Agency Rulemaking: The Comptroller must operationalize the retroactive "savings clause" (Section 3) to process refunds for taxes paid by TWIA/TFPA since January 1, 2023. Watch for Comptroller guidance on amended return procedures in Q3 2025.
Immediate Action Plan
Immediate: TWIA/TFPA finance teams must stop all premium and maintenance tax accruals effective immediately.
Immediate: Private insurers must review internal budgets for the Fire and Allied Lines Maintenance Tax and increase projected liability for the 2025 annual statement.
Q3 2025: TWIA/TFPA must file amended tax returns for 2023 and 2024 to recover retroactive overpayments.
Q4 2025: Monitor TDI rate proposals; prepare to comment if the cost-shift to the private market is miscalculated.
Operational Changes Required
Contracts
Servicing Carrier Agreements: If your organization acts as a servicing carrier or fronting entity for TWIA/TFPA, review compensation clauses immediately. If administrative fees are calculated as a percentage of "gross written premium including taxes," the removal of the tax component will lower your fee basis. You may need to renegotiate to maintain revenue neutrality.
Tax Software Vendors: Ensure third-party tax compliance vendors (e.g., Sovos, Vertex) update their Texas rate tables to apply a 0.00% rate specifically for TWIA/TFPA policies effective June 20, 2025.
Hiring/Training
Tax Teams: Brief tax accounting staff that the 1.6% premium tax and the maintenance tax no longer apply to TWIA/TFPA.
Underwriting: Underwriters should be aware that TWIA/TFPA now possess a roughly 1.6%+ operating cost advantage, potentially impacting competitive positioning in coastal zones.
Reporting & Record-Keeping
Amended Returns (TWIA/TFPA): The law applies retroactively to liabilities accruing on or after January 1, 2023. TWIA and TFPA must prepare amended filings for Tax Years 2023 and 2024 to reclaim overpayments.
Data Segregation: Private carriers must ensure policy administration systems clearly distinguish between their own book (taxable) and TWIA/TFPA policies (exempt) to prevent commingling of tax liabilities.
Fees & Costs
Maintenance Tax Increase (Private Market): The Legislative Budget Board Fiscal Note confirms that maintenance tax rates are set to fund agency operations. With TWIA and TFPA removed from the payer pool, the denominator shrinks. Private insurers must increase accruals for the Fire and Allied Lines Maintenance Tax for the upcoming cycle to absorb this cost shift.
Strategic Ambiguities & Considerations
The "Revenue Neutrality" Shift
The legislation removes TWIA/TFPA from the tax base but does not reduce the statutory funding requirement for TDI. The law does not specify the formula for redistributing this cost.
*Risk:* TDI may propose a maintenance tax rate increase for private carriers that exceeds the raw mathematical offset to build a buffer.
*Watch For:* The Texas Register in late 2025 for the proposed maintenance tax rates. We will need to analyze the proposed rate against the lost TWIA revenue to ensure the increase is mathematically justified and not excessive.
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The bill author has informed the committee that, despite their status as nonprofit organizations operating in a residual market, the Texas Windstorm Insurance Association and the Texas FAIR Plan Association pay premium and maintenance taxes, resulting in the entities having less money to direct to the payment of catastrophic losses. The bill author has also informed the committee that exempting these entities from the applicability of the statutes imposing those taxes would reduce the need for their purchase of reinsurance, increase their ability to pay claims, and reduce other operating expenses. H.B. 2517 seeks to exempt the Texas Windstorm Insurance Association and the Texas FAIR Plan Association from the property and casualty insurance premium tax and the fire and allied lines insurance maintenance tax.
CRIMINAL JUSTICE IMPACT
It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS
H.B. 2517 amends the Insurance Code to exempt the Texas Windstorm Insurance Association and the Texas FAIR Plan Association from the property and casualty insurance premium tax and the fire and allied lines insurance maintenance tax. These exemptions expressly do not affect tax liability accruing before the 2023 calendar year. The liability continues in effect as if the bill had not been enacted, and the former law is continued in effect for the collection of taxes due and for enforcement of the liability for those taxes.
Honorable Jay Dean, Chair, House Committee on Insurance
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB2517 by Barry (Relating to the applicability of premium and maintenance taxes to Texas Windstorm Insurance Association and Texas FAIR Plan Association.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB2517, As Introduced: a negative impact of ($27,983,000) through the biennium ending August 31, 2027.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
General Revenue-Related Funds, Five- Year Impact:
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2026
($13,007,000)
2027
($14,976,000)
2028
($16,474,000)
2029
($18,121,000)
2030
($19,933,000)
All Funds, Five-Year Impact:
Fiscal Year
Probable Revenue Gain/(Loss) from General Revenue Fund 1
2026
($13,007,000)
2027
($14,976,000)
2028
($16,474,000)
2029
($18,121,000)
2030
($19,933,000)
Fiscal Analysis
The bill would amend the Texas Insurance Code to exempt Texas Windstorm Insurance Association (TWIA) and Texas Fair Plan Association (TFPA) insurance premiums from insurance premium and insurance maintenance taxes.
The bill would take effect September 1, 2025.
Methodology
Based on analysis provided by the Comptroller of Public Accounts, TWIA and TFPA collected $996.1 million in insurance premiums in calendar year 2024. These premiums were subject to an insurance premium tax of 1.6 percent, resulting in a premium tax liability of $15.9 million to the credit of the General Revenue Fund. This estimate assumes an increase of 10% in premiums each year, resulting in total premium tax loss of $17,343,000 in fiscal year 2026, $19,968,000 in fiscal year 2027, $21,965,000 in fiscal year 2028, $24,161,000 in fiscal year 2029, and $26,577,000 in fiscal year 2030.
Of the amount credited to the General Revenue Fund, 25% is allocated to the Foundation School Fund. However, this analysis assumes any revenue losses to the Foundation School Fund would be made up with an equal amount of General Revenue to fund the Foundation School Program and are therefore not included in the table above.
This estimate assumes that the provisions of the bill will have no effect on aggregate maintenance tax collections as maintenance tax rates are set in amounts to be sufficient to fund operations, and any reduction in the amount of maintenance tax paid by TWIA and TFPA would result in a corresponding increase in the amount paid by other entities.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.
Source Agencies:
304 Comptroller of Public Accounts, 454 Department of Insurance
LBB Staff:
JMc, AAL, GDZ, BFa
Related Legislation
Explore more bills from this author and on related topics
HB2517 immediately exempts the Texas Windstorm Insurance Association (TWIA) and the Texas FAIR Plan Association (TFPA) from Chapter 221 premium taxes and Chapter 252 maintenance taxes. While this relieves tax liability for these state-run residual market entities, private insurers must anticipate a corresponding increase in their own maintenance tax rates to offset the revenue shortfall required to fund the Texas Department of Insurance (TDI). Implementation Timeline Effective Date: June 20, 2025 (Immediate effect due to supermajority vote).
Q
Who authored HB2517?
HB2517 was authored by Texas Representative Jeff Barry during the Regular Session.
Q
When was HB2517 signed into law?
HB2517 was signed into law by Governor Greg Abbott on June 20, 2025.
Q
Which agencies enforce HB2517?
HB2517 is enforced by Texas Comptroller of Public Accounts and Texas Department of Insurance.
Q
How urgent is compliance with HB2517?
The compliance urgency for HB2517 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.
Q
What is the cost impact of HB2517?
The cost impact of HB2517 is estimated as "low". This may vary based on industry and implementation requirements.
Q
What topics does HB2517 address?
HB2517 addresses topics including insurance, insurance--property & casualty, taxation, taxation--general and windstorm devices & insurance.
Legislative data provided by LegiScanLast updated: November 25, 2025
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