a Wednesday hearing at the state Capitol, several legislators asked Franchini why his office hadn’t alerted previous auditors about his concerns that companies may have “gamed” the state’s tax collection system.

In response, Franchini pointed out his office had requested the report – done by an outside firm and released by state Auditor Tim Keller – and also vowed to pursue recovery of any tax dollars that should have been paid.

“We will be billing and invoicing these companies as soon as we get the information,” Franchini told members of the Legislative Finance Committee, before later adding, “I can tell you we will not give away the state’s money.”

Keller said he was willing to give the Office of the Superintendent of Insurance several months to pursue recovery of the uncollected tax dollars, but said his office would be prepared to take additional steps if nothing is done by December.

One option could be filing a lawsuit against the agency, though Keller described that action as a last resort.

Top deputies in the state Auditor’s Office also testified that the Office of the Superintendent of Insurance, which is in charge of collecting taxes from various types of insurance companies, initially did not want the report about uncollected premium taxes to be publicly released but eventually relented.

Franchini did not dispute the assertion, but he said his office has been investigating insurance underpayments since last December. He said he could not divulge details of the investigation since it is still ongoing.

New Mexico is facing a massive budget shortfall of $589 million for the current and just-ended fiscal years, and several lawmakers said Wednesday that recovering the $193 million in premium taxes identified in the report could help in the state’s budget-balancing efforts.

“This is essentially a large chunk of one-time dollars that could be used,” Keller affirmed.

Meanwhile, Finance and Administration Secretary Duffy Rodriguez and Legislative Finance Committee Director David Abbey sent a joint letter to Franchini on Wednesday asking for more information about his office’s operations, including how it intends to avoid potential conflicts of interest with board members employed by insurance companies.

Only tax filings from several of the state’s largest health insurance companies were scrutinized in the recent report, which dated from April 2010 through April 2015.