Public Act 093-0918
 
HB0393 Enrolled LRB093 06218 JLS 06328 b

    AN ACT concerning insurance.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Illinois Income Tax Act is amended by
changing Section 205 as follows:
 
    (35 ILCS 5/205)  (from Ch. 120, par. 2-205)
    Sec. 205. Exempt organizations.
    (a) Charitable, etc. organizations. The base income of an
organization which is exempt from the federal income tax by
reason of Section 501(a) of the Internal Revenue Code shall not
be determined under section 203 of this Act, but shall be its
unrelated business taxable income as determined under section
512 of the Internal Revenue Code, without any deduction for the
tax imposed by this Act. The standard exemption provided by
section 204 of this Act shall not be allowed in determining the
net income of an organization to which this subsection applies.
    (b) Partnerships. A partnership as such shall not be
subject to the tax imposed by subsection 201 (a) and (b) of
this Act, but shall be subject to the replacement tax imposed
by subsection 201 (c) and (d) of this Act and shall compute its
base income as described in subsection (d) of Section 203 of
this Act. A partnership shall file such returns and other
information at such time and in such manner as may be required
under Article 5 of this Act. The partners in a partnership
shall be liable for the replacement tax imposed by subsection
201 (c) and (d) of this Act on such partnership, to the extent
such tax is not paid by the partnership, as provided under the
laws of Illinois governing the liability of partners for the
obligations of a partnership. Persons carrying on business as
partners shall be liable for the tax imposed by subsection 201
(a) and (b) of this Act only in their separate or individual
capacities.
    (c) Subchapter S corporations. A Subchapter S corporation
shall not be subject to the tax imposed by subsection 201 (a)
and (b) of this Act but shall be subject to the replacement tax
imposed by subsection 201 (c) and (d) of this Act and shall
file such returns and other information at such time and in
such manner as may be required under Article 5 of this Act.
    (d) Combat zone death. An individual relieved from the
federal income tax for any taxable year by reason of section
692 of the Internal Revenue Code shall not be subject to the
tax imposed by this Act for such taxable year.
    (e) Certain trusts. A common trust fund described in
Section 584 of the Internal Revenue Code, and any other trust
to the extent that the grantor is treated as the owner thereof
under sections 671 through 678 of the Internal Revenue Code
shall not be subject to the tax imposed by this Act.
    (f) Certain business activities. A person not otherwise
subject to the tax imposed by this Act shall not become subject
to the tax imposed by this Act by reason of:
        (1) that person's ownership of tangible personal
    property located at the premises of a printer in this State
    with which the person has contracted for printing, or
        (2) activities of the person's employees or agents
    located solely at the premises of a printer and related to
    quality control, distribution, or printing services
    performed by a printer in the State with which the person
    has contracted for printing.
    (g) A nonprofit risk organization that holds a certificate
of authority under Article VIID of the Illinois Insurance Code
is exempt from the tax imposed under this Act with respect to
its activities or operations in furtherance of the powers
conferred upon it under that Article VIID of the Illinois
Insurance Code.
(Source: P.A. 88-361.)
 
    Section 10. The Illinois Insurance Code is amended by
adding Article VIID as follows:
 
    (215 ILCS 5/Art. VIID heading new)
ARTICLE VIID. NONPROFIT RISK ORGANIZATIONS

 
    (215 ILCS 5/123D-1 new)
    Sec. 123D-1. Purpose; construction. The purpose of this
Article is to provide for the organization of and issuance of a
certificate of authority to nonprofit risk organizations that
insure nonprofit organizations and that will qualify, and
continue to qualify, as a qualified charitable risk pool, as
defined in subsection (n) of Section 501 of the Internal
Revenue Code.
 
    (215 ILCS 5/123D-5 new)
    Sec. 123D-5. Definitions. As used in this Article:
    "Member" means a nonprofit organization that participates
as an insured in a nonprofit risk organization.
    "Nonmember charitable organization" has the meaning set
forth in subsection (n) of Section 501 of the Internal Revenue
Code.
    "Nonprofit organizations" means organizations described in
paragraph (3) of subsection (c), and exempt from taxation under
subsection (a), of Section 501 of the Internal Revenue Code.
    "Nonprofit risk organization" means a nonprofit company
organized to do business solely with nonprofit organizations as
a qualified charitable risk pool under subsection (n) of
Section 501 of the Internal Revenue Code that is organized in
accordance with this Article.
    "Startup capital" has the meaning set forth in subsection
(n) of Section 501 of the Internal Revenue Code.
 
    (215 ILCS 5/123D-10 new)
    Sec. 123D-10. Organization of nonprofit risk
organizations.
    (a) A company organized pursuant to Articles III or IV,
including such companies organized as a risk retention group in
this State pursuant to Article VIIB of this Code, that
satisfies the requirements of this Article may be organized as
a nonprofit risk organization.
    (b) Notwithstanding any contrary provision in subsection A
of Section 123B-3 of this Code, a nonprofit risk organization
may be organized as a reciprocal insurance company and qualify
for organization under Article VIIB as a risk retention group.
    (c) No nonprofit risk organization issued a certificate of
authority pursuant to this Article shall be converted into a
corporation or other entity organized for pecuniary profit or
into a for-profit organization of any kind.
 
    (215 ILCS 5/123D-15 new)
    Sec. 123D-15. Conduct of insurance business by nonprofit
risk organizations.
    (a) The Director may, pursuant to this Article, issue a
certificate of authority to write the kinds of insurance
enumerated in Classes 2 and 3 of Section 4 to a nonprofit risk
organization that is a company organized pursuant to Articles
III or IV, including such companies organized as a risk
retention group in this State pursuant to Article VIIB, if such
organization:
        (1) complies with the applicable requirements of
    Articles III or IV and VIIB, if organized as a risk
    retention group; and
        (2) has an initial paid-up capital and surplus at least
    equal to the amount of applicable paid-up capital and
    surplus required by Articles III or IV for a newly
    organized company doing the same kind or kinds of insurance
    business.
Thereafter, every such nonprofit risk organization shall
maintain capital and surplus at least equal to the amount of
applicable capital and surplus required to be maintained by
companies under Articles III or IV doing the same kind or kinds
of insurance business.
    (b) Every certificate of authority to engage in an
insurance business issued by the Director to any nonprofit risk
organization pursuant to the provisions of this Article shall
specify the company's name, the location of its principal
office, the name and principal address of its attorney-in-fact,
if any, and the kind or kinds of insurance business that it is
authorized to engage in this State.
 
    (215 ILCS 5/123D-20 new)
    Sec. 123D-20. Relevant criteria.
    (a) A nonprofit risk organization must meet all of the
following criteria:
        (1) Be organized and operated solely to insure risks of
    its members.
        (2) Directly provide information to its members with
    respect to loss control and risk management.
        (3) Be comprised solely of members.
        (4) Be organized under this Article.
        (5) Be exempt from Illinois income taxes with respect
    to its activities or operations in furtherance of the
    powers conferred upon it by this Article.
        (6) Obtain at least $1,000,000 in startup capital from
    nonmember charitable organizations. The startup capital
    may take the form of advancements or borrowings in the form
    permitted by Section 56 or 76 of this Code, as applicable.
    Startup capital may be used to satisfy the financial
    requirements contained in this Article applicable to a
    nonprofit risk organization only to the extent the Director
    determines that it complies with those requirements.
        (7) Be controlled by a board of directors elected by
    its members.
        (8) Require in its organizational documents that:
            (A) each member of the nonprofit risk organization
        shall at all times be an organization described in
        paragraph (3) of subsection (c) of Section 501 of the
        Internal Revenue Code and exempt from tax under
        subsection (a) of Section 501 of the Internal Revenue
        Code;
            (B) any member that receives a final determination
        that it no longer qualifies as an organization
        described in paragraph (3) of subsection (c) of Section
        501 of the Internal Revenue Code shall immediately
        notify the nonprofit risk organization of the
        determination and the effective date of the
        determination; and
            (C) each policy of insurance issued by the
        nonprofit risk organization shall provide that the
        policy does not cover the insured with respect to
        events occurring after the date the final
        determination was issued to the insured.
        (b) An organization shall not cease to qualify as a
    nonprofit risk organization solely by reason of the failure
    of any of its members to continue to be an organization
    described in paragraph (3) of subsection (c) of Section 501
    of the Internal Revenue Code if, within a reasonable period
    of time after the nonprofit risk organization is notified
    as required under subparagraph (8)(B) of subsection (a) of
    this Section, the nonprofit risk organization takes such
    action as may be reasonably necessary to remove the member
    from the nonprofit risk organization.
 
    (215 ILCS 5/123D-25 new)
    Sec. 123D-25. Applicability of other provisions of this
Code. Except as otherwise provided in this Article, where
inconsistent with this Article, or where the context otherwise
requires, all of the provisions of this Code and the rules of
the Director relating to all insurers and those relating to a
company organized pursuant to Articles III or IV or a risk
retention group organized in this State pursuant to Article
VIIB transacting the same kind or kinds of insurance shall be
applicable to a nonprofit risk organization organized and
issued a certificate of authority pursuant to this Article.
Where any of such provisions of law refer to a corporation,
company, or insurer, those references, when read in connection
with and applicable to this Article, shall mean such a
nonprofit risk organization.
 
    (215 ILCS 5/123D-30 new)
    Sec. 123D-30. Residual market participation exemption;
security funds. A nonprofit risk organization shall not be
permitted or required to join or contribute financially to any
plan, pool, association, or guaranty or insolvency fund in this
State, nor shall any nonprofit risk organization, nor its
insureds nor any claimants against the insureds, nor its parent
nor any affiliated company, nor any member organization of its
association, receive any benefit from any such plan, pool
association, or guaranty or insolvency fund for claims arising
out of the operations of the nonprofit risk organization. Each
nonprofit risk organization must inform each insured, in both
the application for insurance and in the policy issued to the
insured, that (i) the nonprofit risk organization is not
subject to all of the insurance laws and rules of this State,
and (ii) State insurance insolvency guaranty funds are not
available to the insured for claims arising out of the
operations of the nonprofit risk organization.
 
    (215 ILCS 5/123D-35 new)
    Sec. 123D-35. Rules. The Director shall adopt such rules
as may be necessary for the implementation of this Article.